On September 25, 2023, Judge Jessica Clarke (S.D.N.Y.) granted third party Compound Lab, Inc.'s ("Compound Labs”) motion to intervene in a patent infringement action filed by True Return Systems LLC (“True Return”) against Compound Protocol (“the Protocol”). Compound Labs is the software company that developed the Protocol and implemented it on the Ethereum blockchain.

In briefing on the motion, True Return and Compound Labs disagreed over the Protocol’s legal status. True Return contended that the Protocol is a decentralized autonomous organization comprised of voting and governing owners who hold “COMP” tokens and operate a cryptocurrency lending business and marketplace. Compound Labs, on the other hand, contended that the Protocol is mere software and, as such, has no legal existence or the capacity to sue or be sued. The Protocol failed to appear or respond to the Complaint. Fearing that software it developed could be found to infringe, Compound Labs moved to intervene.

Without ruling on the Protocol’s legal status, the Court held that Compound Labs met the standard for permissive intervention under Federal Rule of Civil Procedure24(b)(1)(B). It reasoned that Compound Labs, as the creator of the Protocol, shares a common objective with any potential defendant, including the Protocol, that seeks to defend against a finding of infringement. The Court also reasoned that, as the developer, Compound Labs would contribute to an understanding of the issues and developing the facts at issue. That is, the Court found, Compound Labs is in a unique position to assist the Court in understanding the function and mechanics of the alleged infringing technology. This was particularly important where, as here, the existence of the Defendant is contested.

Case: True Return Sys. LLC v. Compound Protocol, No. 22-CV-8483 (JGLC), Dkt. No. 45 (S.D.N.Y. Sep. 25, 2023)