Blockchain firm sues Coinbase for $350 million over patent infringement
Crypto exchange Coinbase has found itself in legal hot water after being accused by blockchain software firm Veritaseum Capital of infringing a patent related to its blockchain technology – and is now seeking $350 million in damages.
According to a lawsuit filed Thursday by U.S. law firm Brundidge & Stanger in the U.S. District Court of Delaware, Veritaseum alleges that Coinbase infringed on its cryptocurrency payment transfer technology patent, known as the “566 patent.”
Veritaseum said the patent concerns “new devices, systems and methods” that enable parties to “enforce value transfer agreements” with “little or no trust” in each other, and claimed that Coinbase used this for many of its blockchain infrastructure services:
“The defendant’s infringing activities include, but are not limited to, the website […] Coinbase Android mobile wallet […] iOS mobile wallet […] its Coinbase Cloud, Coinbase Commerce APIs, Query and Transact, Participate, Delegate and Validator software, Coinbase Pay, Coinbase Wallet and Coinbase Operated Public Validators.”
The law firm also explained that the patent applies to proof-of-stake (PoS) and proof-of-work (PoW) blockchains, which can enable the transfer of cryptocurrency payments, trading and staking services on chains supported by these consensus mechanisms.
Continuing my many warnings about the risk of poor due diligence, our case includes infringement of patent claims covering PoS & PoW Ethereum, transfer of NFTs and Bitcoin. This was public information since 2015, I’ve been tweeting publicly for almost a year. That shouldn’t surprise anyone! https://t.co/MjuJSvYBrc
— Reggie Middleton DeFi Patent US11196566, JP6813477 (@ReggieMiddleton) 22 September 2022
Veritaseum justified the $350 million figure by claiming that Coinbase had “received substantial profits by virtue of the infringement” and that Veritaseum Capital “sustained damages as a direct and proximate result.”
The lawyers also noted that Veritaseum had previously sent a letter to Coinbase in July warning it of the alleged breach, adding:
“The defendant had prior knowledge, should have known, or at least been willfully blind to the ‘566 patent. The defendant has been on notice of the ‘566 patent at least as early as July 3, 2022, if not earlier from other sources or parties.”
In July, Vertiaseum’s “Coinbase: Forensic Analysis & Deep Dive” report suggested that there may be other “centralized and decentralized digital asset exchanges” using “unlicensed patented IP” from Veritaseum in addition to Coinbase.
Related: Coinbase was hit by two new lawsuits during SEC investigation
According to the court document, patent 566 was awarded to Vertiaseum founder Reginald ‘Reggie’ Middleton and co-inventor Mathew Bogosian by the US Patent and Trademark Office on December 7, 2021. However, Vertiaseum did not mention how long Coinbase had allegedly been using patent 566 for.
Veritaseum Capital also requested a trial by jury in the Delaware-based court as its preferred means of resolving the dispute.
Cointelegraph contacted Coinbase for comment, but did not immediately receive a response by the time of publication.
