The Trolls Are Coming: Defending Bitcoin Mining from Patent Trolls

Bitcoin Magazine

The Trolls Are Coming: Defending Bitcoin Mining from Patent Trolls

Introduction: Patent Trolls Targeting Bitcoin Mining

Bitcoin’s use of elliptic curve cryptography (ECC), which is essential for generating key pairs and validating digital signatures, has drawn the attention of a nonpracticing entity (NPE), more commonly known as a patent troll. In May 2025, Malikie Innovations Ltd., a troll that acquired thousands of patents from BlackBerry’s portfolio, filed lawsuits against major mining firms Core Scientific (CORZ) and Marathon Digital Holdings (MARA). (Some considered MARA an original patent troll itself and thus have expressed schadenfreude at the current attacks.) Malikie claims that routine Bitcoin operations (like verifying transactions with ECC-based signatures) infringe on several ECC-related patents originally developed by Certicom (later owned by BlackBerry). The patents cover techniques for accelerated digital signature verification, finite field math optimizations and other ECC improvements.

Malikie’s lawsuits, in Texas’ Eastern District against CORZ and Western District against MARA, demand damages for past infringement and an injunction against further use of the patented methods. In essence, Malikie seeks to impose a licensing regime on Bitcoin’s core cryptographic functions, a move that could set a dangerous precedent for the entire industry. If Malikie succeeds, virtually anyone running Bitcoin software (miners, node operators and potentially even wallet providers) could be exposed to patent liability. This threat has galvanized the Bitcoin and open source communities to explore every available defensive tool. In this preparatory briefing, we examine:

Historical legal strategies used to fend off troll lawsuits.
The mechanics, costs and effectiveness of Inter Partes Review (IPR) in challenging software/crypto patents.
Community-led responses (EFF, Linux Foundation, COPA, etc.) that help defendants by funding prior-art searches or legal defenses.
The potential ramifications for Bitcoin mining if Malikie’s claims prevail, drawing parallels from other industries.

1. Historical Strategies Against NPE Patent Lawsuits

Over the past two decades, tech companies and industries have developed several tactics to combat patent trolls. Key strategies include challenging patent validity, shifting lawsuits to favorable venues via declaratory judgment actions, leveraging recent case law to dismiss abstract patents and simply refusing to settle in order to deter trolls.

While not all strategies will apply to these cases, for completeness I’ll outline these approaches:

Rigorous Invalidity Challenges (Prior Art – §102/103): The most direct way to neutralize a troll’s patent is to demonstrate that the patent should never have been granted in the first place because earlier technology already taught the same invention. Defendants search for prior art — such as earlier publications, academic papers, standards (RFCs) or open source code — that predate the patent’s priority date and disclose the claimed invention. If a single prior art reference embodies every element of a patent claim, the claim is “anticipated” (invalid for lack of novelty under 35 U.S.C. §102). If no one reference is complete but a combination of references would have been obvious to a skilled person, the claim is invalid for obviousness (§103). In the Malikie cases, for example, Bitcoiners have been called to urgently collect publications from before January 18, 2005 (the priority date of one asserted patent, U.S. 8,788,827), and before December 31, 2001 (for U.S. 7,372,960). to prove the patented ECC techniques were already known. The Bitcoin community has noted that Hal Finney and others actively tracked ECC patents and even delayed certain optimizations in Bitcoin until patents expired — for instance, the famed “GLV endomorphism” speedup was only added to Bitcoin Core after its patent lapsed (and caution on the GLV issue was taken by developers, which Malikie itself acknowledged in its complaint — paragraphs 20 and 21 of the MARA complaint, for instance). Unearthing such prior art may not only win the case at hand but invalidate the patent for everyone.

