Bprotocol Foundation Sues Uniswap Labs for Infringing on Its CPAMM Patent

The case alleges that Uniswap has used patented decentralized exchange (DEX) technology developed by Bancor without authorization.

Bprotocol Basis and LocalCoin have reportedly filed a lawsuit in New York federal court against Uniswap Labs, Inc., claiming that the decentralized exchange (DEX) used patented decentralized exchange technology developed by Bancor without authorization.

The lawsuit, which was filed on Tuesday, alleges that Uniswap's platform operates using a constant product automated market maker (CPAMM) structure that was created by Bancor in 2016 and secured with a provisional patent in early 2017.

According to Bprotocol, this model, which replaces order books and makes automated trading a key feature of DEXs today, was designed and introduced by Bprotocol and LocalCoin with the Bancor Protocol.

"This design, which forms the basis of the Bprotocol Foundation's patent claim, is foundational to how the Uniswap protocol performs token swaps, and the plaintiffs maintain that Uniswap replicated these mechanisms without seeking a license or providing attribution," the release reads.

This lawsuit could be a major legal challenge for the DeFi community. It is alleged that Uniswap has been infringing on Bprotocol's patent rights for several years by operating its exchange using patented technology without a license.

The lawsuit, which was filed in the U.S. District Court for the Southern District of New York, claims that the infringement began when the provisional patent application was filed in early 2017 and continues to this day.

According to the plaintiffs, Bprotocol and LocalCoin designed and introduced the Bancor Protocol, which brought CPAMM trading to decentralized finance.

"This design, which forms the basis of the Bprotocol Basis's patent claim, is foundational to how the Uniswap protocol performs token swaps, and the plaintiffs maintain that Uniswap replicated these mechanisms without seeking a license or providing attribution," the release explains.

The plaintiffs are seeking damages from Uniswap for the unlicensed use of the CPAMM model, which they claim allowed the exchange to gain a major competitive edge within the DeFi market.

"This benefit was developed without rendering proper credit or payment to the founders of the technology or their assigned entity, LocalCoin Capital, Inc.," the release adds.

The lawsuit alleges that Uniswap's ability to quickly rise to prominence within the DeFi market was due in part to its implementation of patented features without a licensing agreement.

According to the plaintiffs, Uniswap's success has come at the expense of Bancor, which struggled to grow and succeed within the DEX market despite being the original innovator.

"The lawsuit aims to achieve justice for the plaintiffs, whose invention and initiative were instrumental in advancing blockchain technology and liquidity solutions," the release concludes.

The lawsuit seeks an injunction to prevent further infringement of the patent and an award of damages to compensate the plaintiffs for the economic losses they suffered as a result of Uniswap's alleged actions.

The plaintiffs argue that they are pursuing this legal action to defend the importance of intellectual property in the development of blockchain technology.

"The filing is unusual in this domain as it asserts patent rights in an area largely focused on open-source protocols," the release notes.

This lawsuit could have significant implications for the future of decentralized finance, as it raises questions about the ownership and transferability of intellectual property in the blockchain space.

Uniswap Labs responded by saying it would be dismissing the lawsuit, which it claims is meritless.

"The lawsuit arises from a provisional patent application filed in 2017 for a foundational constant product formula used in Uniswap’s protocol, which has been open-source and publicly accessible since launch," Uniswap Labs said in a statement.

"This lawsuit will not interfere with our usual operations or hot topics, such as the launch of the Uniswap X proposal or the pending vote on the Uniswap Foundation's proposed closure."

The firm added that it would continue to innovate and build in DeFi.

"Uniswap is committed to transparency and innovation in decentralized finance," the statement concluded.

Uniswap Foundation also stated it would be supporting the legal defense and expressed its commitment to open-source development in decentralized finance.

"We can confirm again that the CPAMM is a common legal mechanism that can be used without breaking any patents or engaging in any unlawful activity," the firm said in a statement.

"We plan to continue with our development work even as we manage this legal matter."