A playbook for combating patent trolls

By Paul Grewal, Chief Legal Officer

Coinbase just lately gained a case in opposition to a very aggressive patent troll. Today, we wish to share a few of what we discovered on this battle — and what we’re doing to assist extra firms within the crypto neighborhood and past stand as much as trolls as nicely.

What are patent trolls?

As a former federal Justice of the Peace choose, let me be clear: circumstances with benefit deserve their day of their courtroom. But patent trolls convey circumstances whatever the deserves and have a easy enterprise mannequin. Instead of really constructing one thing, they purchase up patents after which leverage the price of protection to drive settlements.

Defending in opposition to a troll lawsuit can value thousands and thousands of {dollars}, irrespective of how bogus the claims. Many firms can’t afford to battle, particularly smaller startups. Not surprisingly, nearly 90% of firms sued by trolls select to settle.

In many circumstances, trolls don’t win some huge cash. But they will win sufficient to do actual injury to the businesses they sue as a complete as a result of the prices add up. In the U.S. alone, firms spend as much as $30 billion a yr combating patent trolls — cash they may very well be utilizing to rent expertise or put money into analysis and growth.

That’s mistaken. The crypto neighborhood specifically was constructed on innovation, and our future is determined by firms of all sizes with the ability to do necessary work. No firm, massive or small, ought to need to reside in worry of a frivolous lawsuit filed by a patent troll. And no troll ought to have the ability to stall progress simply because it normally prices extra to defend a case than to settle it.

How to conquer a troll

So what can we do about it?

Trolls are notoriously arduous to conquer. Even if trolls solely win a fraction of their circumstances, the occasional win can present them with greater than sufficient funds and monetary incentive to launch many extra. On the opposite aspect, dropping only a single case to a troll might be financially devastating to many firms, which unfairly incentivizes firms to settle even frivolous troll circumstances that concentrate on the corporate’s core enterprise.

At Coinbase, we’re lucky sufficient to have attorneys and sources to aggressively battle again in opposition to patent trolls. In our most up-to-date case, we didn’t even look forward to the patent troll to sue us — we sued them first and filed a further motion to invalidate their patents on the Patent Office. When all was mentioned and achieved, we didn’t pay them a single cent. But the troll who attacked us can nonetheless go after different firms, together with some that is likely to be too small to place up a battle.

That’s why the one method to really beat patent trolls is by going after them relentlessly, and by working collectively to weaken them as a lot as attainable. Here’s what that appears like in follow:

The anti-troll playbook

Step 1: Hit again arduous

One key to combating trolls is to be as aggressive as attainable.

Cloudflare is an effective instance. In 2017, the corporate was sued by a patent troll. But as a substitute of settling, Cloudflare fought again arduous — refusing to pay, and placing out a public name for proof that might invalidate not simply the patent getting used in opposition to Cloudflare, however the entire troll’s patents. It labored, they usually’ve taken an identical method to combating different trolls.

At Coinbase, we’re following Cloudflare’s lead. If we’re sued by a patent troll, we’ll all the time battle again. We may also do as a lot as attainable to invalidate a troll’s patents and refuse to pay merely for peace.

This will probably be costly and time consuming for us as nicely. But we take critically our duty as advocates for our clients, for our innovation, and for the crypto trade as a complete. We gained’t cease combating trolls and every other organizations that wish to use patents to stifle innovation in your entire crypto neighborhood.

Step 2: Cooperation is extra highly effective than competitors

To make the battle in opposition to trolls profitable, we are able to’t afford distractions. Companies have to keep away from patent fights with different innovators.

This could sound apparent, however it’s necessary. Crypto is constructed on the concept we’re stronger collectively than any of us might be on our personal. That applies to financial alternative, however it additionally applies to innovation.

At Coinbase, we respect legitimate mental property rights. But we’ve pledged to solely use our patents defensively to guard our model and our clients. In different phrases, we consider cooperation is extra highly effective than competitors — and we don’t need any patent wars in crypto, ever. Patent fights in our area simply waste cash that may very well be invested in creating revolutionary merchandise for our clients.

That’s one of many explanation why we co-founded the Cryptocurrency Open Patent Alliance, also called COPA. While COPA isn’t centered on combating trolls, it’s a non-profit neighborhood shaped to encourage innovation in crypto and to take away patents as a barrier to progress and innovation. We encourage anybody who desires to keep away from patent wars in crypto to affix COPA.

Step 3: Take away the troll’s targets

Beyond working collectively and pushing again aggressively in opposition to trolls, we additionally have to make it tougher for trolls to assault firms within the first place.

That’s the thought behind organizations just like the LOT community. LOT is a gaggle of firms which have joined forces to guard themselves — and one another — from trolls. If a patent owned by a member of the community falls into the mistaken palms, the corporate that misplaced the patent agrees to license it to all different members of the group earlier than a troll can use it.

In follow, which means a troll can’t use a patent they acquired from one firm to sue one other firm within the LOT community. It’s a method for greater firms to guard smaller firms, and for smaller firms to guard themselves. Right now, there are greater than 1,900 members of the LOT community holding a mixed 3.3 million patents and climbing. And the larger the community will get, the extra highly effective it’s going to be.

That mentioned, we notice that many firms don’t have the finances to affix a company like LOT. So we requested LOT what they may do to make it simpler, they usually agreed to increase a free one-year membership to everybody in our ecosystem — together with your entire crypto neighborhood, COPA members, our enterprise companions, and our institutional purchasers. Reach out to us at patents@coinbase.com for those who fall into any of those classes and also you’re concerned about LOT.


We will hold combating patent trolls as arduous as we presumably can — not simply to defend Coinbase, however to guard the broader crypto neighborhood. It’s the one method we’ll beat patent trolls as soon as and for all, and we hope you’ll be part of us.

A playbook for fighting patent trolls was initially printed in The Coinbase Blog on Medium, the place individuals are persevering with the dialog by highlighting and responding to this story.

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