Inter Partes Review (IPR) and Post-Grant Proceedings: Beyond raising invalidity in court, since 2012 defendants have relied on IPR at the Patent Trial and Appeal Board (PTAB) as a powerful forum to knock out bad patents. IPR is an administrative trial within the U.S. Patent Office where challengers can present prior patents or publications to show a granted patent is invalid. We detail IPR’s mechanics in Section 2, but historically it has been a favored tool against NPEs because of its high success rate (around 70%+ of patents see claims canceled when reviewed) and lower burden of proof (“preponderance of the evidence,” 51%, rather than the “clear and convincing,” 75%, standard in court). Companies sued by trolls often file IPR petitions early and then move to stay (or pause) the litigation pending the PTAB’s decision — a stay which many courts grant once an IPR is instituted, given the likelihood that the patent may be invalidated. Notably, in the landmark Personal Audio “podcasting patent” case, the Electronic Frontier Foundation (EFF) filed an IPR that successfully invalidated a troll’s patent on podcast distribution, even as the troll was suing podcasters in East Texas. That IPR, funded by over a thousand small donations from the community, culminated in the Patent Office canceling all claims of the patent in 2015, a result later affirmed on appeal. This victory protected not just the sued targets (like comedian Adam Carolla) but all podcasters going forward. Similarly, the best path for the Bitcoin ecosystem may be to file IPR (or the related Post-Grant Review) against Malikie’s ECC patents, leveraging the mountain of cryptography literature from the 1990s and early 2000s to demonstrate that Bitcoin’s use of ECC was not novel to Malikie’s assignors.
Declaratory Judgment (DJ) Actions: Another defensive tactic is to preempt the troll by filing a declaratory judgment lawsuit in a preferred court, seeking a ruling that your product does not infringe or that the patent is invalid. Under U.S. law, a company that feels threatened by a patent (e.g., it received a demand letter or sees peers being sued) can sometimes sue first if it can show a substantial controversy. The goal is to avoid being haled into the NPE’s chosen venue (historically, the Eastern District of Texas was favored by trolls) and instead litigate in a more neutral or defendant-friendly forum. For instance, when notorious troll Lodsys threatened dozens of small app developers over in-app purchase patents, one strategy (supported indirectly by Apple and Google) was to seek declaratory rulings outside of East Texas to undermine the troll’s jurisdiction. In practice, DJ actions can prompt a faster resolution or even settlement on better terms. However, the patent owner must have made a concrete infringement assertion to establish the requisite “case or controversy.” In Malikie’s situation, if other Bitcoin companies (exchanges, wallet providers, smaller miners) suspect they are next in line, those companies could file a declaratory suit in a jurisdiction of their choice. This would flip the script, making Malikie the defendant and potentially consolidating the fight in a forum less favorable to NPEs.
Motions to Dismiss Under Alice (35 U.S.C. §101): Since the 2014 Alice Corp. v. CLS Bank decision, many software patents have been invalidated early in litigation for claiming unpatentable abstract ideas. Courts now examine whether a patent is directed to a fundamental abstract idea (like a mathematical formula) without an “inventive concept.” Defendants often file Rule 12(b)(6) motions to dismiss, arguing the patent is invalid on its face under §101. While cryptographic algorithms can be viewed as mathematical computations (a classic abstract idea), success with an Alice motion depends on how the patent claims are drafted. If the claims merely cover a generalized math formula or the concept of using ECC on a computer, a judge could void them as abstract. Indeed, some defendants have beaten trolls this way, sparing the cost of trial. In Malikie’s case, their patents seem to cover specific techniques to speed up ECC computations (like endomorphisms, modular reduction optimizations, etc.) — arguably “technical improvements” in cryptography rather than a naked abstract idea. That may make an Alice challenge less straightforward, but it remains an option to explore. At minimum, raising a §101 defense preserves it for later and signals to the court that the patents’ validity is dubious on multiple grounds.
“Never Settle” and Fight to Verdict: An aggressive strategy some companies have taken is simply to refuse settlement and force the troll to prove its case in court, even if that means an expensive trial. The rationale is that paying off a troll invites more lawsuits (marking you an easy mark), whereas a courtroom victory not only ends that case but deters future attacks. Newegg pioneered this approach in the tech sector: Confronted by a series of patent trolls in the early 2010s, Newegg adopted a policy of zero settlements. In one famous instance, Newegg fought Soverain Software, which claimed to own the online shopping cart, all the way through appeal — and won a Federal Circuit ruling invalidating the patent, freeing the entire e-commerce industry from that threat. Similarly, Cloudflare, a web services company, was sued by an NPE called Sable Networks and refused to settle even as others paid licenses. Cloudflare not only went to trial (winning a defense verdict) but also launched “Project Jengo,” a crowdsourced prior-art hunt offering cash bounties to the public for any prior art that could invalidate any patent in Sable’s portfolio. This aggressive counterattack led to a remarkable outcome: Sable not only lost in court, it eventually paid Cloudflare to end the case and agreed to surrender its patents to the public domain. The message was clear: Trolls who pick a fight with determined defendants risk losing their entire arsenal. Of course, this approach requires deep pockets and high risk tolerance. Patent litigation costs can easily reach millions of dollars, and as patent attorney Bill Fowler notes, “there is no patent small claims court” — even relatively small infringement cases demand costly expert witnesses and extensive discovery. Thus, while fighting to the bitter end can yield industry-wide benefits, it’s often only viable for larger companies or those with community funding support.
Joint Defense and Industry Coalitions: When a patent troll sues multiple companies over the same patent, defendants often form a joint defense group to pool resources. They can share prior art research, coordinate legal strategy and file unified motions (where appropriate) to avoid duplication. Some industries have gone further by creating defensive coalitions: For example, the Linux Foundation’s OIN (Open Invention Network) is a consortium where members cross-license patents and collaboratively defend against attacks on Linux/open source systems. In 2019, when an NPE sued the GNOME Foundation (a nonprofit open source project) over a photo management patent, OIN and others rallied to GNOME’s aid, providing legal counsel and digging up prior art to invalidate the troll’s patent. This unified front not only helped GNOME achieve a successful outcome (the troll Rothschild Patent Imaging was eventually stripped of all rights), but also sent a warning to other trolls targeting open source projects. We are seeing a similar spirit of coalition in the Bitcoin realm: Community leaders are calling to “engage EFF, the Linux Foundation, [and] the Bitcoin Legal Defense Fund to help fund or support,” a coordinated defense against Malikie. By combining efforts — from current and past core developers providing technical evidence that Bitcoin deliberately avoids patented methods to nonprofits bringing legal expertise — the industry can strengthen each defendant’s case.

