A New York federal judge has dismissed a patent infringement lawsuit brought by Bancor-related companies against Uniswap, ruling that the asserted patents claimed abstract ideas and were not eligible for protection under U.S. 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 defendants’ motion to dismiss the complaint brought by B Protocol Foundation and Localcoin Inc. against Universal Navigation Inc. and Uniswap Foundation.
The court found that these patents were directed to the abstract concept of calculating exchange rates for virtual currencies and therefore did not pass the two-step test for patent eligibility established by the U.S. Supreme Court.
The ruling represents a procedural victory for Uniswap, but it is not final. The case was dismissed without prejudice, and the plaintiffs were given 21 days to file an amended complaint. If an amended complaint is not filed, the dismissal will be converted to dismissal with prejudice.
Shortly after the verdict, Uniswap founder Hayden Adams wrote to X that his “lawyer just told us we won.”
Cointelegraph reached out to representatives of Bprotocol Foundation and Uniswap for comment, but did not receive a response in time for publication.
The judge found that the patent claimed an abstract idea
As previously reported, Bancor claimed that Uniswap infringed a patent related to an “automated market maker for certain products” system that underpins decentralized exchanges.
The dispute centered on whether Uniswap’s protocol illegally used patented technology for automated token pricing and liquidity pooling.
Koertl said the patents cover “the abstract concept of calculating exchange rates to conduct transactions.”
He said currency exchange is a “fundamental economic act” and that established Federal Circuit precedent makes calculating price information abstract.
The judge rejected the argument that implementing a pricing scheme in blockchain infrastructure would qualify as a patent claim, saying the patent merely uses existing blockchain and smart contract technology “in a predictable manner to address an economic problem.”
He said that limiting an abstract idea to a particular technological environment does not make it patent-eligible. The court also found that there was not enough “inventive concept” to turn an abstract idea into a patent-eligible application.
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Complaints cannot allege infringement
The court found that, beyond patent eligibility, the amended complaint did not reasonably allege direct infringement.
According to the memorandum, the plaintiffs failed to determine how Uniswap’s public code includes the required reserve ratio constant specified in the patent.
The judge also found that the complaint did not plausibly allege that the defendants had knowledge of the patent before filing the suit, and dismissed the claims of induced and willful infringement.
The dismissal without prejudice leaves open the possibility that Bprotocol Foundation and LocalCoin Ltd may attempt to resubmit with amended claims.
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