Coinbase sued for patent infringement over crypto transfer technology

A representation of the cryptocurrency can be seen in front of the Coinbase logo in this March 4, 2022 illustration. REUTERS/Dado Ruvic/Illustration/File Photo

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  • Lawsuit alleges multiple Coinbase services infringe blockchain patents, seeks $350 million
  • Plaintiff Veritaseum paid SEC fees through its cryptocurrency token

(Reuters) – Cryptocurrency exchange Coinbase Global Inc is facing a patent lawsuit related to its digital trading technology, filed by a crypto company whose digital token offering led to a settlement with US securities regulators in 2019.

The lawsuit, filed by Veritaseum Capital LLC in federal court in Delaware on Thursday, alleges that Coinbase infringed on a patent granted to Veritaseum founder Reggie Middleton by the U.S. Patent and Trademark Office last December.

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Veritaseum Capital has accused several Coinbase services, including its blockchain infrastructure used to validate transactions, of infringing the patent. It sought at least $350 million in damages from the court.

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Coinbase, one of the world’s largest cryptocurrency trading platforms, did not immediately respond to a request for comment on Friday.

Veritaseum used to issue the token VERI. In 2019, Middleton and two of its Veritaseum units paid the Securities and Exchange Commission more than $9.4 million, including a $1 million fine against Middleton himself to avoid charges of “scheduling fraudulently.” “ to settle the sale of the token in 2017 and 2018.

Among other things, the SEC had accused them of misleading investors about the demand for the tokens and manipulating their price. They agreed to the settlement without denying or admitting the underlying allegations.

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Middleton and Veritaseum argued in federal court in Brooklyn in early 2019 that they had made no fraudulent statements that the tokens were not securities and that the disputed trade “was actually an attempt by Mr. Middleton to test a new online cryptocurrency exchange.”

Veritaseum’s website states that it is “building blockchain-based peer-to-peer capital markets as software on a global scale.” Thursday’s lawsuit alleges that Coinbase features, including its website, mobile app, and Coinbase’s cloud, pay and wallet services, infringe a patent covering a secure method of processing digital currency transactions.

Veritaseum Capital’s attorney, Carl Brundidge of Brundidge Stanger, said Friday that Coinbase had been “uncooperative” when they attempted to settle out of court.

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Middleton and Veritaseum separately sued T-Mobile in 2020, claiming the telecom company’s security flaws led hackers to steal $8.7 million worth of cryptocurrency from them. T-Mobile denied the claims, and the case was referred to arbitration in August.

The case is Veritaseum Capital LLC v. Coinbase Global Inc, U.S. District Court for the District of Delaware, No. 1:22-cv-01253.

For Veritaseum: Carl Brundidge and David Moore of Brundidge & Stanger

For Coinbase: not available

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Blake Britain

Thomson Reuters

Blake Brittain reports on intellectual property law, including patents, trademarks, copyrights and trade secrets. You can reach him at [email protected]

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