In summary, industries hit by patent trolls have developed a toolkit of responses: invalidate the patent if possible (via prior art in court or PTAB review), challenge the troll’s chosen battlefield (through declaratory suits or venue fights), leverage legal precedent (Alice motions) to knock out weak claims early and stand together to share costs and knowledge. These strategies have repeatedly blunted NPE campaigns in the past and are directly relevant to the Malikie litigation.

2. Inter Partes Review: Mechanics, Costs and Effectiveness in Tech Cases

One of the most potent weapons against questionable patents is the Inter Partes Review process. Created by the America Invents Act of 2011, IPR allows anyone (usually a sued defendant, but it could be any interested party) to challenge a granted patent’s validity at the U.S. Patent and Trademark Office. Here’s how IPR works and why it has become a go-to defense, especially for software and cryptography-related patents:

Mechanics of IPR: To initiate an IPR, a petitioner files a detailed petition to the PTAB (an administrative tribunal of specialized patent judges), laying out how the patent claims are invalid in light of prior patents or printed publications. Notably, IPR can only use prior patents or printed publications (no live testimony or other evidence), making it a focused prior-art battle. The petition must be filed within 1 year of being sued for infringement (if applicable) and it typically targets the most critical claims the troll is asserting. The patent owner gets a chance to file a preliminary response. The PTAB then decides whether the challenger has shown a “reasonable likelihood” of prevailing on at least one claim. If yes, the Board “institutes” the IPR, and from that point a one-year trial clock starts (extendable by six months for good cause). During this trial phase, both sides submit briefs, expert declarations and sometimes oral hearings. Finally, the PTAB issues a Final Written Decision determining which claims are invalid, usually on grounds of anticipation or obviousness.
Lower Cost and Faster Timeline: IPRs were designed to be faster and cheaper than courtroom litigation. A typical IPR from start to finish lasts about 18 months, compared to multiyear court litigation. The cost, while not trivial, is often an order of magnitude lower than fighting a full jury trial. Filing fees for an IPR (for up to 20 claims) are around $20,000-$30,000, and legal fees can be a few hundred thousand dollars. In contrast, defending a patent case through trial can cost several million dollars. This cost difference is why even mid-sized companies or start-ups have been able to mount IPR challenges, sometimes with support from outside organizations. For example, EFF’s Save Podcasting campaign raised about $80,000 from the public specifically to fund the IPR against Personal Audio’s podcast patent. In the crypto space, the newly formed Crypto Open Patent Alliance (COPA) or the Bitcoin Legal Defense Fund might similarly bankroll an IPR to protect open source developers and businesses from Malikie’s claims. The relatively manageable cost makes IPR an attractive collective effort: Multiple parties who fear they could be next can split the bill for a single IPR that knocks out the threat for all.
Effectiveness and Success Rates: IPR has proven highly effective at invalidating questionable software and tech patents. Since its inception, statistics show that a large percentage of instituted IPRs result in patent claims being canceled. Recent data (2023-2024) indicate petitioners succeed in invalidating some or all challenged claims about 70-80% of the time when the IPR reaches a final decision. This is partly because patents that make it to IPR are often the “low-hanging fruit,” those that likely should not have been granted over the prior art in the first place. The PTAB judges also tend to be technically skilled and less swayed by rhetoric than a lay jury, focusing strictly on the patentability issues. Given Bitcoin’s academic roots (Bitcoin’s white paper itself cited prior works, and ECC has decades of literature), the odds are favorable that a well-prepared IPR could uncover prior art that the original patent examiners missed. At this point it is useful to note that the vast majority of patents receive primary merits examination by only a single USPTO employee. In Malikie’s case, their patents stem from the early 2000s; already, researchers are pointing to early cryptography conferences and NIST publications that might anticipate those “innovations.” If such references are presented to the PTAB, there’s a strong chance the PTAB would agree that the patent should not have been issued and cancel the relevant claims.
