Uniswap Labs wins patent infringement lawsuit as judge dismisses case

Uniswap Labs is in the clear after a lawsuit brought against the creators of top decentralised exchange by the creator of Bancor, a rival protocol, was thrown out by the presiding judge.

Court documents filed on Tuesday show District Judge John Koeltl granted a request from Universal Navigation, the trading name of Uniswap Labs, to dismiss the case on the grounds that the plaintiffs failed to state a claim upon which relief can be granted.

“This case is a win for DeFi by protecting developers’ ability to build on and improve what came before without patent trolls claiming ownership of centuries-old economic concepts,” Jolie Yang, assistant general counsel at Uniswap Labs, said on X.

The suit concerned code used by Uniswap Labs in building the first iteration of the Uniswap protocol in 2018.

Bprotocol Foundation, a nonprofit supporting the development of the Bancor Protocol, and LocalCoin Ltd., Bancor’s original developer, alleged that code was Bancor’s patented infrastructure, and that Uniswap Labs has “profited greatly” by deploying its intellectual property without consent.

Bancor did not immediately respond to a request for comment.

The judge throwing out the case marks the second win for Uniswap this week. The protocol’s UNI token is up 30% after investment giant BlackRock said it planned to bring its Treasury-backed digital token BUIDL onto Uniswap.

BlackRock also said it bought UNI tokens as part of the tie up, though it didn’t disclose how many.

Too abstract

The disputed code powered a mechanism called a constant product automated market maker, or CPAMM.

This mechanism was pioneered by Bancor in 2017 and popularised by Uniswap a year later, helping it become the dominant design for early decentralised exchanges.

Bancor released the code for its CPAMM as open source — meaning that anyone is free to use, modify or enhance it without permission. Despite this, Bancor argued its specific use in blockchain smart contracts gave the protocol the exclusive rights to license or exclude others from using it in commercial implementations.

However, the court ruled Bancor’s patents claimed abstract ideas, such as the exchange of currency, which are ineligible under US patent law.

It’s not the first time a DeFi protocol has faced legal action over a patent dispute.

In October 2022, True Return Systems, often referred to by critics as a patent troll, filed infringement lawsuits against MakerDAO and Compound in the US.

TRS claimed the DeFi protocols infringed on one of its patents through their oracle technology, which links off-chain data to blockchains and is essential for DeFi price feeds and operations.

The suits were ultimately dismissed after the DeFi Education Fund, a nonprofit DeFi lobby group, agreed to purchase the patent from TRS in August 2024.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.