Wireless service provider Sprint Nextel Corp agreed to settle a patent lawsuit against Vonage Holdings Corp for $80 million, triggering a sharp rebound in the Internet phone company's shares on Monday.

Under the agreement, Sprint will also license its technology, which helps connect phone calls between Internet and telecom networks, to Vonage, the two companies said.

A jury in federal court found in September that Vonage had infringed patents belonging to Sprint, and ordered the company to pay $69.5 million in damages. Vonage had said it would appeal the verdict.

The news of a settlement pushed Vonage shares up 74 percent to $2 in early composite trade. However, they are still a fraction of their May 2006 initial public offering price of $17.

The Holmdel, New Jersey-based company has suffered through a string of legal setbacks. A U.S. appeals court late last month upheld a verdict that Vonage infringed two patents held by Verizon Communications Inc (VZ.N: Quote, Profile, Research).

Vonage was a pioneer in selling Web-based phone services to consumers looking for a cheaper alternative to regular phone services, but now faces growing competition from cable and other Internet companies. Analysts have also voiced concerns over its losses from heavy marketing spending.

Sprint shares fell 1.5 percent to $18.73.

(Reporting by Ritsuko Ando)