Bancor, a leading decentralized exchange (DEX) platform, recently made headlines by filing a groundbreaking patent infringement lawsuit against Uniswap, another prominent DEX in the crypto space. The lawsuit, filed in the U.S. District Court for the Southern District of New York, alleges that Uniswap has been using Bancor’s patented automated market maker (AMM) technology without authorization for the past eight years. This legal battle raises significant questions about intellectual property rights in the decentralized finance (DeFi) sector, which has traditionally been rooted in open-source development.
At the heart of the dispute is Bancor’s claim that it invented and patented the constant product automated market maker (CPAMM) model, which revolutionized decentralized trading through smart contracts. Bancor filed the original patent application for this technology in January 2017 and released a white paper shortly after. The Bancor Protocol, launched in June 2017, was the first DEX to utilize the AMM model. Bancor was granted two patents for its innovation and introduced the first CPAMM-based DEX that same year.
In contrast, Uniswap launched its v1 protocol in 2018 and has since become the dominant DEX in the crypto market, with over $40 billion in total value locked. Bancor alleges that Uniswap has been infringing on its patents from the outset without obtaining proper licensing or authorization. The lawsuit seeks damages and aims to address the potential negative impact of unlicensed use on innovation within the DeFi industry.
The legal challenge between Bancor and Uniswap underscores the growing importance of intellectual property rights in the DeFi space. While DeFi has traditionally embraced open-source principles, this lawsuit highlights the need to address issues related to patents and ownership of foundational blockchain technologies. If the court rules in favor of Bancor, it could set a significant legal precedent and influence how DeFi protocols are developed, shared, and monetized in the future.
In a related regulatory context, Bancor recently received a favorable ruling in a securities class action lawsuit filed against its operators, which was dismissed by a Texas federal judge due to a lack of U.S. jurisdiction. This decision shields Bancor from U.S. securities laws, at least temporarily. On the other hand, Uniswap Labs successfully navigated an investigation by the U.S. Securities and Exchange Commission, further highlighting the contrasting regulatory environments in which these two DEX platforms operate.
Despite these legal and regulatory challenges, both Bancor and Uniswap continue to play significant roles in the DeFi ecosystem. Bancor’s total value locked (TVL) currently stands at $58 million, a significant decrease from its peak in May 2021, while Uniswap commands 23% of daily DEX volume and recently surpassed a $3 trillion all-time milestone. As the patent war between Bancor and Uniswap unfolds, it has the potential to reshape the landscape of DeFi and redefine intellectual property rights within the industry. This ongoing legal battle underscores the importance of protecting innovation and fostering a supportive environment for continued growth and development in the DeFi space.