updated 6/25/2007 6:33:58 PM ET 2007-06-25T22:33:58

A judge suggested a possible compromise in a patent dispute between Internet phone carrier Vonage and Verizon Communications that would allow Vonage to continue signing up new customers while it modifies its technologies.

Judge Timothy B. Dyk, part of the three-judge panel of the U.S. Court of Appeals for the Federal Circuit, made the remark during oral arguments Monday.

The panel is considering Vonage's appeal of a March jury verdict that found Vonage infringed on three Verizon Communications Inc. patents in constructing its Internet phone system. The jury in awarded Verizon $58 million, plus future royalties for continued patent infringement.

U.S. District Judge Claude Hilton then barred Vonage from signing up new customers, a decision that threatens to cripple the company. The appeals court granted a stay while it considers the case.

Dyk raised the possibility that the appeals court could instruct Hilton to consider softening the injunction.

"Isn't there kind of a middle ground in these cases when the injunction would put someone out of business? Shouldn't that be a consideration?" he asked. "Shouldn't the district court consider allowing time for a workaround as part of the injunction?"

Verizon lawyer Richard Taranto said that Vonage has never asked for such a compromise. He added that Vonage has said publicly that it will be able to find alternatives to the disputed technologies while telling the court that the injunction would kill the company.

Verizon Deputy General Counsel John Thorne said after the hearing that Verizon has always been open to a settlement that would give Vonage more time.

Vonage could accept a modified injunction "if that's the least we got," Vonage attorney Roger E. Warin said. But he stressed that the company wants the entire verdict thrown out and a new trial granted because of what Vonage claims were flawed jury instructions.

Arguing before the judges, Warin said the verdict was invalid because Hilton, the trial judge, failed to provide the jury with adequate definitions for some technical terms.

Shares of Vonage rose 4 cents to $3.09 Monday. Verizon shares fell 13 cents to $41.50.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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