Cryptocurrency exchange Coinbase has found itself in a difficult legal position after blockchain software company Veritaseum Capital accused it of infringing a patent related to its blockchain technology and is now seeking $350 million in damages.
According to a lawsuit filed Thursday by US law firm Brundidge & Stanger in Delaware District Court, Veritaseum alleges that Coinbase infringed its patent on its crypto-payment transfer technology, known as “Patent 566.”
Veritaseum said the patent relates to “new devices, systems, and methods” that allow parties to “enforce value transfer agreements” with “little or no trust” in each other, and claims Coinbase has used this for many of its blockchain infrastructure services. :
“The defendants’ infringing activities include, but are not limited to, website […] Coinbase Android Mobile Wallet […] iOS Mobile Wallet […] Coinbase Cloud, Coinbase Commerce APIs, query, transaction, sharing, delegate and verification software Health, Coinbase Pay, Coinbase Wallet, and public verification tools operated by Coinbase.”
The law firm also explained that the patent covers a Proof-of-Stake (PoS) and Proof-of-Work (PoW) blockchain, which can provide cryptocurrency payment transfer, trading and storage services on chains backed by these consensus mechanisms.
Veritaseum justified the $350 million figure by saying that Coinbase “made significant profits as a result of the breach” and that Veritaseum Capital “incurred losses as a direct and immediate result.”
Lawyers also noted that Veritaseum sent Coinbase a warning letter earlier in July about the alleged breach, adding:
“Defendant knew in advance, should have known, or at least willfully overlooked Patent 566. Respondent was notified of Patent 566 on or after July 3, 2022, from other sources or parties.”
In July, Vertiaseum’s “Coinbase: Forensic Analysis & Deep Dive” report suggested that unlike Coinbase, there may be “centralized and decentralized digital asset exchanges” using Veritaseum’s “unlicensed patented intellectual property”.
Related: Coinbase receives two new cases as part of the SEC investigation
According to the court document, 566 patents were granted to Vertiaseum founder Reginald “Reggie” Middleton and co-author Matthew Bogosian by the US Patent and Trademark Office on December 7, 2021. However, Vertiaseum did not say how long Coinbase allegedly used the patent. . 566 each.
Veritaseum Capital has also requested a jury trial in Delaware as the preferred means of resolving the dispute.
Cointelegraph has contacted Coinbase for comment but has received no response at press time.