Bancor Sues Uniswap for Patent Infringement

Bancor, the developer of a smart contract-based automated market maker, has initiated legal action against Uniswap, accusing the decentralized finance exchange of infringing on its patented technology. The lawsuit, announced on May 20, alleges that Uniswap has utilized Bancor's technology without proper authorization, thereby generating significant profits.

According to the lawsuit, Bancor developed the technology in 2016 and secured a patent for it in January 2017. This technology forms the basis of the "constant product automated market maker," which employs mathematical algorithms to add or withdraw resources from a liquidity pool. The innovation led to the issuance of two patents.

Bancor claims that Uniswap leveraged this invention to create its protocol, which was launched in November 2018. Both organizations are recognized as competitors within the decentralized finance (DeFi) sector. Mark Richardson, the project lead at Bancor, stated, "When an organization continuously uses our invention without our authorization and does so as a means of competing with us, we must take action."

At the time of the announcement, Uniswap had not issued a public response to the lawsuit, which was filed in the US District Court for the Southern District of New York. Bancor, through Bprotocol Foundation and LocalCoin, is seeking compensation for Uniswap Labs’ unlicensed use of its patented technology and the Uniswap Foundation’s inducement of infringement.

Despite the legal action, Uniswap remains a dominant player in the decentralized exchange (DEX) market. While Bancor has not achieved similar success, Uniswap is ranked as the second-largest DEX by 24-hour trading volume. Bancor, on the other hand, ranks much lower in this metric. Uniswap has processed a substantial amount of trading volume throughout its existence, highlighting its significant presence in the DeFi landscape.

Richardson expressed concern that if companies like Uniswap are allowed to operate without consequences, it could stifle innovation across the industry, ultimately harming all participants in the DeFi sector. The lawsuit underscores the competitive dynamics and intellectual property disputes within the rapidly evolving DeFi ecosystem.