A federal judge in New York has thrown out a patent case against Uniswap. Parties affiliated with Bancor accused the DeFi platform of patent infringement, but according to the court, the patents in question mainly concern abstract ideas. And they are not covered by US patent law.
Procedural victory for Uniswap
Judge John G. Koeltl of the federal court in the Southern District of New York granted Uniswap’s request to have the case dismissed. The suit was filed by the Bprotocol Foundation and LocalCoin Ltd. v. Universal Navigation Inc. and the Uniswap Foundation.
According to the court, the patents essentially revolve around calculating exchange rates for crypto transactions. This is legally seen as an abstract idea. The claims therefore do not meet the so-called two-step test of the US Supreme Court, which determines whether an invention actually qualifies for patent protection.
Yet the matter is not completely over yet. The judge dismissed the complaint without prejudice. This means that plaintiffs have 21 days to file an amended complaint. If they do not do so, the rejection becomes final.
Uniswap founder Hayden Adams responded to X shortly after the ruling: “A lawyer just told me we won.”
What was the conflict about?
The core of the case lay in patents on so-called automatic market makers with constant products. This mechanism forms the basis of many decentralized exchanges. Instead of a traditional order book, algorithms and liquidity pools automatically determine the price of tokens.
Bancor alleged that Uniswap used proprietary technology for automated pricing and liquidity pool management without authorization.
The plaintiffs argued that the application via blockchain and smart contracts made the system technical enough to qualify as an invention. But the judge did not agree with that. According to Koeltl, existing blockchain and smart contract technology is used in a predictable way to solve an economic problem. According to established case law, this is insufficient to convert an abstract idea into a protectable patent.
In addition, the court ruled that the plaintiffs did not sufficiently demonstrate that there was actually an infringement. For example, they could not concretely demonstrate that Uniswap’s publicly available code contains the specific reserve ratio constant mentioned in the patents.
Allegations of intentional or induced infringement were also dismissed, as Uniswap was not likely to have known about the patents before the lawsuit.
For the time being, the ruling mainly represents an important development in the broader discussion about patents on fundamental DeFi mechanisms. It will become clear in the coming weeks whether the plaintiffs will return with an amended complaint.
Source: https://newsbit.nl/amerikaanse-rechter-defi-patenten-bancor-niet-geldig-in-zaak-tegen-uniswap/
