Vonage Holdings Corp., a pioneer in placing phone calls over the Internet, was in federal court last week defending itself against a nearly $200 million patent-infringement suit filed by Verizon Communications, the second-largest phone company in the U.S.

Although Vonage made a name for itself as an innovator in digital voice communications, Verizon claims that Vonage has been illegally using patented Verizon technologies at the core of voice-over-Internet Protocol (VoIP) service, including signaling interconnectivity, authorization, authentication, billing and fraud prevention.

Verizon, defending five patents in U.S. District Court in Alexandria, Va., is seeking $197 million in damages, equal to about 25% of Vonage's current market value. Before its stock sank 70% on Wall Street, Vonage was briefly worth $2.8 billion after going public last year.

Verizon commercialized its patents partly through the development of its own VoIP service, called VoiceWing. Verizon does not disclose VoiceWing subscriber totals.