DeFi Education Fund Ends Lawsuits Against MakerDAO and Compound by Acquiring Key Patent

In a move hailed as a victory for open-source innovation, the DeFi Education Fund (DEF) has stepped in to resolve a potentially crippling legal battle within the decentralized finance (DeFi) space. How? By acquiring a key patent that was being used to sue MakerDAO and Compound, two of the most prominent DeFi protocols. Let’s dive into what this means for the future of DeFi.

DeFi Education Fund Acquires Patent: What Happened?

The DeFi Education Fund (DEF) successfully acquired a patent from True Return Systems (TRS), effectively putting an end to lawsuits against MakerDAO and Compound Protocol. This patent describes a “method and system for separating storage and processing” of a computerized ledger. The acquisition prevents future legal actions regarding this technology.

The Patent in Question

Granted by the US Patent and Trademark Office in 2018, the patent focuses on enhancing the functionality of computerized ledgers by separating storage from processing. True Return Systems (TRS) then used this patent to accuse MakerDAO and Compound of infringement, arguing that their systems, which connect off-chain data to blockchains, violated the patent’s terms. This connection is vital for DeFi operations, making the lawsuit a significant threat.

DEF to the Rescue

On Monday, DEF announced that it had “reached an agreement” with TRS to buy the patent, leading to the immediate dismissal of the lawsuits. Amanda Tuminelli, DEF’s chief legal officer, stated that DEF plans to make the patent public. This ensures it cannot be used to sue other projects using oracle technology. As Tuminelli said, “We are pleased to announce we have purchased the patent from True Return Systems that was being used to sue MakerDAO and Compound. As a result, TRS will dismiss its lawsuits.”

A History of Legal Wrangling

True Return Systems, with patent inventor Jack Fonss, initially filed lawsuits against MakerDAO and Compound in late 2022. They alleged that these organizations violated their patent, which covers a system for “storing, creating, monitoring, and managing data in distributed ledgers.” The system improves functionality by separating and linking modular data storage and processing.

Patent as an NFT?

In a surprising twist, Tuminelli revealed that TRS had attempted to sell the patent as an NFT on OpenSea. Initially listed for 2,250 WETH (approximately $6 million), it was later reduced to 1,250 WETH ($3.3 million) due to a lack of offers. This move highlights the evolving landscape of intellectual property in the digital age.

Why This Matters

Tuminelli criticized the idea of patenting widely used technology like oracle technology, stating, “Patenting widely used technology like oracle technology contradicts open-source development principles.”

By purchasing the patent and making it public, DEF reinforces its commitment to open-source values. This action aims to shield the DeFi community from similar lawsuits and foster innovation without the looming threat of patent infringement. It also underscores the inherent tension between proprietary claims and the collaborative ethos of blockchain technology.

Looking Ahead

True Return Systems has filed a voluntary dismissal of its lawsuits against MakerDAO and Compound following the agreement with DEF. By acquiring and dedicating the patent to the public, DEF aims to protect the DeFi ecosystem from further litigation.

This resolution sets a precedent for handling disputes over foundational blockchain technologies. It balances intellectual property protection with the open-source ideals that drive innovation in the crypto space.

Key Takeaways

• Protection of Open-Source Values: DEF’s actions directly support the open-source nature of DeFi, preventing proprietary claims from stifling innovation.
• Reduced Legal Risk: By making the patent public, DEF significantly lowers the risk of future lawsuits targeting similar technologies.
• Encouragement of Innovation: Developers can now build and experiment freely without the fear of patent infringement, fostering a more vibrant and dynamic DeFi ecosystem.

In Conclusion

DEF’s acquisition of the patent from True Return Systems represents a pivotal moment in resolving conflicts within the DeFi sector. By ensuring the patent is publicly available, DEF seeks to cultivate an environment where developers can innovate freely, reinforcing the fundamental principles of decentralization and innovation within the blockchain community. This move not only resolves immediate legal threats but also sets a positive trajectory for the future of DeFi.