IPR vs. Court Litigation — Key Differences: A major reason defendants prefer IPR is the lower burden of proof. In an IPR, invalidity needs to be shown by a preponderance of evidence (just >50% convinced). But in a district court trial, a patent is presumed valid by statute (35 U.S.C. §282) and a challenger must provide clear and convincing evidence (a higher standard, often analogized to >70%) to get a jury or judge to void it. This disparity means that even if you have solid prior art, a jury might still side with the patent holder in close cases, whereas the PTAB would likely invalidate the claims under the more lenient standard. Additionally, juries (especially in Texas, at least historically…) are generally reluctant to invalidate patents, perhaps due to a layperson’s deference to an issued government patent. The PTAB has no such reluctance and was nicknamed a “patent death squad” by some patent owners because of how many patents it struck down in the early years. That being said, it’s worth noting some recent policy shifts: The current U.S. Patent and Trademark Office leadership has made instituting IPRs a bit harder, aiming to curb some challenges in favor of patent owners (a “pro-patent stance”). Discretionary denials of IPR (for instance, if a parallel court case is well underway) have increased. Bill Fowler’s commentary in June 2025 noted that Commerce Secretary Lutnick instituted policies to tighten IPR institution practices, prompting some challengers to consider the older ex parte reexamination process as an alternative. Ex parte reexam is another Patent Office proceeding to reconsider a patent’s validity (with no strict one-year time bar), though the challenger doesn’t get to participate after filing the request. Some defendants pursue both routes: file an IPR (if not time-barred) for a fast, adversarial trial, and simultaneously file an ex parte reexam as a backup to keep the pressure on the patent even if the IPR is denied or the challenger later settles.
Costs in Context: While $300,000 or more for an IPR is not pocket change, it is often a fraction of the potential damages at stake or the cost of continued litigation. Malikie, for example, is reportedly seeking up to six years of back royalties from the miners (CORZ is not subject to this, due to its Chapter 11 Bankruptcy). If those royalties were, hypothetically, $50 million, spending a few hundred thousand on an IPR to eliminate that liability (or to gain leverage to settle for a nuisance amount) is a wise investment. However, smaller startups or open source projects could probably not afford it alone, which is why industry groups step in. We’ve seen crowdfunding and pooled funding make IPRs possible: Beyond EFF’s podcast patent IPR, there was also Unified Patents, an organization (calling itself “The Anti-Troll”) that files IPRs to protect sectors from trolls. Unified often operates by collecting annual dues from member companies and then challenging patents that threaten those companies’ industries, at no extra cost to the individual members. In fact, in late 2024 COPA (the Crypto Open Patent Alliance) announced a partnership with Unified Patents to launch a “Blockchain Zone” dedicated to challenging NPE-held blockchain and crypto-related patents. This means that if patents like Malikie’s pose a serious threat, Unified Patents could file IPR petitions on its own initiative, funded by the broader alliance, which would save individual defendants money. Unified boasts that it never pays trolls and only invalidates their patents, thus removing the incentive for future attacks. In COPA’s view, this proactive use of IPRs and other challenges is essential because an estimated 58% of all U.S. patent litigation in the crypto/blockchain sector comes from NPEs, a staggering figure that highlights how critical patent defenses are for the crypto community.
Outcome of IPR — What Then? If an IPR is successful, the claims are invalidated (once appeals are exhausted), meaning Malikie or other trolls can no longer assert those claims against anyone. This benefit is industry-wide: Unlike a settlement or win in one lawsuit, which only affects the parties, an IPR win knocks the patent out of the system. If the IPR fails (e.g., PTAB finds the claims valid over the presented prior art), the litigation in court still proceeds, but the defendant loses the ability to reuse those same prior art arguments at trial (IPR estoppel applies to any ground that was raised or reasonably could have been raised). Even so, defendants often take the shot at IPR because a win is so decisive, the burden of proof is much lower and the forum is more educated on these issues. In high-stakes cases, defendants might pursue both IPR and traditional invalidity defenses in parallel (raising different prior art in each to avoid estoppel overlap). And if an IPR petition is denied at the institution stage — which can happen for procedural reasons or insufficient showing — the defendant isn’t estopped at all, and they can still litigate validity in court as if the IPR was never filed. Thus, filing an IPR is usually a no-brainer defense in modern patent litigation, and it is very likely Core Scientific and Marathon (or an allied group like COPA/Unified) will prepare IPR petitions on the ECC patents Malikie is asserting.

