For whom the bell tolls. Vonage Barred in Verizon Suit From Adding Customers (Update3) By Jeff St.Onge http://www.bloomberg.com/apps/news?pid=20601087&sid=avJLckDk7cJ0&refer=home April 6 (Bloomberg) -- A federal judge barred Vonage Holdings Corp. from signing up new customers while it appeals a ruling that it infringed three Verizon Communications Inc. patents covering Internet telephone-call technology. U.S. District Judge Claude Hilton in Alexandria, Virginia, today put his March infringement ruling on hold while Vonage, an Internet telephone service provider, seeks to overturn his ban on use of Verizon's technology. He stayed his ruling as it applies to existing customers during the appeal. The decision is like ``cutting off oxygen as opposed to a bullet in the head,'' Vonage lawyer Roger Warin told Hilton, urging him to reconsider. The ruling would ``in effect slowly strangle Vonage'' since it loses about 650,000 subscribers a year, Warin said. Verizon, the second-biggest U.S. telephone company, opposed any stay. New York-based Verizon asked that if a stay was granted, that it be partial, blocking Vonage from signing up new customers during the appeal. Hilton agreed. Vonage, based in Holmdel, New Jersey, had asked Hilton to fully freeze the order that bans Vonage from using Verizon technology. ``It's more along the lines of what Verizon was looking for,'' said Qaisar Hasan, an analyst at Buckingham Research Group Inc. in New York. He rates the shares ``underperform'' and doesn't own them. ``Vonage faces a very uphill climb ahead.'' Request Approved A federal jury found in March that Vonage infringed the Verizon patents and should pay $58 million and a 5.5 percent royalty. Verizon claimed Vonage lured away 600,000 customers by copying technology such as voice-mail features, as well as the method for allowing Internet calls to reach traditional phone lines. Hilton approved Verizon's injunction request on March 23, blocking Vonage's use of the inventions. He put off implementing the injunction until he could hear Vonage's stay request today. Vonage has said it expected to get a 120-day stay from Hilton or the U.S. Court of Appeals for the Federal Circuit in Washington, which has jurisdiction over patent appeals. The company is certain to immediately appeal Hilton's ruling, lawyers said. The appeals court ``may see things differently than I do,'' Hilton told Warin. Winning a stay would give Vonage time to develop a ``workaround,'' technology that handles the same tasks as the inventions at issue in the lawsuit without infringing Verizon's patents. That may help assure customers and investors that the company can endure its legal battle with Verizon. Vonage spokeswoman Brooke Schulz declined to immediately comment because the company hasn't seen the order. Verizon spokesman David Fish didn't immediately return a call seeking comment. Vonage shares fell 25 cents to $3.37 yesterday in New York Stock Exchange trading. They have fallen 51 percent this year. Verizon fell 2 cents to $38 and have added 2 percent in 2007. The case is Verizon Services Corp. v. Vonage Holdings, 06- cv-682, U.S. District Court, Eastern District of Virginia.