DCT
1:24-cv-07651
Liquid Rarity Exchange LLC v. Ozone Networks Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Liquid Rarity Exchange, LLC (Puerto Rico)
- Defendant: Ozone Networks, Inc., d/b/a OpenSea (Delaware)
- Plaintiff’s Counsel: Windels Marx Lane & Mittendorf, LLP
- Case Identification: 1:24-cv-07651, S.D.N.Y., 01/13/2025
- Venue Allegations: Venue is based on Defendant’s alleged principal address located within the Southern District of New York.
- Core Dispute: Plaintiff alleges that Defendant’s OpenSea non-fungible token (NFT) marketplace infringes a patent related to a virtual trading platform for rare assets.
- Technical Context: The technology concerns online platforms that enable the trading of unique or rare assets, both tangible and intangible, through fractional ownership and immersive three-dimensional visualization.
- Key Procedural History: The complaint details the prosecution of the patent-in-suit, noting that the claims were amended to include a "simulated trading center" to overcome a patent-eligibility rejection under 35 U.S.C. § 101. The complaint also alleges pre-suit notice of infringement was provided to the Defendant, including multiple communications and a claim chart, which may form the basis for a willfulness claim.
Case Timeline
| Date | Event |
|---|---|
| 2015-12-16 | ’090 Patent Priority Date (Provisional App. 62/268,281) |
| 2016-03-17 | ’090 Patent Application Filing Date |
| 2019-11-15 | Patent Examiner issued non-final office action |
| 2020-03-16 | Patentee amended claims in response to office action |
| 2020-11-02 | ’090 Patent Issue Date |
| 2024-03-22 | Plaintiff initiated communications with Defendant regarding patent portfolio |
| 2024-04-17 | Plaintiff provided Defendant with claim chart for ’090 Patent |
| 2024-09-03 | Accused asset "Gen II #14051" listed for sale on OpenSea |
| 2025-01-13 | Complaint Filing Date |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 10,825,090 - Rarity Trading Legacy Protection and Digital Convergence Platform, issued November 2, 2020
The Invention Explained
- Problem Addressed: The patent’s background section identifies a "fundamentally unbalanced opportunity" where small and middle-class investors are financially excluded from investing in high-value "rarities" such as fine art, classic cars, or gems. It notes the absence of an effective computer platform designed for the trading of fractional shares in such unique assets (Compl. ¶20; ’090 Patent, col. 1:45-51, col. 3:11-17).
- The Patented Solution: The invention proposes a "Rarity Trading Platform" (RTP) that creates a "virtual merchandising mart" for trading these assets. This platform allows owners to list assets in a "raritymine" (a pool of assets) and enables investors to buy and sell fractional ownership units called "raritybits." A key feature is the use of "virtual three-dimensional depictions" to allow users to visualize the assets within the online marketplace, aiming to replicate and enhance the experience of a physical gallery or showroom (’090 Patent, Abstract; col. 4:11-23).
- Technical Importance: The described technology sought to create liquidity and democratize access to traditionally illiquid, high-value asset classes by combining the concepts of fractional ownership with an interactive, visual, and data-rich online trading environment (Compl. ¶19; ’090 Patent, col. 1:61-64).
Key Claims at a Glance
- The complaint asserts independent claim 1 and dependent claims 2-7, 11, 14, 15, and 16 (Compl. ¶¶ 35, 47, 51, 55, 59, 63, 67, 71, 75, 81, 84).
- Independent Claim 1 requires:
- A virtual merchandising mart comprising a simulated trading center,
- wherein a virtual three-dimensional depiction of one or more rarity assets included in a raritymine are configured for visualization by sellers and buyers of raritybits in the raritymine.
III. The Accused Instrumentality
Product Identification
- The accused instrumentality is the OpenSea online platform, accessible at opensea.io (Compl. ¶11).
Functionality and Market Context
- The OpenSea platform is described as a marketplace for buying, selling, and discovering "crypto collectibles and non-fungible tokens (NFTs)," which are defined as unique and provably scarce digital items (Compl. ¶¶ 11-12).
- The complaint alleges the platform provides functionality to display three-dimensional depictions of assets, categorizes some collections as "Trending in 3D PFPs," provides rarity rankings for assets within a collection, and enables users to trade these NFTs (Compl. ¶¶ 39, 41). The complaint asserts OpenSea is the "world's first and largest" marketplace for NFTs (Compl. ¶11).
- An image from the "Gen II Brains Collection" is provided as an example of a three-dimensional asset that can be visualized by sellers and buyers on the platform (Compl. ¶42).