In sum, IPR has reshaped the patent troll battlefield by giving defendants a powerful, efficient way to invalidate patents outside the uncertainties of a jury trial. Especially for software and cryptographic patents, where a rich background of academic prior art exists, the IPR process tilts the playing field back toward technology innovators and away from shell companies exploiting older patents.

3. Community-Led Responses and Industry Support Networks

Beyond the formal legal tools, an equally important aspect of fighting patent trolls is the mobilization of the community and industry support structures. In many NPE showdowns, collective action and public interest initiatives have made the difference between a lone defendant being coerced into settlement and a unified front that quashes the troll’s campaign. Here we explore how open source communities, advocacy groups and industry alliances contribute to defending against patent trolls:

Crowdsourced Prior Art Searches: The global developer and academic community can be an invaluable resource for finding prior art, especially for patents in niche technical fields. Patent trolls count on the fact that individual defendants might not have the time or expertise to dig up obscure conference papers or decades-old source code. But when a call to action is issued, experts worldwide often volunteer leads. The EFF has a long history of organizing these efforts. In the Personal Audio case, EFF put out a public request for any evidence of pre-1996 podcast-like technology. Submissions poured in, including old Usenet postings and early Internet Radio projects, which helped form the basis of EFF’s successful IPR. Similarly, in 2017 Cloudflare’s Project Jengo offered cash bounties for prior art on all of a troll’s patents, not just the one asserted, flipping the script to put the troll on the defensive. I personally called for such a scorched-earth approach and believe that such a vigorous response is not only warranted but necessary. In the Bitcoin context, we’re already seeing this approach: Bitcoin developers and enthusiasts are actively hunting for prior art that predates Malikie’s patents. By pooling such knowledge on forums or via organized initiatives (perhaps a “Bitcoin Prior Art Repository” for ECC and other core technologies), the community can bolster the invalidity case. Dan Sanchez explicitly issued a call to arms for builders and researchers to unite and “delete these [patent] claims” by compiling prior art, emphasizing that “if you are a builder of any kind, you are at risk!” This kind of rallying cry is reminiscent of open source communities in the past, for instance, when the GIF image format’s patent threatened open web use, developers created patent-free alternatives (PNG) and shared work-arounds until the patent expired. It’s a combination of defensive documentation and morale-building, showing trolls that the community won’t be easy prey.

