Amidst a wave of success and optimism engulfing the DeFi movement in recent months, a thorny issue has also reared its head. Several prominent DeFi groups have recently launched a petition to urge authorities to take action against alleged “patent trolls” who are targeting DeFi protocols. The offenses of these trolls have become a primary cause for concern, prompting the petition as an effort to combat them.
1. Petitioning to Stop Patent Trolls From Targeting DeFi Protocols
Patent trolls targeting DeFi protocols is an issue that needs to be addressed sooner rather than later. In recent news, patent trolls have filed lawsuits against various decentralized finance (DeFi) protocols, citing patent infringements.
Economic Impact of Patent Trolls
Patent trolls are able to exploit loopholes in the system to collect large sums of money from innocent projects, leading to economic losses worth billions of dollars. The money involved in the patent troll lawsuits is usually drained from small businesses, startups, universities, and even non-profit organizations. It is time to take more proactive steps to prevent patent trolls from preying on the DeFi protocols.
Initiatives Taken to Prevent Patent Trolls
Different initiatives have been taken to address this problem. These include:
- Creating and investing in a Patent Troll Defense Fund
- Winnowing out cases involving weak and frivolous patents
- Educating the industry on effective approaches to combating patent trolls
- Adding additional resources and personnel to enforcement
The US Congress is also pushing for legislation aimed at better protecting small companies and organizations from patent trolls. This includes reforming patent law to reduce the incentives that plantiffs have to sue. The proposed legislation will also require plantiffs to provide detailed information about what patents they believe are being infringed and why.
Unfortunately, many DeFi protocols still remain vulnerable to patent troll attacks. It is important to unite the community and raise public awareness of the issue via petitions and other campaigns. If enough people sign the petitions, it could lead to a successful campaign to stop patent trolls from targeting DeFi protocols.
2. Roundup of Recent “Patent Troll” Cases Targeting DeFi
The recent flurry of patent trolling activity has been particularly prominent within the decentralized finance (DeFi) industry. These are some of the notable cases targeting DeFi in the past year.
Lattice Exchange
- Lattice Exchange, a startup building infrastructure for trading digital assets, was targeted by a patent troll which alleged that its automated liquidity protocol technologies infringed its patent.
- The patent troll filed a lawsuit demanding a licensing fee and damages.
- Lattice Exchange was able to have the case dismissed in federal court, with the judge ruling that the patent was invalid.
bZx Protocol
- The bZx protocol was targeted with a patent infringement claim in December 2020.
- The patent troll alleged that the protocol was in violation of the patent it held.
- The legal representation for bZx denied the patent troll’s allegations and proposed a countersuit.
Synthetix Network
- Synthetix Network, a decentralized derivatives trading platform, was targeted with a patent infringement suit in June 2020.
- The suit claimed that the platform infringed the patent’s claims regarding automation technology.
- Synthetix Network responded by filing a motion to invalidate the patent, which has yet to be resolved.
3. DeFi Group Demands Increased Repercussions for Abusive Patent Claims
A group of Decentralised Finance (DeFi) protocols and users, representing the industry, has called on governments to increase legal repercussion for companies or groups who make abusive patent claims. To achieve this, the DeFi Group asked policy makers to revise existing patent laws.
The malpractice of patent aggression, such as the filing of bogus claims or threats against competitors, is a growing issue within the digital finance industry. In response to such acts, the DeFi group has proposed legislative measures to ensure that patent law works to encourage innovation rather than inhibit it.
The group has detailed the following actions needed to make patent laws more punitive against aggressive actors:
- An increased focus on curtailing abuse: The group suggests more stringent measures should be put in place to ensure patent applicants are genuine innovators and not aggressive actors.
- A more proactive stance on patent abuse litigation: Governments should become more proactive in seeking out and sanctioning those who file of malicious patent claims.
- A shift away from punitive fee structures: The patent process should not act as a financial penalty to applicants and so the DeFi Group calls for a change in fee structures to avoid creating a financial disincentive.
The DeFi Group’s calls for legislative action is aimed at preventing abusers from leveraging patent to gain unfair advantage while safeguarding those who are developing innovative products in the DeFi space.
4. Legal Strategies to Address “Patent Trolling” in DeFi Space
The decentralized finance (DeFi) space has experienced a significant rise in “patent trolling” in recent years. Patent trolling refers to a situation in which people or companies claim ownership of existing technology or ideas in an attempt to make a profit and/or stifle innovation. The aim of this article is to consider the legal strategies available to address this issue.
As a starting point, DeFi participants should keep a close eye on patent filings to ensure their ideas are not being misappropriated. Additionally, a comprehensive review of existing patents and patent applications in the space should be conducted to identify any potential patents that could be used to harass DeFi participants. This review should also include the filing of provisional patent applications to protect the innovator’s ideas, should a patent troll come knocking.
Finally, DeFi participants should consider the strategic elements of defense against potential patent trolls. This includes filing for summary judgments against those who have misappropriated ideas, invalidating the troll’s patents, and raising defenses based on prior art. Additionally, other legal strategies may be available, such as:
- Negotiating licensing agreements
- Filing of defensive patent applications
- Challenging the validity of a patent at the United States Patent and Trademark Office
- Enforcement of antitrust or unfair competition laws
Ultimately, the best protection against patent trolling lies in education and preparation. DeFi participants should take the time to understand the basics of patent law and the legal strategies available to protect against potential infringement, as well as their own internal process to protect their own intellectual property.
As the DeFi protocol looks to dig in and defend itself from the patent trolls, this DeFi group has made the choice to seek legal action and has the community behind them. Whether or not they will be successful is yet to be seen, but this could have huge implications for the future of DeFi protocols. As such, this is a battle that will be watched closely by the DeFi community and the blockchain space as a whole.