DeFI’s most significant legal victory to-date validates the DAO rope-a-dope strategy

DeFI’s most significant legal victory to-date is sadly buried in an obscure federal court docket - How DAO defenselessness (w/ the right friends) is a huge asset.

This quick blip of a matter may be the best living example of the theory that a DAO can sue (in an FDIC situation for example) but cannot practically be sued, because it can broadly sidestep proceedings and timelines and then achieve unconstrained defense by proxy.

In this case, there was a US patent holder claiming inventiveness over L2+ price data integrations, and the owner attempted to assert the patent against the DAO. In anticipation, DAO’s Foundation and their largest holders coordinated with The Crypto Council and US amici to challenge the patent holder - a proxy defense capitalizing on the DAO’s helpless victim quality theatrically enhanced with an outstanding default certificate. A default-certificate-rope-a-dope strategy.

After only a few days, the DAO’s amici legal team built a tidy argument based on claims of irregularities at the US Patent Office. Summarizing the argument pushed into the docket:

  • Plaintiff, an outsider, gets granted essential tech in the earliest days of DeFI (presented as improbable and raises questions of actual ownership and possible mischief)

  • Team claims evidence that the patent examiner knew the patent was invalid (through examination of the written record) and the patent should have gone through a year+ of review regardless (which it did not)

  • But the patent examiner granted the confirmed invalid patent anyway in record time without any public rejections or public review

  • Q.E.D., DAO’s team concludes that the process was compromised and the patent is invalid for any purpose

A legal matter which could have dragged on for months+ was concluded in days by appealing to the court that the DAO was, only days prior, defenseless…all while arranging post default attacks. The ultimate Judo move and an amici masterclass.


Forum Administrators: This Post “DeFi’s most significant legal victory…” is spreading a false and dangerous narrative - PLEASE DELETE OR REMOVE IF POSSIBLE.

This post appears to be inspired by U.S. law firm Sullivan and Cromwell’s (S&C) representation of MakerDAO and the Crypto Council in a patent matter with my firm. In a federal court filing, S&C writes that a US patent examiner granted the subject patent even though she knew the application to be invalid and the subject matter to be un-patentable. Similar to this post, a number of forum and social media contributors are running with this conspiracy in an unhelpful way.

Very oddly, S&C either misunderstands or has misrepresented the phrase “…appear[s] to be statutory at this time” as indicative of incompetence or malfeasance, when in fact the phrase is used when an examiner has determined that an application’s claims (at this time in the USPTO’s process) require no further amendment or review - so the opposite of what S&C claims.

Thank you.

I will not delete. Better to have it here with your additional information so readers do have some educational feedback about it.

Thank you.

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IMHO the reporting of a victory here is premature, but if true, it opens up entirely novel DeFi and DAO defenses. I’d give it 50/50, but S&C lawyers operate with unique local knowledge and influence which may be the basis for LexPanda’s conclusion?

In CFTC, the amicus participation was traditional and conventional, addressing wider decentralized organizations constructs, autonomous operation, user homogeneity, apps-vs-protocols, and a number of other high-level questions.

Here, it looks like Sullivan & Cromwell is making the simpler bet that the DAO can act as its own derivative amicus curiae (!?), cleverly going directly to specific case theories and laying out particular attacks. While I wish they’d used this case to advance the “regulate the apps and not the protocols” mission, a victory here means (direct) derivative defenses and (direct) regulatory pushback are possible for DAOs and DEXs. The patent office conspiracy claims do look a little tin-foil-hat, but it does help paint the complaint as BS, and its bigger strategy is super simple. Certainly, if S&C’s derivative-amicus works, there’s much less need to navigate the limitations in Wyoming and Tennessee arrangements.