Category: investment

INVESTMENT TECHNOLOGY NEWS — Inventor of peer-to-peer capital markets, and the Father of DeFi, Reggie Middleton recently filed a lawsuit against a leading crypto exchange over patent infringement. The lawsuit was filed by Veritaseum Capital in September 200 in the U.S. District Court in Delaware.

Coinbase Global ( COIN ) is being sued by Veritaseum Capital LLC, which alleges the exchange has infringed on a patent awarded to Veritaseum founder Middleton. According to Veritaseum, Coinbase has used patented intellectual property for some of its blockchain infrastructure. Veritaseum is seeking at least $350 million in damages. Coinbase didn’t immediately respond to request for comment, according to CoinDesk. As expected, Coinbase is attempting to ignore the lawsuit and hope it goes away, addressing the legal issue with a request that the court dismiss the case. The case continues, so here’s a breakdown of the patent and its consequences.

Invented in 2013, the patent application was submitted in 2014. Patents include jurisdictions of U.S. and Japan. The U.S. patent became active in 2021. The foundational technology is presumed to cover ETH, BTC, SOL, NFTs and cold storage using partially signed transfers etc.

A patent is a powerful asset. Companies that pay for a license to use a strong, powerful patent also acquire a valuable asset. Middleton’s approved patent has already proven to be an extraordinary achievement, as 90% of blockchain patent applications are rejected by the USPTO. Let’s analyze the patent, and see exactly what’s in it. What does it cover exactly?

The patent covers a problem that wasn’t specific to any particular blockchain and that problem was the transfer of value without an authority, without a third party, contingent upon a data source — replicating traditional finance abilities on a distributed ledger. That’s why the patent covers distributed ledgers, blockchains, centralized platforms, decentralized platforms etc.

Patent number US20170187535A1 abstract: 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), optionally affording participation of third-party mediators, substitution of transferors and transferees, term substitution, revision, or reformation, etc. Such value transfers can occur reliably without involving costly third-party intermediaries who traditionally may otherwise be required, and without traditional exposure to counterparty risk.

The bulky patent is largely about technologies involving conditional value transfer. Two parties transferring value between them conditionally, without need of a third party, falls under the patent. While some of the patent language is quite technical and may not be 100% clear to everyone, much of the language clearly describes transaction technology that transfers cryptocurrency from one person to another. The patent describes 4 key pairs, apparently referring to the private key and public key used by cryptocurrencies: 2 that belong to the sender (1 public and 1 private), along with two that are used by the receiver. The verbose patent language mentions other components, such as seemingly superfluous 5th key pairs, along with formulas that a layman would not likely understand. The patent language seems to be a combination of verbiage specific to DeFi decentralized finance, while also using the kitchen sink strategy to mention as many facets, instances and examples as possible for broad coverage in the DeFi sector.

Just how much protection and intellectual property rights does Reggie’s patent give him? Many users of Bitcoin, especially commercial users, are likely subject to the patent because many modern applications that further the effectiveness of Bitcoin fall under the patent. The patent is designed to provide longer staying power than many other patents.

Does Reggie Middleton legally own all of your Ethereum? Well, intellectual property holders don’t usually obtain total ownership of all assets linked to their patent, but they are often entitled to license fees or an equitable remedy paid by the owners of products and services that infringe on the patent. It’s quite possible that Middleton could be entitled to a significant slice of the entire crypto pie, particularly with regards to some assets now owned by commercial organizations that profit from products and services related to Middleton’s patent.

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