A federal judge in New York has dismissed a patent infringement lawsuit brought by entities affiliated with Bancor against Uniswap, ruling that the claimed patents claim abstract ideas and are not eligible for protection under US patent law.
In a memorandum opinion and order dated Tuesday, February 10, Judge John G. Koeltl of the United States District Court for the Southern District of New York granted the defendant’s motion to dismiss the lawsuit filed by Bprotocol Foundation and LocalCoin Ltd. against Universal Navigation Inc. and Uniswap Foundation.
The court determined that the patents are directed to the abstract idea of calculating cryptocurrency exchange rates and therefore do not pass the two-step test for patent eligibility established by the United States Supreme Court.
The ruling marks a procedural victory for Uniswap, but is not final. The case was dismissed without prejudice, giving the plaintiffs 21 days to file an amended complaint. If an amended complaint is not filed, the dismissal will become a detriment.
Shortly after the ruling, Uniswap founder Hayden Adams wrote on X: “A lawyer just told me we won.”
Cointelegraph contacted representatives from Bprotocol Foundation and Uniswap for comment but did not receive a response via post.
Judge considers that patents claim abstract ideas
As previously reported, Bancor alleged that Uniswap infringed patents related to a “constant product automated market maker” system that underpins decentralized exchanges.
The dispute centered on whether the Uniswap protocol illegally used proprietary technology for automated pricing of tokens and liquidity pools.
Koeltl said the patents were aimed at “the abstract idea of calculating currency exchange rates to make transactions.”
He wrote that currency exchange is a “fundamental economic practice” and that calculating price information is abstract under established Federal Circuit precedent.
The judge rejected arguments that the implementation of the pricing formula in blockchain infrastructure made the claims patentable, saying that the patents simply use existing blockchain and smart contract technology “in predictable ways to address an economic problem.”
He said that limiting an abstract idea to a particular technological environment does not make it eligible to be patented. The court also did not find any “inventive concept” sufficient to transform the abstract idea into a patent-eligible application.
Related: Vitalik Draws Line Between ‘Real DeFi’ and Centralized Yield Stablecoins
The complaint does not allege infringement
Beyond patent eligibility, the court concluded that the amended complaint did not plausibly allege direct infringement.
According to the memo, the plaintiffs failed to identify how Uniswap’s publicly available code includes the required reserve ratio constant specified in the patents.
The judge also dismissed the claims of induced and willful infringement, finding that the lawsuit did not plausibly allege that the defendants knew about the patents before the lawsuit was filed.
The dismissal without prejudice leaves open the possibility that Bprotocol Foundation and LocalCoin Ltd. could attempt to resubmit revised claims.
Magazine: ‘Tsunami’ of Wealth Heads to Cryptocurrencies: Nansen’s Alex Svanevik