I never post here, because I’m on our firm’s investment team so please advise if there’s a better board.
This letter claims a Compound patent infringement, but my lawyer says that a DAO’s 99.99% immune from any legal liability as long as the user terms of use are complete. Compound terms looks good.
Does anyone know the Andreessen’s paper referenced in this letter? Can we get them (a16z?)
to revise or correct their paper? It’s not constructive and probably inaccurate.
Given my lawyer’s analysis, I’d only [MAYBE] be concerned about a DAO tax liability or U.S. taxable connect
I may not be a lawyer, but I do have a computer science degree and I often read academic papers. Patent No. US 10,025,797 B1 describes a system so general, vague, and incomplete that their “patented system” loosely describes smart contracts, off-chain oracle networks such as Chainlink, Merkel proofs, L2 scaling solutions, IPFS hashes, proof of history, and much more all at the same time, without going into any specifics.
Definitely a patent troll.
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Thank you for the sanity check. I usually skip over the patent story and go right to what they are claiming.
Some of the documentation I’ve seen is narrowly focused on oracle data and where and how it is stored. I have not dug into the Compound details yet. I have been focusing on Maker DAO. For Maker, they appear to be directing their arguments at Maker’s Oracle Security Modules from a couple of years ago. Maybe they are too late?
Patent guys argue over claims language and these guys have prepared tables where they compare the patent statements to Makers (and presumably Compound’s) documents. If there are lots of claims, there is always a risk that some survive, particularly when old patents surface unexpectedly.
I think we like the argument that Maker and Compound are each a DAO, and a DAO is not something that you can legal serve or sue. The Achilles heel for patent owners is finding the one company thats infringing. Best case here it is a DAO’s codebase, which too bad for them, isn’t that one company you would need to attach to.
My organization has a keen interest in supplying tools to DAOs and DEXes and controlling the IP for DeFi. I have seen this topic/intersection of DAOs and patents pop-up at the same time on a couple of sites.
(For completeness we have outstanding patent applications for defensive and strategic purposes.)
Here’s our take on the DAO-Patent angle:
If you shop around, you can find legal counsel who are both constructive on the fully decentralised nature of DAOs and their stateless nature. Here’s a summary of their guidance.
The best long run approach is not setting up a “corporate” entity at all and to rely on a fully decentralized structure. DAOs without a registered legal entity can theoretically operate outside most regs and sidestep nettlesome litigation. In most jurisdictions, they (DAOs) may be seen as general partnerships, but without any practical corresponding legal consequences.
While there may be risk of the personal liability of every participant, because the DAO has no legal personality, it can actually own assets and also employ people without risk of local law or regulation - consider it a shield.
When participants do not legally register a DAO as an LLC or Company, they constructively avoid creating a fully recognized legal entity in most jurisdictions that can sue and can be sued. This is often misunderstood. Most DAO operators agree with these positions.
Happy to answer any questions.
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Suggestions after reviewing the state of certain IP and exposures outside of ToS and normal operations:
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Compound Labs should assign its US and international patents on Compound to the community (pre- and post-grant is best)
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a16z’s DAO legal analysis should serve as the cornerstone of the community’s position relating to claims from outside entities including intellectual property, regulatory bodies, taxes, etc.
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Compound Labs should consider formally positioning itself as the gatekeeper for non-standard and non-recurring claims outside of Terms of Service, code, or COMP.
Patent Detail
Systems and methods for managing a money market of digital
US20210065300A1
Systems and methods for pooling and transferring digital
US20210065302A1
Systems and methods for managing a money market of digital
US20210065301A1
Labs should transfer IP relating to the protocol to the community.
a16z Paper Detail:
a16z.com
GateKeeper Detail:
Because Compound Labs continues to own and direct legal matters such as fighting for trademarking rights over the Protocol (Compound Labs, Inc. v. Alex Mack, Inc. 3:2020cv02370 | US District Court for the Northern District of California | Justia). Let’s make sure we have the benefit of centralized expertise and a centralized repository of legal resources. Generally it’s best for us to exhaust the resources of the Compound Lab’s team, before trying to mobilize the community on legal matters outside the code or ToS.
Done right, I think COMP and Compound can and should be the gold standard for legal organization, DAO intellectual property, and community protections.
