DeFi Education Fund files petition over 'patent troll' lawsuits

The DeFi Education Fund is fighting back against lawsuits alleging patent infringement in a move to defend the cryptocurrency industry's ability to use open source software. 

The Washington D.C.-based advocacy group filed a petition late last week with the U.S. Patent and Trademark Office in a New York district court after a firm sued two decentralized autonomous organizations over alleged patent infringement. 

Connecticut-based technology company True Return Systems LLC sued both Compound Protocol and MakerDAO in October 2022 and said both DAOs knew about a patent and infringed on it. 

True Return holds a patent issued in 2018 that claims to "invent a process for bringing off-chain data on-chain, including the use of oracles," the DeFi Education Fund said in a statement on Monday. Oracles are third-party services that serve as bridges between blockchain and the real world. 

True Return says it "possesses the exclusive right to and standing to prosecute" for infringement, the firm said in its original complaints filed against MakerDAO and Compound Protocol.

The DeFi organization says the patent never should have been issued because it wasn't a new invention. It cited a Nasdaq patent that was filed more than a year before True Return's patent. 

The Nasdaq patent is very similar, and brings price feed data on chain, said Amanda Tuminelli, the DeFi Education Fund's chief legal officer. 

"All of us benefit, in crypto and outside of crypto, from open source software development," Tuminelli said. "It’s how we innovate, it's how people are able to improve on each other's technological developments. It is the opposite of open source ethos to patent something because what happens when you patent something is you get to say, this is mine, and nobody else gets to copy it."

"You don't see a lot of patents in crypto because people want to contribute to the growing open source development community," Tuminelli added. 

What comes next

DAOs are known for not being controlled by a single entity or person. 

"Unsurprisingly because they named a DAO in a protocol, nobody showed up in court to defend against the complaint. And it makes it very quick for a plaintiff to just get a default judgment when the defendant doesn’t show up," Tuminelli said. 

As of July, MakerDAO is represented by law firm Perkins Coie to fight the default judgment and is asking for more time. Compound Labs is now looking to intervene in the case with Compound Protocol and is represented by Morrison Cohen LLP. 

True Return Systems did not respond to a request for comment from The Block.