A New York federal judge dismissed a patent infringement lawsuit brought by Bancor-affiliated entities against Uniswap, ruling that the asserted patents claim abstract ideas and are not eligible for protection under US patent law.
In a memorandum opinion and order dated Tuesday, Feb. 10, Judge John G. Koeltl of the US District Court for the Southern District of New York granted the defendant’s motion to dismiss the complaint filed by Bprotocol Foundation and LocalCoin Ltd. against Universal Navigation Inc. and the Uniswap Foundation.
The court found that the patents are directed to the abstract idea of calculating crypto exchange rates and therefore fail the two-step test for patent eligibility established by the US Supreme Court.
The ruling marks a procedural win for Uniswap, but it is not final. The case was dismissed without prejudice, giving the plaintiffs 21 days to file an amended complaint. If no amended complaint is filed, the dismissal will convert to one with prejudice.
Shortly after the ruling, Uniswap founder Hayden Adams wrote on X, “A lawyer just told me we won.”
Cointelegraph reached out to representatives of Bprotocol Foundation and Uniswap for comment but had not received a response by publication.
Judge finds that patents claim abstract ideas
As previously reported, Bancor alleged that Uniswap infringed patents related to a “constant product automated market maker” system underpinning decentralized exchanges.
The dispute centered on whether Uniswap’s protocol unlawfully used patented technology for automated token pricing and liquidity pools.
Koeltl said that the patents were directed to “the abstract idea of calculating currency exchange rates to perform transactions.”
He wrote that currency exchange is a “fundamental economic practice” and that calculating pricing information is abstract under established Federal Circuit precedent.
The judge rejected arguments that implementing the pricing formula on blockchain infrastructure made the claims patentable, and said the patents merely use existing blockchain and smart contract technology “in predictable ways to address an economic problem.”
He said limiting an abstract idea to a particular technological environment does not make it patent-eligible. The court also found no “inventive concept” sufficient to transform the abstract idea into a patent-eligible application.
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Complaint fails to plead infringement
Beyond patent eligibility, the court found that the amended complaint did not plausibly allege direct infringement.
According to the memorandum, 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 claims of induced and willful infringement, finding that the complaint 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 refile with revised claims.
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