IV. Analysis of Infringement Allegations
’090 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| A virtual merchandising mart comprising a simulated trading center, | The OpenSea website is alleged to be a virtual merchandising mart that functions as a simulated trading center for digital assets. | ¶38 | col. 19:19-20 |
| wherein a virtual three-dimensional depiction of one or more rarity assets | The platform allegedly displays three-dimensional depictions of assets, with the complaint citing a category for "Trending in 3D PFPs" and providing a screenshot of a specific 3D asset. | ¶39, ¶42 | col. 19:20-22 |
| included in a raritymine | The assets (NFTs) are allegedly "included in pools of assets," which the complaint equates to the claimed "raritymine." This is supported by allegations that OpenSea provides a "rarity rank for assets in a collection." | ¶41 | col. 19:22-23 |
| are configured for visualization by sellers and buyers | The assets are allegedly configured for visualization by users, as they are listed for sale on the marketplace. | ¶42 | col. 19:23-24 |
| of raritybits in the raritymine. | Sellers and buyers allegedly offer and purchase "raritybits," which the complaint equates to individual NFT tokens within a collection (the raritymine). | ¶44 | col. 19:24 |
- Identified Points of Contention:
- Scope Questions: A central dispute may concern whether an NFT, a purely digital asset, qualifies as a "rarity asset" under the patent's definition. The patent's specification is heavily focused on physical items (cars, art, coins), though it includes a broad definition that encompasses intangible assets like copyrights and software (’090 Patent, col. 2:56-59). The court may need to decide if the definition can be read to cover a technology type (NFTs) that was not prevalent at the time of the patent’s priority date.
- Technical Questions: The analysis may turn on whether the "three-dimensional depictions" on OpenSea (Compl. ¶39) are technically equivalent to the "virtual three-dimensional depiction" required by the claim. The defense may argue that the functionality offered by OpenSea does not meet the specific technical implementation of a "simulated trading center" that was added to the claims to overcome a § 101 rejection during prosecution (Compl. ¶¶ 28, 34).
V. Key Claim Terms for Construction
- The Term: "rarity asset"
- Context and Importance: The applicability of the entire patent to the accused platform hinges on whether NFTs are considered "rarity assets." Practitioners may focus on this term because its construction will determine if the patent, with a 2015 priority date, can read on the modern NFT marketplace.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The specification provides an expansive definition, stating rarities can be "all other tangible and intangible assets (copyright, brands, trademarks etc.) for all privatized or public ownership and possession that have an identifiable value due to their rareness, scarcity or similar unique or special quality" (’090 Patent, col. 2:41-47).
- Evidence for a Narrower Interpretation: The specification is replete with examples of physical assets like "coins, gems, fine art, rare vehicles, antiquities" (’090 Patent, col. 2:33-34). An argument could be made that the invention is directed to solving problems unique to these tangible assets, such as physical storage and fractionalization.
- The Term: "simulated trading center"
- Context and Importance: This term was added to the claim during prosecution to overcome a § 101 abstract idea rejection (Compl. ¶28). Its definition is therefore critical to both patent eligibility and infringement.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: During prosecution, the patentee defined "mart" simply as a "trading or trade center" (Compl. ¶29), which could support construing the term to cover any online marketplace.
- Evidence for a Narrower Interpretation: The Examiner’s stated reason for allowance pointed to the "additional element of 'a virtual merchandising mart comprising a simulated trading center'" as what integrated the abstract idea into a practical application (Compl. ¶34). This suggests the term may be construed to require more than a generic web interface, perhaps pointing to specific embodiments like customizable "virtual... garages" or "showcase wall space" described in the patent (’090 Patent, col. 7:19-28).
VI. Other Allegations
- Indirect Infringement: The complaint focuses on direct infringement under 35 U.S.C. § 271(a), alleging that Defendant operates the infringing system. It does not contain separate counts for indirect or induced infringement.
- Willful Infringement: The complaint alleges that Defendant's infringement is willful. This allegation is based on alleged pre-suit notice, including "multiple communications" beginning on March 22, 2024, and the provision of a specific claim chart on April 17, 2024, after which Defendant allegedly continued its infringing conduct (Compl. ¶¶ 14-16, 91).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of definitional scope: can the term "rarity asset", conceived in a 2015 patent rooted in the context of tangible collectibles and traditional intangible property, be construed to cover the non-fungible tokens (NFTs) traded on the accused OpenSea platform?
- A second key issue will be one of patent eligibility and claim construction: given the prosecution history, does the OpenSea platform represent the specific, "non-abstract" implementation of a "simulated trading center" that persuaded the Patent Office to allow the claims, or is it a generic online marketplace that falls outside the bounds of what was patented?
- An evidentiary question will be one of notice and intent: do the alleged pre-suit communications constitute clear notice of infringement sufficient to support a finding of willful infringement if the platform is ultimately found to infringe?