The Bitcoin Legal Defense Fund: In January 2022, a Bitcoin Legal Defense Fund was announced by Jack Dorsey and others, initially to help Bitcoin Core developers facing frivolous lawsuits (like Craig Wright’s claims). While its primary focus was on defending open-source devs from harassment and liability, the fund could extend to patent issues if needed. Its mandate is to financially support legal defense for Bitcoin ecosystem participants who cannot afford it. Patent battles definitely fit that description for smaller companies and individual devs. These community-funded efforts create a safety net: They ensure that a smaller Bitcoin mining operation or wallet startup hit by a patent suit isn’t left to choose between bankrupting itself in litigation or paying an unjust licensing fee. Instead, they can get backing to mount a proper defense.

COPA (Crypto Open Patent Alliance): COPA deserves special attention. Formed in 2020 by fintech and crypto firms (with Block, Coinbase and others as founding members), COPA’s mission is twofold: encourage members to pledge not to offensively assert their own crypto-related patents (to prevent an arms race) and actively challenge patents that threaten the community. COPA has already taken on a high-profile fight by suing Craig “Faketoshi” Wright over the Bitcoin white paper copyright/patent claims (and won a U.K. court ruling that Wright’s assertions were false). In the patent troll sphere, COPA’s partnership with Unified Patents led to the creation of the aforementioned Blockchain Zone, explicitly targeting NPE-held patents in blockchain. COPA’s chief counsel has stated that “patent trolls must be stopped so the community can continue to build,” and that COPA will provide “pass-through protection at no cost” to its members. This implies that if a COPA member (say a smaller Bitcoin company) is sued, COPA and Unified might handle the IPR or even the litigation, effectively shielding the member. Malikie’s broad net, with the implication that no Bitcoin infrastructure company is safe, is precisely the scenario COPA was created for. We can expect COPA to rally its member companies (over 300 of them as of late 2024) to share prior art and perhaps file collective amicus briefs or petitions. They might even engage in licensing negotiations as a bloc, though given COPA’s stance, they’re more likely to fight than pay.

Public Awareness and Stigma: Community response isn’t only behind the scenes. There’s also value in controlling the narrative. Patent trolls often operate in the shadows, pressuring targets quietly to sign licenses. Publicly calling them out can undermine their strategy. We see Bitcoin media outlets and influencers doing just that: referring to Malikie plainly as a patent troll, and framing the lawsuits as an attack on the Bitcoin network rather than a legitimate claim. This narrative puts moral pressure on Malikie; if they push too hard, they risk a backlash or even legislative attention. It’s happened before: When an NPE started sending mass demands to small businesses for using Wi-Fi (the infamous Innovatio case), it garnered negative press and eventually, the major Wi-Fi equipment makers stepped in to defend their customers. In another case, the state of Vermont sued the MPJH Scanner Troll for violating consumer protection laws by sending misleading demand letters to local businesses. Other states, such as North Carolina, have passed strong anti-troll legislation that has been upheld in court. In the crypto world, portraying Malikie’s campaign as an existential threat to innovation can rally lawmakers or regulators to scrutinize the situation. We already see experts noting that if Malikie truly enforced its patents broadly, “it might undermine the security of the Bitcoin network” — a dire consequence that no regulator or politician would want to be responsible for. While patent law is federal, there’s precedent for the FTC investigating patent trolls for anticompetitive behavior if they abuse a dominant patent in bad faith. Community outcry can prompt such oversight.

In summary, the defense against patent trolls is not just legal filings, but also community solidarity and resource-sharing. From EFF’s legal battles and COPA’s patent pool, to crowdsourced prior art and joint defense groups, these collective efforts ensure that even those without deep pockets have a fighting chance. The Bitcoin community, much like the open source software community before it, is leveraging these tools: engaging nonprofits, coordinating through alliances like COPA, and tapping the wisdom of the crowd. This multipronged community response can significantly tilt the balance against Malikie’s assertions.

4. Ramifications for Bitcoin and Parallels in Other Industries

What happens if, despite all defenses, a patent troll like Malikie succeeds in court? The implications for the Bitcoin industry, especially smaller players, could be profound, and analogous scenarios in other industries provide cautionary tales. Here we consider the potential fallout and compare it to past outcomes in tech sectors:

