Coinbase Facing a $350M Patent Lawsuit
Veritaseum Capital LLC, a crypto company specializing in patents meant for encoding contracts for DeFI transactions, filed a lawsuit against Coinbase. According to Veritaseum, the crypto exchange infringed on their patent and proved “uncooperative” when an out-of-court settlement was offered.
Veritaseum Sues Coinbase for Patent Infringement
According to the lawsuit, the case concerns a patent held by Reginald Middleton that was licensed to Veritaseum Capital. The license includes a right to pursue legal action against parties that infringe upon the patent.
Reginald Middleton (“Mr. Middleton”) has invented novel devices, systems and methods enabling parties with little trust or no trust in each other to enter into and enforce value transfer agreements conditioned on input from or participation of a third party, over arbitrary distances, without special technical knowledge of the underlying transfer mechanism(s) and was awarded a Patent by the U.S. Patent and Trademark Office (“USPTO”), namely U.S. Patent No. 11,196,566 (the “’566 Patent”) (see Ex. 1)
Veritaseum allegedly notified Coinbase of the infringement on July 3rd, but the crypto exchange ignored the warning letter. The suing company is requesting the court grant it $350 million in damages, declare Coinbase guilty of patent infringement, and block the crypto exchange from using the patents in question.
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Veritaseum’s Previous Troubles With the SEC
In a case reminiscent of 2022’s Coinbase troubles with the SEC, Veritaseum alongside Reginald Middleton was sued by the commission in 2019 over its offering of the VERI tokens. According to the complaint, Veritaseum’s ICO was fraudulent and included the offering of unregistered securities.
At one point during the lawsuit, Veritaseum had more than $8 million of its assets frozen by the SEC. While the company ultimately settled with the commission, it did so without denying nor admitting guilt. Middleton and his company claimed that the ICO was in fact an attempt to test a new cryptocurrency exchange.
Both the Veritaseum case from 2019 and the Coinbase one from 2022 are a part of the SEC’s ongoing efforts to crack down on unregistered ICOs. This policy stems from the finding of the commission’s 2017 DAO report that equates initial coin offerings with securities.
The SEC’s actions, along with a wider government push to regulate crypto have given birth to a movement among crypto companies attempting to bring crypto-friendly politicians into office in the upcoming midterm elections. Coinbase recently opened a voter education program and created an initiative to score representatives and candidates based on their actions and statements regarding digital assets.
Do you think Coinbase really infringed on Veritaseum’s patent? Let us know in the comments below.