CAFC Stays Permanent Injunction against Vonage Pending Appeal

Vonage v. Verizon (Fed. Cir. 2007).

In a rare emergency hearing on April 24, the Federal Circuit heard Vonage's plea for a stay of an injunction that would bar the upstart VOIP company from contracting with new customers. Soon after the hearing, the CAFC agreed -- staying any injunctive relief pending appeal.  The full appeal will also follow an expedited schedule and is scheduled for oral arguments on June 25, 2007.

This appeal comes on the heel of the jury verdict finding that Vonage infringes three Verizon patents. (6,282,574, 6,104,711, 6,359,880).  These patents all relate to various aspects of Internet telephony. Following the jury verdict, the District Court Judge issued a permanent injunction against Vonage, but granted a partial stay.  Under the district court's decision, the stay would have allowed Vonage to continue operation, but would have barred the Internet Telephone company from signing-up any new customers in the interim.

Rule 62(a) of the Federal Rules of Civil Procedure provides the general rule that a permanent injunction "shall not be stayed" pending appeal. According to the rule, however, such a stay is generally within the discretion of the district court. Likewise, the CAFC has, at times, also exerted its discretion to stay injunctive relief pendente lite.

The jurisprudence regarding patent stays is fairly scarce. Perhaps for obvious reasons, emergency stays are usually issued without any substantive opinion. There are a few cases outlining the basic approach to determining whether to issue a stay. In Standard Havens (1990) the Federal Circuit announced a four-factor test for considering whether to issue a stay pending appeal.

• Likelihood of success on the merits of the appeal;
• Irreparable harmed absent a stay;
• Irreparable harm due to a stay (continued infringement); and
• Public interest.

For Vonage, issuance of the permanent injunction would be equivalent to the proverbial fat lady singing through the Internet pipes. A full injunction would seemingly destroy Vonage's core business -- leaving its customers ready for the picking. 

The CAFC's swift action in these cases shows that it understands the critical business importance of the stay. 

Comments

[Thomason]

The recent grants of mandamus and applications for stays, and the 2nd appeals of cases are business relationship symptomatic of problems with the CAFC jurisprudence. If things were more certain, there'd be less need for the CAFC to be the arbiter of every issue.

[Joe Smith]

This may be an example of the CAFC looking over its shoulder at the Supreme Court. As I understand the key patent in the dispute it amounts to this:
1. we patent the idea of interconnecting voice transmission over the internet and over the regular telephone system;
2. to make idea #1 work there will need to be a cross reference table associating telephone numbers and internet addresses so that calls can be routed to the right place.

If that is all there is to the patent then the CAFC may just be a little concerned about the effect on the court's credibility of effectively shutting down Vonage.

[John Roethel]

Last weekend I saw a Vonage ad on TV soliciting new customers. Guess they were pretty confident about getting a stay.

[Alan McDonald]

After all the bad press over refusing the stay in the Blackberry case and letting the Virginia judge force a greater than half billion dollar settlement over patents the PTO may now find unpatentable, the CAFC could not afford to put Vontage out of business, or Congress might have put them out of business.

[Lonnie E. Holder]

John Roethel:

The presence of those commercials means little. Those commercials may have been contracted for and placed weeks or months ago. While we may think that it is easy to halt commercials, there may be a variety of reasons where a commercial will run even if it should not.