DeFi group petitions to stop ‘patent troll’ targeting DeFi protocols

A decentralized finance (DeFi) advocacy body has petitioned the United States Patent and Trademark Office (USPTO) to review a patent owned by a company it accused of being a a “patent troll” — a firm that aims to profit from patent lawsuits.

In a Sept. 11 blog post, the DeFi Education Fund (DEF) said on Sept. 7 that it filed an over 90-page petition to the Patent Trial and Appeal Board in a bid to cancel a patent owned by True Return Systems.

Granted in 2018, the patent lays claim to a process for “linking off-chain data to a blockchain,” DEF legal chief Amanda Tuminelli said in a Sept. 11 X (Twitter) post.

Tuminelli claimed True Return tried to sell its patent as a nonfungible token (NFT). After no buyer, it sued the DeFi protocols MakerDAO and Compound Finance in October.

“Clearly [True Return’s] goal was to name defendants who could not answer the complaint so [it] could get a default judgement,” Tuminelli said.

Responding to a request for comment, True Return’s founder Jack Fonss told Cointelegraph it didn’t believe “an inventor’s diligence over their own inventions is patent trolling.”

He said the suits against MakerDAO and Compound were a “matter of disclosures and not legal outcomes” and added as their tech was publicly disclosed “patent infringement assessments are readily doable and a practical necessity for an [intellectual property] owner.”

Fonss said the patent is based on “more than a decade of tech work” in the trading and operations of public equity and institutional derivative markets.

In its petition, Tuminelli claimed True Return would try to enforce the court’s ruling against token holders and repeat the process with other protocols “that either can’t challenge them in court or don’t have the resources to do so.”

DEF claimed True Return’s tech in the patent wasn’t new at the time it was granted and claims to highlight similar existing tech such as the InterPlanetary File System (IPFS) along with the decentralized storage platforms Sia, Storj and Swarm.

In comments to Cointelegraph, Fonss said True Return was familiar with the patents cited in DEF’s petition and claimed there is “often a perception vs. reality gap” in DeFi IP technology.

DEF said it launched the petition with USPTO to defend the ability to use and develop open source software, to stop any potential plans by True Return to sue crypto projects and help MakerDAO and Compound’s legal defense.

True Return has three months to optionally respond to the petition, after six months the USPTO must make a decision if it will move forward with reviewing the patent where it has 12 months to decide if the patent should be cancelled.

Fonss said True Return is now “preparing a complete response.”