The Tax Collection Technovation Tussle: A Test Case for Industrial Property in Kenya

“The law recognises the rights of employees who go beyond the call of duty. According to the Industrial Property Act, they have to be issued with a certificate and their rights to the invention must be established (…) Many people are not aware of this right under the Act and assume that all works they do automatically belong to the employer. Therefore, they fail to gain recognition for their innovations.” – Cathy Mputhia, Advocate.

The Kenya Revenue Authority (KRA) is charged with the responsibility of collecting revenue on behalf of the Government of Kenya. Recent media reports indicate that KRA is embroiled in a multi-million shilling intellectual property law suit over rental tax system developed by one of its employees.

Mr Samson Ngengi — who is in his third year as an employee of KRA – claims he developed the Geo-spatial Revenue Collection Information System (GEOCRIS), a software that maps property location, ownership and building details, as well as the tax status of a taxpayer, providing an effective tool for collecting rental income levy.

KRA was recognised and awarded for developing the GEOCRIS innovation at the 46th Inter-American Centre of Tax Administrations (CIAT) General Assembly that took place from April 23 to 26 this year.

What has raised eyebrows is KRA’s latest move to advertise bids for the development and supply of an information system linking a database of properties to owners and tax compliance records. Ngengi now alleges that this move by KRA is an attempt to usurp his intellectual property rights in GEOCRIS which is a markedly similar system to the one being tendered by KRA>

Ngengi has now successfully moved to court for interim orders barring KRA from dealing in GEOCRIS or developing any similar system until full hearing and determination of Ngengi’s case for compensation for KRA’s use of GEOCRIS and whether KRA should issue a technovation certificate to Ngengi in respect of GEOCRIS.

Comment:

In section 94 of the Industrial Property Act 2001, a “technovation” is defined as

“a solution to a specific problem in the field of technology, proposed by an employee of an enterprise in Kenya for use by that enterprise, and which relates to the activities of the enterprise but which, on the date of the proposal, has not been used or actively considered for use by that enterprise;(…)”

In this regard, it is clear that GEOCRIS relates directly to KRA’s tax collection activities as the only agency mandated to collect tax revenue on behalf of the government.
Ngengi’s alleged right to a technovation certificate in respect of GEOCRIS is covered under section 95 of the Act, however this right is not automatic and several requirements must be met, namely:

1. Ngengi must have filed a dated and signed request for a technovation certificate
2. Ngengi must prove that his duties as a KRA employee do not comprise the making and proposing of technovations which pertains to the field of activities for which he is employed.
3. Despite of the requirement under point 2, Ngengi can argue he is entitled to a technovation certificate where the degree of the creative contribution inherent in the technovation exceeds that which is normally required of a KRA employee in his position.

Ngengi will also be seeking to rely on section 99 of the Act which deals with the question of remuneration for a technovator. In the present case, Ngengi may not find it difficult to show that KRA has used the technovation or communicated it to a third person, as required by the Act.

However the Industrial Property Act provides a reprieve for KRA. section 97 (2) of the Act states:

“The enterprise may refuse to issue the certificate if it is of the opinion that the requirements of this Part have not been satisfied and shall notify the employee of the reasons therefor within a period of three months from the date of the proposal..”

In addition, KRA may also wish to challenge the High Court’s jurisdiction to hear this matter in light of the provisions of section 101 of the Act which provides for a mandatory dispute resolution mechanism, which must commence with arbitration, then appeals from the arbitration board are to be taken to the Industrial Property Tribunal. The section reads as follows:

“101. (1) Any dispute concerning the application of this part shall be submitted by any interested party to an arbitration board consisting of three members: one member appointed by the employee or technovator, one member appointed by the enterprise, and a chairman appointed by the two members. The arbitration board shall hear interested parties and thereafter deliver its ruling.
(2) Where the parties fail to agree on the appointment of the chairman, he shall be appointed by the Resident Magistrate’s Court having jurisdiction in the place where the enterprise is located.
(3) An aggrieved party may appeal against the decision of the arbitration board to the Tribunal.”

IPKenya will keep a close eye on the developments in this case and will issue a comprehensive comment once the case is concluded.

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