Texas LLC seeks to take on Coinbase by ‘weaponizing’ SMS messaging patent

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Quick Take

  • A Texas-based LLC is suing Coinbase for infringing on its patent of a type of SMS messaging technology with Coinbase’s text notification solution
  • Companies sometimes “weaponize” patents by pursuing patents then suing other companies that may infringe on them
  • If that is the case here, it’s indicative of the industry maturing, showing players are willing to spend more resources to pursue these sorts of tactics 

Disclaimer: These summaries are provided for educational purposes only by Nelson Rosario and Stephen Palley. They are not legal advice. These are our opinions only, aren’t authorized by any past, present or future client or employer. Also we might change our minds. We contain multitudes.

As always, Rosario summaries are “NMR” and Palley summaries are “SDP”.

We have one of the first patent infringement lawsuits involving a crypto player this week. A company is suing Coinbase for patent infringement in the District Court of Delaware. The patent at issue is not related to blockchain technology, but this is another sign of the blockchain industry maturing for reasons we’ll get into.

Presumably, everyone knows who Coinbase is, but who is Anuwave? Anuwave LLC is a company with its principal place of business in Frisco, Texas. For those unfamiliar, Frisco is located in the Eastern District of Texas, which is the location of a large percentage of patent infringement lawsuits. Really, Texas? Time for a little patent law sidebar.

Patents are often reviled in the open-source software community for reasons both good and bad. How can you get a patent on an idea? How can you sue someone for infringing your patent when it’s so obvious? Why is the world terrible? Like most things in life it’s complicated. For better or worse, patents are a part of the technology landscape at this moment in time, and they are becoming an ever-larger part of the blockchain and cryptocurrency landscape. The reality is that companies often file patents to cover their technology for defensive purposes, but other times they attempt to “weaponize” the patent system by filing patents for offensive purposes, i.e., suing people. Asserting patents and suing people for patent infringement has been big business in the Eastern District of Texas over the years.

Anuwave was granted a patent in 2012 for a “[m]ethod and system to enable communication through SMS communication channel.” That is just the title of the patent itself, and you can deduce that the patented technology relates to using SMS. What is actually covered by the patent is likely much narrower than what the title states broadly, because what is protected by a patent is chiefly limited to what is listed in the patent claims… and I’ve lost my audience. The point is, when you see someone cry out “that’s outrageous! you can’t patent SMS technology!” know that this patent is very likely much more limited in what it covers, but I digress.

Anuwave is asserting that Coinbase’s text notification solution is infringing on Anuwave’s patented technology. To prove their assertion, Anuwave has about 2-3 pages of argument detailing how they claim Coinbase is infringing Anuwave’s technology. It is worth noting that this is not a lot. In fact, at nine pages, this is a short patent lawsuit. It’s fair to assume that Coinbase’s response will be a bit more substantial.

So, why is this indicative of the industry maturing? Well, the growing number of patent filings in this space shows an increased amount of resources (time and money) being spent by companies operating in this space. Additionally, the fact that a company who monetizes its patent portfolio has deemed Coinbase as worthy of its attention shows that blockchain and crypto companies are on people’s radars. Does this mean we can expect an explosion of patent infringement litigation? Probably not, but they are definitely going to become more common.

The Block is pleased to bring you expert cryptocurrency legal analysis courtesy of Stephen Palley (@stephendpalley) and Nelson M. Rosario (@nelsonmrosario). They summarize three cryptocurrency-related cases on a weekly basis and have given The Block permission to republish their commentary and analysis in full. Part III of this week’s analysis, Crypto Caselaw Minute, is above.

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