Bitcoin miners sued over cryptography patents in US court case

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Malikie Innovations, a firm that acquired tens of thousands of patents from BlackBerry in 2023, has sued major Bitcoin mining firms Marathon Digital and Core Scientific for using the Elliptic Curve Cryptography (ECC) employed by the Bitcoin blockchain, which it claims to own.

The cases against Marathon Digital Holdings and Core Scientific follow Malikie Innovations’ acquisition of 32,000 ‘non-core’ patents from a communications firm and former phone maker, BlackBerry, in 2023.

“This case centers on ground-breaking innovations in elliptic curve cryptography […] that years later were recognized and selected by the designers of Bitcoin,” the filings state.

The lawsuit claims the defendants are using ECC-based cryptographic methods covered under the Malikie-held patents to support their Bitcoin (BTC) mining operations.

Are Bitcoin users in danger?

Aaron Brogan, founder and managing attorney at Brogan Law, told Cointelegraph that it is unlikely that such lawsuits will hit most individual Bitcoin users, even if the patents were found to be valid:

“Pursuing individuals is trickier because they are often ‘judgment-proof,’ which is lawyer jargon for broke.“

Miners, on the other hand, are wealthy targets that are worthy of a lawsuit. Brogan said “these entities will always tend to attract lawsuits because they have money, and the patent bar can try to take it from them.“

If the plaintiffs prevail, they will be able to recover up to six years of lost royalties. The sum that it translates to is not easy to calculate and often results in a secondary trial, “but you can reasonably assume it would be a large sum, and it might cause these defendants to enter bankruptcy,” Brogan added.

Large-scale consequences

Brogan also noted that winning the case would establish a favorable precedent for Malikie to use in pursuing cases against other miners in the United States. This, in turn, could have disastrous consequences for Bitcoin.

“If they chose to pursue that strategy, it might undermine the security of the Bitcoin network,” he said.

Still, Brogan argued that Malikies is more likely to try to extract a fee until the patents expire, rather than tank the entire industry altogether. Niko Demchuk, head of legal at cryptocurrency compliance and forensics firm AMLBot, told Cointelegraph that this scenario is unlikely:

“Malikie’s claim appears not so strong if the asserted patents are expired or cover techniques that predate Bitcoin’s ECC implementation. Even if some patents remain active, their scope is likely limited to specific implementation details, not the core ECC algorithms used in Bitcoin,“ Demchuk said. Still, nothing is certain, he added:

“However, the outcome depends on the details of specific patents asserted and the court’s interpretation of their scope.“

This is not the first time that intellectual property-related lawsuits have targeted Bitcoin. The bitcoin.org website was able to reupload a copy of the Bitcoin white paper little over a year ago after it was taken down during Craig Wright’s unsuccessful court attempt to prove he is Satoshi Nakamoto, the protocol’s pseudonymous creator.

Wright has been hard at work trying to claim ownership of key parts of the technology behind Bitcoin. In the two years preceding 2019, he had filed 114 blockchain-related patents.

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