The DeFi Education Fund (DEF) on Monday reached an agreement with True Return Systems (TRS) to purchase a patent for oracle-like technology. The disputed patent was at the heart of two legal complaints against MakerDAO and Compound, a pair of decentralized finance protocols.
An oracle is an entity that connects a blockchain to an external system, such as a digital-asset price feed, and is a critical tool in DeFi. The purchase ends the fight against the firm, which the DEF once characterized as a “patent troll.”
TRS had sued MakerDAO and Compound for using oracle-like technology in 2022, claiming ownership to a “method and system for separating storage and process of a computerized ledger for improved function,” according to DEF. But the advocacy group—as well as lawyers for both protocols—disputed those allegations, suggesting the patent lawsuit was overreaching.
“Oracle technology is very important to the DeFi space so… we see a potential issue that could result in developers or users having their rights infringed upon,” DEF chief legal counsel Amanda Tuminelli said Monday to Decrypt.
DEF declined to disclose the settlement amount, citing the “confidential” nature of the negotiations.
TRS’ lawsuits sought to bar the protocols from “making, using or selling” products based on oracle-like technology, court filings show. But that never came to be. TRS on Monday filed to terminate its lawsuits against the protocols. The decision came shortly after the firm agreed to sell its patent to DEF.
The patent purchase not only guarantees that MakerDAO and Compound can continue to use oracle-like technology to power their on-chain price feeds, but also ensures that other protocols can utilize the technology for a host of other applications, Tuminelli told Decrypt.
“Any protocol using Oracle-like technology… could [have been] next,” Tuminelli said. “Now, the patent can’t be used against anybody else.”
DEF said plans to dedicate the patent to the public, meaning every protocol will have the legal right to employ the oracle-like technology mentioned in its intellectual property filing.
DEF had been fighting the patent for years, filing a petition with the United States Patent and Trademark Office in late 2023 to invalidate TRS’ patent, in an attempt to nullify the basis for the lawsuits against MakerDAO and Compound.
“ICYMI, we petitioned the USPTO for the cancellation of a patent being used by a ‘patent troll’ to sue DAOs and ‘protocols,’” DEF said in an Twitter post last September. However, it eventually decided to purchase the patent, bringing an end to the matter more quickly.
“We thought the most efficient way to resolve everything—our petition and these two lawsuits—was to settle the case,” Tuminelli said.
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In conclusion, the resolution of the legal dispute between the DeFi Education Fund (DEF) and True Return Systems (TRS) marks a significant victory for decentralized finance protocols like MakerDAO and Compound. By acquiring the patent for oracle-like technology, DEF ensures that these protocols can continue to operate without fear of litigation. The decision to dedicate the patent to the public further solidifies the commitment to open access and innovation within the DeFi space.
