NEW YORK -- For the second time in two days, Internet phone company Vonage Holdings Corp. was hit with bad legal news Wednesday when a federal appeals court upheld a jury verdict and injunction against it for patent infringement. The company's shares sank to 96 cents Tuesday, their lowest level since Vonage went public in May 2006. A Virginia jury had awarded Verizon Communications Corp. $58 million in damages in March plus 5.5 percent royalties on future revenues after finding that Vonage violated three Verizon patents in building its Internet phone system. The U.S. Court of Appeals for the Federal Circuit, which hears patent cases from around the country, partially upheld the March verdict, directing the trial court to reconsider the verdict on one of the three patents. It also vacated the damages and royalty awards. The awards were vacated because the lower court did not specify which portion of the damages was attributable to which patent, Blair Levin, an analyst with Stifel Nicolaus, said in a note to investors. The appeals court found that the district court improperly construed part of the third patent, which involves wireless access to Voice over Internet Protocol (VoIP) service. Verizon spokesman Peter Thonis said Wednesday's ruling "speaks for itself." The injunction has been stayed pending resolution of Vonage's appeal. Unless the company now obtains an emergency stay from the U.S. Supreme Court, the injunction will go into effect within a month, Levin said. On Tuesday, Vonage was ordered to pay Sprint Nextel $69.5 million in damages after a jury found that Vonage willfully infringed on six Sprint telecommunications patents. Buckingham Research Group analyst Qaisar Hasan had called that decision the "final nail" in Vonage's coffin and said the risk of bankruptcy "is now increasingly real." Vonage said it would appeal the decision. Vonage said it does not expect Wednesday's decision to have an adverse effect on its business because it has deployed workarounds for the two patents in question for some time. The legal setbacks are not Vonage's only troubles. In August, the company said it saw a big drop in new subscribers during its second quarter. As a result, the company was no longer the largest provider of Internet phone service in the U.S., having lost the top spot to cable company Comcast Corp. Verizon shares rose 41 cents Tuesday to close at $44.48.
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