After several rounds of discussions, a US court has ruled in favor of Uniswap, the largest decentralized exchange (DEX) on Ethereum, in a patent infringement lawsuit filed by entities associated with Bancor Protocol.
Lawsuit centered on Bancor’s automated market maker patent
Last year, BProtocol Foundation and LocalCoin, a nonprofit organization affiliated with Bancor, filed a lawsuit claiming that Uniswap used Bancor’s patented technology without permission.
Bancor is an early decentralized finance (DeFi) protocol and an innovator behind automated market maker (AMM) in DEXs. The technology or model that the entities mentioned in the lawsuit were a constant product automated market maker (CPAMM).
In simple terms, CPAMM is a pricing mechanism used by DEXs to help people trade cryptocurrencies without the need for an order book. This system is widely considered a foundation for modern DEXs.
Hayden Adams, founder of Uniswap, announced on X about the win over the legal battle: “A lawyer just told me we won.” The US District Court for the Southern District of New York stated that the claims were too broad and did not include Uniswap’s application of the CPAMM technology.
A lawsuit case that DeFi world eagerly watched
The crypto industry was eagerly watching the case, not because it involved well-known platforms like Uniswap and Bancor, but because the key area of discussion was whether a platform can privately own a basic formula that several crypto projects commonly use for trading.
The lawsuit critically raises some questions: If a company patents a formula (CPAMM), can it prevent others from using it, or should such a trading mechanism stay free for every platform to use?
Even before the final judgment from the court was announced, many crypto communities had questioned Bancor’s move as inconsistent with DeFi’s open-source strategy.
Earlier patent infringement cases in crypto
There are several well-known patent lawsuits in the crypto sector. Veritaseum Capital, a blockchain-based capital market, filed a lawsuit against Coinbase alleging that it violated a patent connected with transfer and trading systems.
In another instance, a platform claimed that elliptic curve cryptography (ECC), mostly used in Bitcoin, belonged to them and sued Bitcoin miners for alleged patent infringement.
Patent infringements were also reported in the NFT market, where multiple NFT platforms sued major brands for using NFT-related technology without permission.
