Risk Management

Sprint Nextel Loses One, Wins One

Vonage is told by federal-court jury to pay its rival $69.5 million over VoIP patent violations, while Sprint settles a separate class-action suit ...
Roy Harris and Stephen TaubSeptember 26, 2007

Sprint Nextel Corp. said it would pay $57.5 million to settle a class-action lawsuit that stemmed from the 2004 combination of its two tracking stocks. Separately, the company won a $69.5-million patent-infringement verdict over Vonage Holdings Corp. in a Kansas City, Kans., federal-court jury trial.

Vonage said it would appeal the result in the case over voice over internet protocol (VoIP) patents, but nonetheless took a major hit in New York Stock Exchange trading.

The class-action settlement certainly could have been worse for Sprint. Shareholders had claimed that the company had undervalued its wireless stock when it was combined with its wireline stock, costing investors between $1.3 billion and $3.4 billion, and the Associated Press calculated that the proposed settlement works out to 4.4 percent of the low end of damages claimed by plaintiffs.

Johnson County District Judge Kevin Moriarty has given the deal preliminary approval, according to AP, and a hearing has been scheduled for December to give a final okay. Sprint Nextel would pay $10 million and its insurers would cover the rest, AP said.

“This settlement resolves a dispute that arose during an earlier period for the company,” Sprint Nextel spokesman Matt Sullivan told the wire service. “We are pleased to put the issue behind us.” The case stems from then-Sprint Corp.’s decision to combine the stocks it had previously set up to track the separate fortunes of its wireless and wireline businesses, with wireless share exchanged for a half-share of wireline.

In the patent-infringement case, the Kansas City jurors found that for infringing six patents owned by Sprint Nextel, Vonage ust pay spring not only the $69.5 milllion, but also a 5-percent royalty on future revenue.

Vonage said it would ask the court to rival Internent phone-service provider Vonage Holdings Corp. should pay Sprint $69.5 million in damages. It also said it was developing

We are disappointed that the jury did not recognized that our technology differs from that of Sprint’s patents,” Vonage chief legal officer Sharon O’Leary said. “Vonage has already demonstrated that it can keep its focus on customers and on its core business while managing ongoing litigation.”

Still, in late-morning trading, AP reported that Vonage shares fell 40 cents, or 31 percent, to 90 cents a share. The company went public in May 2006.

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