- Veritaseum has accused Coinbase of patent violation and demanded $350 million
- The blockchain project says Coinbase has profited from using its technology without permission
- Veritaseum founder Reggie Middleton was awarded the patent in question in December 2021
Coinbase is facing more legal trouble after being sued by Veritaseum Capital over an alleged patent infringement. The blockchain firm claims that Coinbase infringed on its cryptocurrency payment transfer technology patent, known as the 566 Patent, and is seeking $350 million in compensation. Veritaseum founder Reggie Middleton, who claims on his Twitter bio to be the “founder of DeFi”, says that he has issued “many warnings of the risks of poor due diligence” relating to the breach of patent laws over the past year, and that the suit was only a matter of time.
Middleton Awarded Patent in 2021
According to the filing, Middleton created a system that allowed “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).” The patent allegedly covers transactions involving trading and transfers of the old Ethereum, Ethereum 2.0 staking and NFT and Bitcoin trading.
This patent was granted by the Japan Patent Office in December 2021, and Middleton alleges that Coinbase has been using it without his permission ever since, claiming that the platform “had prior knowledge, should have known, or at least been willfully blind of the
‘566 Patent”. The $350 million, Veritaseum says, is the amount of profits it suggests Coinbase has made by using its technology.
Furthering my many warnings of the risks of poor due diligence, our suit includes infringement of patent claims that cover PoS & PoW Ethereum, transfer of NFTs & Bitcoin. This was public info since 2015, I’ve been tweeting publicly for almost a year. It should surprise no one! https://t.co/MjuJSvYBrc
— Reggie Middleton DeFi Patent US11196566, JP6813477 (@ReggieMiddleton) September 22, 2022
“At least” $350 Million Sought
Veritseum says that the technology Coinbase has allegedly been using without permission has earned it hundreds of millions of dollars in profits, across many facilities:
The Coinbase blockchain infrastructure, including its Ethereum Validator nodes for POS validator systems, infringe the claims of the ‘566 Patent by providing products and services including the payment of block rewards to new Validators under POS, payment of Validators from transactions on the Solana network and the transfer of Non-Fungible Tokens (“NFT”) from one party to another party on the Coinbase platform.
As a result, the company has asked a judge to award “at least $350,000,000 in damages” plus expenses to Veritaseum.
This isn’t Veritaseum’s first legal tangle. In 2019 it was accused of “making material misrepresentations and omissions about the unregistered securities” it was offering as part of its 2017/18 ICO. This led to the accounts of the company and Middleton being frozen, and the company eventually having to pay a $9 million settlement.
