Blockchain Patents and Litigation — Updated May 2023

Blockchain had a challenging year but continues to grow as a technology with broad applicability. Here, we update our previous article on the state of blockchain patents and patent litigation with an overview of the landscape of patents and patent litigations in the space.

Filing and Allowance of Blockchain Patents Slows

The number of new patent applications filed and published stabilized in 2022 and looks to plateau by the end of 2023. This leveling-off was not unexpected after the exuberance for everything crypto that continued into late 2021 cooled. Further, this leveling-off will likely continue as we get farther from the start of the crypto bear market. The steepness of decline in the graph below is due to only having partial data for 2023.

Patent Applications Published and Patents Issued for Blockchain Technology on an Annual Basis

 _{https://www.lens.org/lens/search/patent/analysis?q=blockchain,%20%22distributed%20ledger%22}

Despite the slowing of patent applications, many new patents are still being granted, and there are now nearly 10,000 issued blockchain patents.

Cumulative Patents Issued for Blockchain Technology

Number of Blockchain Patent Litigations Increases

As we anticipated in our 2021 article, more patent litigation related to blockchain has started as companies may want to extract value from their patents. Since then, several new cases that will impact the future of blockchain patent litigation have been filed.

The issue of patent eligibility (i.e., 35 U.S.C. §101) remains an important hurdle for blockchain patents in litigation. As we discussed previously, the district court case of Rady v. Boston Consulting Group, LLC served as an initial test case, where the court found the claims patent ineligible. While patent ineligibility has continued to be a universally asserted defense in blockchain patent cases, most accused infringers have not immediately moved to dismiss the complaint based on patent eligibility. This follows a general trend where courts are more inclined to look at this issue later in the case after the factual record has been developed, particularly when a patentee has alleged facts supporting patent eligibility in its complaint.

TD Professional Services v. Truyo Incorporated et al.^[1]

TD Professional accuses Truyo of infringing two of its patents because its platform uses blockchain to assist in complying with the European Union’s General Data Protection Regulation (GDPR). The case is currently the most progressed patent case that directly involves blockchain technology, as the court has issued a claim construction order. The order construed numerous blockchain-related terms such as “blockchain miners” and “private blockchain.”

While the plaintiff did not move to dismiss the case based on patent eligibility, the court relied on multiple citations to responses by the patentee to Section 101 rejections in its claim construction order. It will be interesting to see whether the defendant moves on patent ineligibility during summary judgment, given that the U.S. Patent and Trademark Office (USPTO) considered the issue of patent eligibility and confirmed the claims.

Veritaseum Capital, LLC v. Coinbase Global et al. / Veritaseum Capital, LLC v. Circle Internet Financial Limited et al.^[2]

Veritaseum asserts its patent in two cases against Coinbase and Circle, with both being accused of infringement for their running of validators in proof-of-stake (PoS) blockchains like Ethereum.

In its case, Coinbase filed a motion to dismiss, alleging that Veritaseum’s infringement claims were implausible on their face and that the asserted claims were patent ineligible. Specifically, Coinbase alleged that the claimed subject matter is directed to the abstract concept of processing economic transactions using a decentralized digital currency network without needing a trusted intermediary. Coinbase argued that the claims fail to recite an inventive concept because they rely on generic computer components and data, recite conventional blockchain features, such as a distributed ledger, and use generic public key encryption techniques. This motion has not been ruled on yet. An interesting turn from this case is that an order in another case indicated that Veritaseum might not have standing to sue because the inventor had improperly assigned the patent to himself, an issue that is currently subject to discovery. The case is presently stayed to allow the plaintiff time to hire new counsel after the passing of his attorney.

In the later-filed case against Circle, Circle filed a motion to dismiss for (1) lack of personal jurisdiction because Veritaseum did not name Circle’s U.S. entity and (2) lack of standing because the same issue related to the patent being improperly assigned. This motion was not fully briefed because the case was also stayed to allow the plaintiff time to hire new counsel.

Pardalis Technology Licensing, L.L.C. v. International Business Machines Corporation^[3]

This case involves seven patents on tracking and controlling a supply chain distribution system using an “immutable ledger” asserted against many IBM blockchain products, including those involving the well-known Hyperledger technology. IBM answered the complaint and asserted that the patents were not infringed and were invalid on multiple grounds. The court has issued a schedule in the case, and the trial is scheduled for August 2024.

Forte Labs, Inc. v. Pocketful of Quarters, Inc.^[4]

Here, Forte requested a declaratory judgment that Pocketful of Quarters’ (PoQ) patent related to blockchain gaming is invalid and, therefore, not infringed by Forte. Forte alleged that the claims were directed to patent-ineligible subject matter and that there is invalidating prior art. Forte further alleged that it was in reasonable apprehension of being sued because the COO of PoQ stated at a conference that Forte infringed the patent and had copied PoQ’s technology. PoQ has moved to dismiss the request for declaratory judgment because it claimed that it was an “off the cuff” statement at a conference and it was not reasonable for Forte to believe it was about to be sued. The motion is currently awaiting action by the court.

True Return Systems, LLC v. MakerDAO / True Return Systems, LLC v. Compound Protocol^[5]

These cases involve True Return’s assertion of a patent against two distributed organizations. These cases have a complicated history that we previously examined here. Since that article was published, Compound Labs Inc. has requested to intervene in the case against the “Compound Protocol,” arguing that the protocol is “just software” and that Compound Labs is the real party in interest.

^[1] _{TD Pro. Servs. v. Truyo Inc., No. 2:22-cv-00018-MTL (D. Ariz.).}

_{[2] Veritaseum Cap., LLC v. Circle Internet Fin. Ltd., No. 2:22-cv-00498-JRG-RSP (E.D. Tex.), and Veritaseum Cap., LLC v. Coinbase Glob., Inc., No. 1:22-cv-01253 (D. Del.).}

^[3] _{Pardalis Tech. Licensing, L.L.C. v. Int’l Bus. Machs. Corp., No. 2:22-cv-00452-JRG-RSP (E.D. Tex.).}

^[4] _{Forte Labs, Inc. v. Pocketful of Quarters, Inc., No. 4:22-cv-04982-YGR (N.D. Cal.).}

^[5] _{True Return Sys., LLC v. MakerDAO, No. 1:22-cv-08478-VSB (S.D.N.Y.), and True Return Sys., LLC v. Compound Protocol, No. 1:22-cv-08483-JPC (S.D.N.Y.).}