Financial Strain and Market Exit: The most immediate impact would be financial. If Malikie were to prevail and secure a judgment or licensing agreement, miners and possibly other Bitcoin companies would face ongoing royalties (or a hefty one-time payout). Patent damages can include up to six years of back royalties (the statutory limit for past infringement), which for large-scale miners could mean tens of millions of dollars. As attorney Aaron Brogan noted, a win could even risk pushing defendants like Core Scientific or Marathon into bankruptcy (or back into bankruptcy in CORZ’s case) given the sums involved. For smaller and mid-size miners, the prospect is grim: Many operate on thin profit margins tied to the BTC price and energy costs. An additional “patent tax” could make their business unsustainable, forcing them to shut down or relocate to jurisdictions where U.S. patent law can’t reach them. In Bitcoin, a few well-capitalized miners might weather the fees, but independent miners could be priced out, further centralizing the U.S. mining ecosystem — ironically contributing to the opposite of Bitcoin’s decentralization ethos.
Precedent for More Lawsuits: A successful assertion by Malikie would set a precedent and embolden further litigation. Malikie itself could go down the list of targets: other public mining companies, mining pool operators, hardware manufacturers (if any of the patent claims cover aspects of mining devices or wallets, as Malikie’s complaint suggests). Moreover, other patent trolls might dust off old cryptography patents in adjacent areas (hash algorithms, networking protocols in blockchain, etc.) seeing that the Bitcoin industry is “open for business” to patent licensing. This has happened in industries like semiconductors and smartphones; one troll’s big win triggered a “gold rush” by others holding similar patents. For example, after NPEs successfully extracted settlements from some small mobile app developers, a wave of new demand letters hit the market targeting every popular app. The cost of legal defense creates a vicious cycle: Even meritless claims can cause companies to settle to avoid litigation expenses, and those settlement dollars then fund the troll to sue the next target. If Malikie proves profitable, it could lead to a long-running drag on the Bitcoin sector, where innovation slows because companies must allocate budget to patent licensing or lawsuits instead of development.
Future Safeguards: Looking forward, success against Malikie could also spur the Bitcoin community to adopt more systematic safeguards. This might include deeper participation in organizations like COPA. It could also lead to patent insurance products for miners or developers, and increased lobbying for patent law changes (for example, raising the bar for patent eligibility of pure software, or fee-shifting to penalize trolls). The outcome of these cases could even influence how protocol upgrades are approached. There might be a push to more thoroughly vet any BIPs for patent risks and document alternatives or get explicit patent grants from inventors (somewhat similar to how the IETF requires disclosure of patents on proposed standards). In a sense, the Bitcoin ecosystem may mature in its IP awareness, much as the Linux community did after early legal scares.

Conclusion

The clash between Malikie Innovations and Bitcoin miners exemplifies a classic conflict between open innovation and legacy fiat intellectual property rights. History shows that industries can fend off patent trolls by using every available legal tool, from IPRs at the PTAB to robust invalidity defenses in court and by banding together through community-driven initiatives. U.S. law provides mechanisms like declaratory judgments, prior-art based invalidity challenges and the Alice test for abstract ideas to defend against overly broad or old patents repurposed by NPEs. The Bitcoin community, much like the open source software community before it, is now mobilizing these defenses.

If there is a silver lining, it’s that such challenges often rally the community to emerge stronger: Weak patents get knocked out, collaboration intensifies, and a clear message is sent to would-be trolls that this ecosystem is not an easy target. Cases in parallel industries, from podcasting to Wi-Fi to Linux, demonstrate that a determined defense can not only defeat the immediate threat but also set precedents that discourage future suits. On the flip side, complacency or capitulation could impose a tax on innovation and dent the growth of Bitcoin technology in the crucial years ahead.

Ultimately, the fight against Malikie will likely hinge on demonstrating that Bitcoin’s cryptographic methods were neither novel nor proprietary to any one company, but rather stemmed from decades of public research and collaborative development. By clearly articulating that story in court, in the Patent Office and in the court of public opinion, the defendants and their allies can not only protect their own operations but also preserve the freedom to build and use Bitcoin for everyone. As Paul Grewal, chief legal counsel for COPA member Coinbase, said, “Patent trolls are barriers in the path of innovation… They must be stopped so that the community can continue to do the important business of building the crypto-economy.”

The coming together of miners, developers, legal advocates and industry groups in this case will be crucial in determining whether that vision holds true.

This is a guest post by Colin Crossman. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

This post The Trolls Are Coming: Defending Bitcoin Mining from Patent Trolls first appeared on Bitcoin Magazine and is written by Colin Crossman.

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