Crypto exchange Coinbase has found itself in legal hot water after being accused by blockchain-based software firm Veritaseum Capital of infringing on a patent relating to its blockchain technology — and is now seeking $350 million in damages.
According to a lawsuit filed on Thursday by U.S. law firm Brundidge & Stanger in the U.S. District Court in Delaware, Veritaseum alleges that Coinbase infringed on its cryptocurrency payment transfer technology patent, known as the “566 Patent.”
Veritaseum said the patent revolves around “novel devices, systems and methods” which enable parties to “enforce value transfer agreements” with “little or no trust” in each other, alleging Coinbase used this for many of its blockchain infrastructure services:
“Defendant’s infringing activities include but are not limited to its 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 is applicable with proof-of-stake (PoS) and proof-of-work (PoW) blockchains, which could enable the transfer of cryptocurrency payments, trading and staking services on chains supported by those consensus mechanisms.
Veritaseum justified the $350 million figure by arguing that Coinbase had “gained substantial profits by virtue of its infringement” and that Veritaseum Capital “sustained damages as a direct and proximate result.”
The attorneys also noted that Veritaseum had previously sent a letter to Coinbase in July warning it of its alleged infringement, adding:
“Defendant had prior knowledge, should have known, or at least been willfully blind of the ‘566 Patent. 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” that employ “unlicensed patented IP” from Veritaseum in addition to Coinbase.
According to the court document, Patent 566 was awarded to Vertiaseum founder Reginald 'Reggie' Middleton and co-inventor Mathew Bogosian by the U.S. Patent and Trademark Office on Dec. 7. 2021. However, Vertiaseum did not mention how long Coinbase had been allegedly using Patent 566 for.
Veritaseum Capital also requested a trial by jury in the Delaware-based court as its preferred means to resolve the dispute.
Cointelegraph reached out to Coinbase for comment but did not get an immediate response by the time of publication.