A legal storm is brewing in the world of decentralized finance. Bancor, a pioneer in the creation of automated market maker models, has filed a patent infringement lawsuit against Uniswap Labs and the Uniswap Foundation. The lawsuit centers around the alleged unauthorized use of a key technology that Bancor claims to have developed and registered in 2016.
This technology, known as Constant Product Automated Market Maker (CPAMM), allows for decentralized exchanges without permission through smart contracts. Bancor asserts that it invented this model in 2016, followed by the publication of a whitepaper and the filing of patent applications in the US in 2017. According to the lawsuit, Bancor obtained two patents that same year and launched the first decentralized exchange based on CPAMM.
In contrast, Uniswap introduced its protocol in November 2018, allegedly using the same design without authorization or recognition. “For the past eight years, Uniswap has been using our patented technology in their projects without our permission,” said Mark Richardson, project lead at Bancor. “As a result, we have taken legal action to defend our technology for the benefit of the entire DeFi community.”
The case has significant implications for the development and ownership of intellectual property within the DeFi space. Richardson warned that allowing entities like Uniswap to use patented technologies without consequences could harm innovation in the sector. “If companies like Uniswap can act without restrictions, we fear that it will stifle innovation across the industry, to the detriment of all DeFi players,” he added.
The magnitude of the case is amplified by the fact that Uniswap is currently one of the largest and most used decentralized exchanges in the world. If the infringement is confirmed, the impact will not only affect the company being sued but also the users and developers who rely on its infrastructure.
As the case unfolds in the courts, it will be determined whether Uniswap has indeed replicated Bancor’s CPAMM model and if that constitutes a patent violation under US law. The resolution could influence how intellectual property rights are managed in decentralized technologies, a topic that has historically been unclear in the crypto space. It may also prompt other platforms to review their technical and legal foundations more carefully.
The debate between open-source code, community innovation, and property rights is becoming increasingly relevant as the DeFi ecosystem matures and faces regulatory and judicial challenges worldwide. The outcome of this lawsuit will be closely watched by the industry, as it may set a significant precedent for the development of decentralized finance.
Uniswap has yet to publicly comment on the lawsuit. According to reports by The Block, the company has been requested to provide a statement, but no immediate response has been given. The lack of reaction may be due to a cautious legal strategy, given the potential scope of the conflict.
The lawsuit was filed by the Bprotocol Foundation, a non-profit organization that supports the development of the Bancor protocol, along with LocalCoin Ltd., the original developing firm. The case was presented in the Southern District of New York Court, as reported on May 20 in an official statement.
In the world of DeFi, innovation and intellectual property are increasingly at the forefront. As the industry continues to grow and mature, it’s essential to establish clear guidelines and regulations to ensure that innovation can thrive while respecting the rights of creators and inventors. The outcome of the Bancor vs. Uniswap lawsuit will be a crucial step in shaping the future of decentralized finance.