In BPROTOCOL Foundation v. Universal Navigation, Judge John G. Koeltl of the U.S. District Court for the Southern District of New York dismissed patent infringement claims against Uniswap, finding the asserted cryptocurrency exchange patents claim ineligible subject matter under Section 101. The court described the outcome as consistent with earlier rulings that implementing an abstract idea on the blockchain remains an abstract idea. The plaintiffs asserted two patents, U.S. Patent No. 11,107,049 (the ‘049 Patent) and U.S. Patent No. 11,574,291 (the ‘291 Patent). They relate “to the field of exchange and evaluation of virtual currency,” or cryptocurrency.
According to the plaintiffs, they invented a “self-executing smart token system for the blockchain that uses smart contracts to exchange one crypto asset for another while enabling continuous liquidity, instant conversions, and automated price discovery without the need for a centralized exchange or individual market makers.” This system is known as a “constant product automated market maker” (CPAMM), which relies on liquidity pools and a new type of token: the “Liquidity Provider Token” or “LP Token.” The court found that the claims in both patents are directed to the abstract idea of calculating currency exchange rates to perform transactions. The court noted that currency exchange is “a fundamental economic practice long prevalent in our system of commerce.”
The court concluded that none of those allegedly inventive features were actually claimed. The amended complaint did not allege that the defendants’ protocol includes the reserve ratio constant, Rr, as required by each claim, and the plaintiffs had access to it but failed to plead accordingly. The court also found that the plaintiffs failed to plead direct infringement, and the induced and willful infringement claims were rejected as well. The dismissal was without prejudice, giving the plaintiffs an opportunity to amend their complaint.
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