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Vonage attacked by defunct rival

A flare-up from SunRocket

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It's a bit like fending off a house fly while you're locked in mortal combat with Godzilla.

As it continues to battle a multi-million dollar federal lawsuit from telecom behemoth Verizon, VoIP pioneer Vonage is now facing a suit from the remains of SunRocket, the Virginia company that recently shut down its internet-based telephone service.

According to the suit, filed yesterday with the Court of Chancery in Delaware and tracked down by The Reg, Vonage illegally obtained a list of SunRocket's former customers after an unsuccessful bid to purchase the list straight from the SunRocket.

SunRocket LLC - the company that stepped into the breach when SunRocket Inc. ceased to exist - seeks "injunctive and declaratory relief," hoping the court will prevent Vonage from using the list and order the New Jersey outfit to fork over some dough.

When we contacted Vonage, the company was quick to play down the complaint. "We believe the suit lacks merit," said company spokesman Charles Sahner. "We obtained a VoIP subscriber list through an established marketing list broker. We were assured that the data was legally obtained and could be used without violating anyone’s proprietary rights."

In early June, the suit says, the two VoIP companies promised a vow of silence as they negotiated a transfer of SunRocket's assets: "SunRocket and Vonage entered into a confidentiality agreement for the purpose of allowing Vonage to conduct due diligence for potentially entering into a business transaction, such as the acquisition of SunRocket or its assets by Vonage." In essence, SunRocket is saying that Vonage agreed not make use of information it was privy to during their negotiations.

In the end, the negotiations broke down. On July 18, two days after SunRocket announced that its service was kaput, the company agreed to move its customers onto VoIP services run by Unified Communications Corp. and 8x8 - leaving Vonage as the odd man out.

The suit contends that Vonage violated the confidentiality agreement by acquiring SunRocket's customer list from a third party and using it to drum up new business. Naturally, SunRocket believes this has damaged its deals with Unified and 8x8.

Though Vonage acknowledges it discussed some sort of asset transfer with SunRocket, it won't admit that those discussions involved the customer list. Of course, that's the one SunRocket asset worth having. "We discussed a variety of arrangements, including the possibility of acquiring asserts of SunRocket, but in the end that didn't work out," Sahner said.

Vonage also acknowledges that after the discussions broke down, it did indeed track down a list of SunRocket's former customers - and that the list was used to contact customers. But it claims that the list was legitimately obtained through a New York-based marketing firm called Paradysz Matera, a company it's done business with in the past. Paradysz did not respond to our requests for comment, but Sahner says that Paradysz obtained the list from a "data reseller".

Is Vonage still using the list? We can't quite tell. "We haven't finalized plans for its continued use," Sahner said.

Meanwhile, Vonage is waiting for the US Court of Appeals to rule on that mega-suit from Verizon. This spring, after a federal jury decided that Vonage was infringing on three Verizon patents, Judge Claude Hilton ordered the company to pay $58m in damages and slapped it with an injunction preventing forbidding the use of Verizon's technologies. After a Vonage appeal, a stay was granted, and a new ruling is expected sometime next month.

With its latest earnings call, Vonage said that it spilled $6m in litigation costs during the second quarter. At the same time, the company lopped a sizable chunk off its marketing budget, and as a result, it's had trouble recruiting new customers.

But CEO Jeffrey Citro also told investors that the company has developed workarounds for the three technologies said to infringe on Verizon's patents. ®

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