Bancor Sues Uniswap Labs and Foundation for Infringing on Its Constant Product Automated Market Maker (CPAMM) Technology

Bancor's nonprofit arm, Bprotocol Foundation, and LocalCoin Ltd. have jointly filed a lawsuit against Uniswap. The legal complaint was submitted to the U.S. District Court for the Southern District of New York.

DeFi protocol Bancor has filed a patent infringement lawsuit against Uniswap Labs and the Uniswap Foundation, sparking debate and unease within the decentralized finance ecosystem.

The suit, filed by Bprotocol Foundation, a nonprofit entity related to Bancor, and LocalCoin Ltd., now pending in the U.S. District Court for the Southern District of New York, claims that the founders of Uniswap used a patented technology invented by Bancor.

According to the lawsuit, the lawsuit claims that the founders of Uniswap were aware of Bancor's patent and still went ahead to use the technology in building Uniswap.

"At least as early as 2015, the founders of Defendant Uniswap Labs were aware of Claimants' invention of the Constant Product Automated Market Maker technology, and at least as early as 2016, the founders of Defendant Uniswap Labs began developing a copycat version of Claimants' patented technology, which copycat version later became known as Uniswap. In or around 2017, Defendant Uniswap Labs launched its copycat version of Claimants' patented technology to the public."

The lawsuit further claims that the accused infringers were notified of the patent and given the opportunity to cease and desist but nevertheless continued their actions, leading to this litigation.

The lawsuit arises from a patent granted in 2021 by the U.S. Patent and Trademark Office to LocalCoin, covering a "system and method for facilitating automated trading in a trustless environment." This patent builds upon a provisional application filed in January 2017 by the inventors of Bancor.

According to Bancor, the patent is directed toward a constant product automated market maker (CPAMM) structure, which forms the basis of decentralized exchanges that do not rely on centralized order books.

The lawsuit states that the provisional patent application was filed in response to a trade secret litigation matter that arose in December 2016, aiming to quickly disclose the invention to the public.

"To the best of Claimants' knowledge, the provisional patent application was the first to disclose the invention of the constant product formula in a patent application, and Claimants believe that the provisional patent application was also the first to disclose the invention of the CPAMM in a patent application."

This lawsuit comes amid broader concerns within the DeFi community regarding the implications of patents in a decentralized setting. While patents are typically intended to incentivize innovation by granting exclusive rights for a limited period, they can also pose challenges to the spirit of open-source collaboration that underpins decentralized protocols.

The lawsuit has already generated discussion and varying perspectives online, highlighting the complexities of legal issues in a rapidly evolving technological landscape.