A high profile David and Goliath legal dispute in bitcoin mining just ended in a surprising draw, as oil and gas mining firm Crusoe’s patent petition against mining infrastructure company Upstream Data resulted in a partial win for both parties, according to a ruling Tuesday from the the United States Patent and Trademark Office’s Patent Trial and Appeal Board (USPTO).
The USPTO ruled that Crusoe Energy proved that the concept of powering a bitcoin mine with a natural gas generator is unpatenable, but it failed to prove that specific design aspects of Upstream Data’s oil and gas bitcoin mining systems are also unpatenable.
The case is the first of its kind for the bitcoin mining industry, particularly its subset of oil and gas miners. Industry estimates for flare gas powered Bitcoin mining tend to be fall below 0.5% of the total Bitcoin network. Still, the USPTO ruling opens the doors to possible future litigation, particularly around Upstream’s claims to various oil and gas container designs for bitcoin mining field operations.
Sand Hill Road-darling Crusoe Energy recently closed a $600 million Series D round, valuing the company at $2.8 billion. Meanwhile, industry stalwart Upstream Data is a relatively small private firm focused on oil and gas bitcoin mines in Alberta, Canada. The impact of Upstream’s partial win is unclear, but it could be used to enforce royalty payouts or other protections against competitors.
“Petitioner has proven by a preponderance of the evidence that claims 1 and 24 of [the patent] are unpatentable…Petitioner has not proven by a preponderance of the evidence that claims 2–4, 7–12, 15–23, 25–30, 34–37, and 40 of [the patent] are unpatentable,” the decision’s order reads.
This decision is the latest and likely final development in a legal dispute that began in May 2023, when Upstream Data sued Crusoe Energy for patent infringement. Upstream’s suit alleged that Crusoe Energy, which operates Bitcoin mining sites on oil fields using natural gas, stole a patented design from Upstream Data founder Steve Barbour. Barbour holds 13 other patents for similar oil and gas field bitcoin mining systems.
The patent in question describes a system for powering a bitcoin mine with a natural gas generator. Claim 1 of the patent describes the entire “system” of the container, namely “a source of combustible gas…a generator connected to the source of combustible gas to receive a continuous flow of combustible gas to power the generator; and blockchain mining devices connected to the generator.”
Claim 24 describes the process of drawing gas from a source (like an oil and gas well), converting it into energy via combustion, and using this energy to power bitcoin mining hardware.
As such, the USPTO’s decision appears to say that Upstream cannot patent the process of combusting natural gas or other hydrocarbons for the purpose of mining bitcoin. But it also ruled that Crusoe Energy did not prove that other aspects of the system are unpatenable, including a method for regulating power loads, a design for backup power, the design of an oil and gas bitcoin mining container, and other features.
Upstream Data declined to comment. Crusoe did not return questions for comment by press time.
