Vonage, the Internet telephone start-up, said Monday that it was being sued by Verizon Communications Inc. in a dispute over the underlying technology that allows voice calls to be delivered over the Internet.
The lawsuit adds a new challenge for Vonage, which has seen its stock price slide precipitously since its initial public offering last month.
Word of the suit caused shares of Vonage Holdings Corp. to fall 11.7 percent, to $8.48, on the New York Stock Exchange. The company went public at $17 a share, and the stock has lost more than half its value since then.
Verizon is accusing Vonage of violating “at least” seven patents, according to the complaint, which was filed on June 12 in Federal District Court in the Eastern District of Virginia.
Among its claims, Verizon alleges that Vonage has used some of its technology that allows voice calls to be transferred from the Internet onto the traditional telephone network.
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It is unclear whether the technology covered by those patents is being used in Verizon’s consumer Internet phone service, called VoiceWing.
Significantly, the lawsuit, as is sometimes the case in patent suits, does not ask the court to halt Vonage’s operations immediately, but does ask the court to do so if the matter is resolved in Verizon’s favor. Legal experts said it could take more than a year for the case to work its way through the system.
In a press release, Vonage said it respected the valid intellectual-property rights of others and that it believed its services were built on technology it developed itself or licensed from other companies.
Vonage “intends to vigorously defend the lawsuit,” the statement said.
Brooke Schulz, a Vonage spokeswoman, declined to comment further. Vonage executives have declined to comment since their IPO, citing a quiet period mandated by the Securities and Exchange Commission, though that period expired Monday.
Vonage, despite being the early leader in the Internet phone market and enjoying relatively strong name recognition, faces growing pressures from much larger competitors.
In particular, cable companies such as Time Warner Inc. and Comcast Corp. and telephone companies like Verizon are investing more heavily in developing and marketing services that deliver voice traffic over Internet lines.
Industry analysts have said that the steep slide in Vonage’s stock price reflects not just rough market conditions but also a perception by investors that Vonage will be unable to fend off competition from larger companies with deeper pockets and longer-standing customer relationships.
“I’m getting more and more concerned,” said Richard S. Greenfield, a media industry analyst at Pali Research. “It increasingly feels like the competitive dynamics are getting more severe.”
Last Friday, Greenfield issued a 12-month target price of $5 for Vonage. He said he believed that the growing competition would put continued price pressure on Internet phone providers, which in turn would cut into Vonage’s revenue.
Analysts who are more optimistic about Vonage’s prospects argue that the company’s early market lead and brand name will enable it to hold onto a meaningful chunk of the growing Internet telephone market.