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Late last week, the DeFi Education Fund took action to protect DeFi and crypto from invalid patent infringement claims.
DEF filed a petition with the United States Patent and Trademark Office (“USPTO”) seeking to initiate an inter partes review (“IPR”) and cancellation of all claims in a patent owned by True Return Systems LLC (“TRS”). TRS is a patent troll who first tried to sell the patent as an NFT, and when that didn’t work, sued both “MakerDAO” and “Compound Protocol” in federal court for alleged infringement of U.S. Patent No. 10,025,797.
The patent, which was applied for and issued in 2018, claims to invent a process for bringing off-chain data on-chain, including the use of oracles.
Below is high-level information on what this all means and why we chose to get involved.
What is an IPR?
An Inter Partes Review is when a third party challenges the validity of a patent by asking the USPTO to convene a trial proceeding to review the claims in the patent. Among other requirements, an IPR petitioner must demonstrate that “prior art” existed before the patent application. “Prior art” is essentially publicly available writings (like a patent or whitepaper) that predate a patent and show the patent was not a new invention.
What is the timeline for an IPR?
Once an IPR petition is filed, the patent owner has the option to respond within three months. No later than six months after the IPR is filed, the USPTO must decide whether to accept the petition and move forward with review of the patent. Once a review is initiated, the USPTO must make a decision within one year.
Who is True Return Systems LLC?
TRS is the holder of U.S. Patent No. 10,025,797 being challenged in DEF’s petition.
What is patent ’797?
The TRS patent claims to invent a “method and system for separating storage and process of a computerized ledger for improved function.”
TRS applied for the patent in March 2018 and its application was granted in July 2018.
The patent is valid for 20 years, ending March 16, 2038.
How is DEF challenging the patent?
In our petition, we demonstrate to the USPTO that the technology described in the patent was not new or unique at the time the patent was granted, and, in fact, there was prior art in circulation prior to its issuance.
The prior art we cite includes a patent from NASDAQ that links price data off-chain to on-chain transaction history, and was published more than a year prior to March 2018. We also cite applications of the technology in medical record storage and distribution, Internet-of-Things data storage and indexing, and decentralized service marketplaces:
IPFS, introduced in a 2014, allows linking between IPFS off-chain storage and blockchain smart contracts
SIA, introduced in 2014, provides for a blockchain-based network that aims to create a secure and decentralized cloud storage system
Storj, introduced in 2016, provides a decentralized cloud storage platform that utilizes blockchain and peer-to-peer technology to create a secure and cost-effective storage solution (EX1023); and
Swarm, introduced in 2016, provides a decentralized and distributed file storage system that offers a decentralized storage solution for smart contracts.
Why is DEF Challenging the Patent?
To defend people’s ability to use and develop open source software.
To invalidate efforts by TRS to sue additional crypto projects and hopefully add to the defense of the suits against MakerDAO and Compound.
TRS filed lawsuits against MakerDAO and “Compound Protocol” alleging that they engaged in patent infringement. Given the decentralized nature of the defendants TRS went after, TRS tried to create an easy path to a default judgment that it could then try to enforce against token holders.
The current dockets for the federal court cases can be found here: TRS v. Compound Protocol, TRS v. MakerDAO.
DEF will be sure to keep the community informed on the progress of this IPR. If you have any questions or would like to learn more about this matter, please do not hesitate to reach out.
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