Vonage Expects to Settle AT&T Patent Lawsuit by Month’s End

Vonage has reached an “agreement in principle” to settle its intellectual property dispute with AT&T, the VoIP pioneer announced yesterday.

The deal under discussion would have Vonage pay $39 million over five years, in exchange for AT&T dropping its patent infringement lawsuit. Vonage would also agree to drop its counter suit against the telecom giant.

“We’re moving in the right direction with regard to AT&T and are focused on finalizing our agreement by the end of this month,” said Charles Sahner, a spokesman for Vonage. “We would like to be able to put AT&T behind us together with Verizon, Sprint and our other recent settlements.”

Vonage’s new strategy of settling patent infringement complaints has been a convenient and effective way of avoiding crippling injunctions against its technology, but it has also been very costly, cutting into the unprofitable company’s ever-dwindling supply of cash.

“The company’s cash requirements in the fourth quarter increased due to the release of $78 million of restricted cash to Verizon, an additional $2 million to Verizon, $40 million placed into escrow and reported as current restricted cash until the Verizon appeal is decided, $80 million to Sprint and $2 million in other IP litigation settlements,” the company said in its most recent financial statement.