The Ghost of M-Pesa: Faulu Kenya Cries Intellectual Property Theft over Safaricom’s M-Shwari

In a recent news article titled “Safaricom loses first round of M-Shwari row with Faulu”, it is reported that Mr Justice Jonathan Havelock, sitting in the High Court, made the following two determinations in respect to Faulu Kenya’s suit against Safaricom’s M-Shwari:

1. The court denied Faulu Kenya’s request that Safaricom be barred from any dealings in the M-Shwari service until the former’s case is heard and determined.
2. The court rejected Safaricom’s bid to have Faulu Kenya’s bid moved to the Industrial Property Tribunal and stated that it had jurisdiction to hear and determine the case.

To recap, Faulu Kenya filed a lawsuit last week in the Kenyan High Court seeking to halt Safaricom from operating M-shwari, arguing that it is similar to its Kopa Chapaa service, which has been in operation since last year in partnership with Indian mobile operator Airtel Kenya. Faulu Kenya claimed that it had pitched to Safaricom the idea of a mobile money service that allows users to save, borrow loans and earn interest using their mobile phones.

During this pitch, Faulu Kenya alleges that it presented to Safaricom a prepared concept paper detailing how the platform was going to operate. Faulu Kenya also claims that it entered into a non-disclosure agreement with Safaricom, which it claims that Safaricom disregarded when it developed and launched the M-Shwari product. However Safaricom now claims that it had knowledge of a similar product to Faulu Kenya’s, having signed a pact with Commercial Bank of Africa (CBA) eight days before the Faulu agreement.

Safaricom has made a lengthy statement on this matter via their official site, which reads in part:

“While this matter is already in court and is therefore subject to sub judice rules, Safaricom Ltd seeks to clarify that M-Shwari is a proprietary product of Safaricom Limited which is the successful result of a 2-year product development process.

As you are aware, Safaricom Ltd has had a strong focus on Financial Inclusivity since 2007, when it launched M-Pesa. The commitment has been sustained through relevant enhancements informed by proactive research into user habits, dynamic customer needs and emerging trends, relating to the use of M-Pesa and other mobile finance solutions.

In developing M-Shwari, Safaricom Ltd and the Commercial Bank of Africa followed the due legal process as required by the Laws of Kenya.

As Kenya’s leading integrated communications company, Safaricom has consistently worked hard to conceptually develop innovative solutions for all Kenyans. As a result Safaricom has built an enviable intellectual property portfolio.

While the allegations are lamentable and unfortunate, Safaricom will seek to have the matter resolved through the right legal processes. We believe that this law suit is tainted with malice because it is founded on untrue allegations(…)”

Comment:

Certainly, this latest row between Faulu Kenya and Safaricom is reminiscent of previous intellectual property (IP) disputes surrounding Safaricom’s flagship M-Pesa product. As one commentator rightly notes, everytime Safaricom launches a new M-product, an “intellectual property” lawsuit is not too far behind therefore such suits are “all part of the cycle of an m-product”.

Fortunately, the learned judge, Mr. Jonathan Havelock did not fall into the trap of his learned sister Lady Justice Joyce Khaminwa, who was persuaded by Safaricom to make a ruling in the M-Pesa litigation that the High Court had no jurisdiction to handle the matter directing that the litigant Mr Christopher Ondieki ought to file his suit at the Industrial Property Tribunal.

This blogger submits that if this litigation proceeds to its full conclusion, Hon. Justice Mr. Jonathan Havelock will have the rare opportunity to, once and for all, provide Kenya with useful jurisprudence on the nature and scope of intellectual property protection, with a clear emphasis on the copyrightability of mobile-based ICT innovations, the oft-misunderstood idea/expression dichotomy and perhaps the patentability of M-products generally.

This may also be a worthwhile opportunity for the learned judge to examine both M-Shwari and Kopa Chapaa and determine whether both products can co-exist in the market bearing in mind Kenya’s new laws on competition and the alleged existence of a non-disclosure agreement signed by both Safaricom and Faulu Kenya.

All in all, this is a case that we will all be following keenly as it now proceeds to the hearing stage.

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