Publicly listed crypto exchange Coinbase is in legal hot water as it has been accused of patent infringement by Vertiaseum Capital, a blockchain-based software company.
The patent relates to blockchain technology and the company is now seeking damages worth a whopping $350 million.
The lawsuit was filed in the US District Court of Delaware on Thursday by Brundidge & Stanger, a law firm based in the United States.
It alleges that the US-based crypto exchange, Coinbase infringed on the ‘566 Patent’ that belongs to Vertiaseum and is related to crypto payment transfer technology.
According to the blockchain firm, the patent is related to novel methods, systems and devices that allow parties to implement value transfer agreements that have no or little trust between each other.
The company has alleged that Coinbase used this patent for offering a number of its blockchain infrastructure services.
These include Coinbase’s website, its iOS and Android mobile wallet, Commerce APIs, Coinbase Cloud, Coinbase Wallet, Coinbase Pay, Query and Transact, Validator, Delegate and Participate software as well as their Public Validators.
The law firm also stated that the patent can be used with both proof-of-work (PoW) and proof-of-Stake (PoS) blockchains.
These can allow the transfer of crypto payments, staking as well as trading services on chains that these consensus mechanisms support.
The demand for damages worth $350 million was also justified by Vertiaseum, as it argued that the infringement had allowed Coinbase to make substantial profits.
It also said that because of the infringement, Vertiaseum Capital had had to suffer damages. The attorneys also said that the company had also sent Coinbase a letter in July.
The company had warned Coinbase about the alleged infringement in the said letter. This meant that the defendant was aware of the patent’s existence at least from July 3rd, or may have known earlier as well.
A report by Vertiaseum in July showed that there could be other digital asset exchanges, both centralized and decentralized, which may be using its patent, along with Coinbase.
The court document highlighted that on December 7th, 2021, the US Patent and Trademark Office awarded Patent 566 to two people.
One of them was Reginald ‘Reggie’ Middleton, who is the founder of Vertiaseum and the other was Matthew Bogosian, the co-inventor.
However, the company did not mention in the lawsuit as to how long Coinbase had been using Patent 566.
In its filing in the court in Delaware, Vertiaseum Capital also asked for a trial by jury as its preferred method of resolving the dispute.
This is certainly not good news for Coinbase, which is already facing a great deal of problems for now. Its trading volumes have declined significantly this year because of the crypto winter.
Therefore, the exchange has been forced to lay off a significant part of its workforce in the midst of expanding its services in Europe.
Likewise, it has also found itself in some trouble with the Securities and Exchange Commission (SEC) over its token listings.