Bancor files patent infringement lawsuit against Uniswap over DEX tech

Bancor, a pioneer in automated market makers (AMMs) using smart contracts, has initiated legal action against Uniswap, alleging patent infringement. The lawsuit, filed in the US District Court for the Southern District of New York on May 20th, claims Uniswap utilized Bancor’s patented technology without authorization, generating substantial profits.

Bancor’s technology, developed in 2016 and patented in 2017, centers on a “constant product automated market maker.” This mechanism employs mathematical formulas to manage resource allocation within liquidity pools. The lawsuit asserts that Uniswap’s protocol, launched in November 2018, directly incorporates this patented invention. Bancor and Uniswap are key players within the decentralized finance (DeFi) landscape, making this a significant industry dispute.

Mark Richardson, project lead at Bancor, stated that the company felt compelled to act due to Uniswap’s unauthorized use of their patented technology, especially given the competitive nature of the DeFi market. The Bprotocol Foundation and LocalCoin are also involved in the suit, seeking compensation for Uniswap Labs’ alleged infringement and Uniswap Foundation’s alleged inducement of infringement. At the time of this writing, Uniswap has not publicly responded to the allegations.

A stark contrast in market performance underscores the implications of this lawsuit. DefiLlama data reveals a significant disparity between Bancor and Uniswap’s trading volumes. Uniswap holds a prominent position as the second-largest decentralized exchange, processing nearly $3.8 billion in 24-hour trading volume. In contrast, Bancor ranks much lower, with only $378,579 in 24-hour volume. Over its operational lifespan, Uniswap has facilitated over $2.8 trillion in trading volume.

Bancor argues that allowing such unchecked use of patented technology could stifle innovation within the DeFi sector. Richardson emphasizes the potential harm to all DeFi participants if companies can utilize patented inventions without consequence. The outcome of this case will likely have far-reaching effects on intellectual property rights within the rapidly evolving decentralized finance ecosystem.