A federal judge in New York recently delivered a significant procedural victory to Uniswap, dismissing a patent infringement lawsuit initiated by entities affiliated with Bancor. This ruling provides crucial insight into the applicability of traditional patent law within the innovative and rapidly evolving decentralized finance (DeFi) ecosystem, particularly concerning fundamental blockchain functionalities.
Patents Deemed Abstract and Ineligible
The core of Judge John G. Koeltl's decision was his finding that the patents asserted by Bprotocol Foundation and LocalCoin Ltd. claimed "abstract ideas" and were therefore ineligible for protection under U.S. patent law. The court determined that the patents essentially pertained to the abstract concept of calculating cryptocurrency exchange rates for transactions – a fundamental economic practice. Judge Koeltl emphasized that merely implementing these pricing formulas on blockchain technology or through smart contracts did not render them patentable. He clarified that such applications utilized existing technology in "predictable ways to address an economic problem" and lacked the necessary inventive concept to transform an abstract idea into an eligible patent application.
Failure to Allege Infringement and Future Implications
Beyond the primary issue of patent eligibility, the court also concluded that the plaintiffs' amended complaint failed to plausibly allege direct infringement. Specifically, the complaint did not adequately identify how Uniswap's publicly available code incorporated a specific "reserve ratio constant" as defined in the patents. Consequently, related allegations of induced and willful infringement were also dismissed. While a clear win for Uniswap, the dismissal was "without prejudice," granting the plaintiffs 21 days to file an amended complaint. Should no revised complaint be submitted, the dismissal will become permanent. Uniswap founder Hayden Adams welcomed the news, with a Uniswap Labs spokesperson reinforcing their commitment to transparent development within DeFi and expressing satisfaction with the court's recognition of the lawsuit's unfounded nature.
