Intersections between Intellectual Property, Consumer Protection and Competition Law in Kenya

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Editor’s note: This article is a commentary on the LSK CLE on Competition and Consumer Law on Feb 8, 2014 at the Hilton, Nairobi. Audio recordings of the various presentations made during the CLE have been uploaded here.

From an intellectual property (IP) perspective, the enactments of the Competition Act, 2010 and the Consumer Protection Act, 2012 have played a major role in balancing the interests of IP owners and IP users in Kenya. The Competition Act is a broad piece of legislation as it seeks to promote and safeguard competition in the economy whilst protecting consumer rights. The Consumer Protection Act was enacted with a view to consolidate various consumer protection provisions scattered in several pieces of legislation. In this regard, the 2012 Act governs the protection of the consumer and aims to prevent unfair trade practices in consumer transactions.

In this discussion of how IP intersects with consumer protection law and competition law, the point of departure is the Constitution of Kenya, 2010. The rights of the various categories of IP rights holders are guaranteed under Article 11, 40 and 69 of the Constitution, whereas the rights of IP rights licensees as users are guaranteed under Article 46 of the Constitution.

However it is important to note that, under Article 24 of the Constitution, none of these rights enshrined in the Bill of Rights are absolute in nature. This Article provides that a right in the Bill of Rights can be limited by law where that limitation is reasonable and justifiable in an open and democratic society, taking into account certain factors relating to the nature, extent, importance and purpose of the limitation.

In this connection, it is submitted that the Competition and Consumer Protection Acts introduce several limitations to the rights of IP owners, discussed below.

In the Competition Act, restrictive trade practices are defined to include any agreement, decision or concerted practice which amounts to the use of an intellectual property in a manner that goes beyond the limits of legal protection. However the Act provides for the grant of exemption for certain restrictive practices in respect of intellectual property rights. This blogger wonder whether de jure monopolies such as collective management organisations would be required to apply and obtain such exemptions.

In addition, the Act defines the abuse of dominant position to include abuse of an intellectual property right. This latter point is discussed by Guserwa, SC at 4:37 in the audio recording below, labelled: “Competition Law Issues in the Legal Profession”.

With regard to the provisions on extra-territorial operation and mergers in the Act, it is important to note the use of the word “asset” which is defined in section 2 as follows:

” “asset” includes any real or personal property, whether tangible or
intangible, intellectual property, goodwill, chose in action, right, licence, cause
of action or claim and any other asset having a commercial value;”

Another important section of the Act is part VI which deals with consumer welfare. This blogger submits that these consumer welfare provisions may have the effect of limiting some of the rights enjoyed by IP owners. These provisions are further enhanced by the Consumer Protection Act. Therefore it is noteworthy that the provisions in the Competition Act relating to false or misleading representations and unconscionable conduct are covered in the provisions relating to unfair practices under the Consumer Protection Act.

From an IP perspective, the consumer law provisions in these two Acts interact with IP at both international and national levels. At the international level, these consumer law provisions give effect to Kenya’s obligations under the Article 10bis of the Paris Convention. These obligations are reinforced by Article 2 of the TRIPs Agreement. At the national level, these consumer law provisions give effect to three IP legislations, namely the Copyright Act, the Trade Marks Act and the Anti-Counterfeit Act. In this context, this blogger argues that the definition of “supplier” in the Consumer Protection Act is broadly defined such that it includes owners of IP rights. Therefore the obligations and duties imposed on suppliers can therefore be extended to IP owners in their normal course of trade.

Copyright Board To Review Guidelines for Collective Management Organisations

This blogger has learned that KECOBO is in the process of the review its CMO Guidelines titled “Guidelines for Licensing Collective Management Organisations”. These CMO Guidelines are available on KECOBO’s website here. Therefore, this blogger hopes to provide an in-depth examination of the Guidelines while making comments on important areas and issues connected with the Guidelines.

In coming up with these Guidelines, KECOBO explains in the opening paragraph that it is mandated under the Act to license and supervise CMOs in Kenya so to ensure that CMOs carry out their core function, namely the collection and distribution of royalties. It is noteworthy that since 2011 when the Guidelines were introduced, KECOBO has been enforcing these Guidelines against CMOs despite the fact these guidelines have no force of law. It is therefore advisable that KECOBO causes the inclusion of these Guidelines in Regulations to be made by the Minister (Attorney General) under section 49 of the Act.

Notwithstanding the legal force of these Guidelines, this blogger has the following comments to make on the Guidelines:

1. Title: this blogger suggests that the title of the Guidelines be amended to include “and Supervising”.

2. Public Notice: KECOBO may wish to include a time frame within which notices shall be published to increase KECOBO’s accountability and transparency. In addition, KECOBO may wish to specify which platform(s) will carry the public notices eg. local dailies with national circulation, KECOBO’s official website, KECOBO notice board?

3. Licensing: In the spirit of transparency and accountability, KECOBO may consider including a time frame within which licenses shall be processed once all application documents are submitted.

4. New Applications: The requirement under (g) appears vague and KECOBO may consider specifying what documents would be required to satisfy that the applicant has the “capacity for collection and distribution of the royalties”.

5. Renewal of License: To avoid duplication of documents submitted by licensed CMOs, the requirements of (a) and (b) should be removed. In the alternative, the requirement (b) should be qualified for cases where the memorandum and articles of association have been amended.
With regard to requirement (i), submitting individual deeds of assignment for each and every member may be onerous for most CMOs due to the sheer bulk of documentation to be produced. At any rate, KECOBO may decide to verify the deeds during an inspection visit to ensure that it corresponds with the list of members submitted.

6. Revocation of a license: The CMO Guidelines have made several additions to the grounds provided under the Act. However the wording and punctuation of this list of grounds for revocation is ambiguous as it does not disclose whether all the ten (10) listed grounds must be present for revocation or whether the presence of one or several grounds is sufficient.

In sum, this blogger submits that the Guidelines play an important role of supplementing the existing legal provisions on licensing and supervision of CMOs found in the Copyright Act, 2001 and Copyright Regulations, 2004. However these Guidelines ought to be given the force of law in order for KECOBO to enforce them against CMOs.

Editor’s note: The author currently works with MCSK however the views, opinions and analyses expressed herein are solely those of the author and are not those of his employers, both past and present.

Copyright Licensing Requires Salesmanship: Lessons from the Banned “Wolf of Wall Street”

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One of the most talked about stories in the month of January was the decision by the Kenya Film Classification Board (KFCB) to ban the sale, exhibition and distribution of the critically acclaimed Hollywood film “The Wolf of Wall Street”.

KFCB claims that the film was “restricted” due to elements that include nudity, sex, alcohol, drugs and profanity found in almost every scene of the 3-hour long motion picture which chronicles the title character’s (Jordan Belfort’s) pursuit of the American Dream.

This blogger has watched the banned film and believes that it is a must-watch for all those involved in the sale/assignment and/or licensing of content. In particular, this blogger recommends several short clips from the movie where the lead character demonstrates the art and skill of making a sale.

In the above scene, Jordan Belfort is trying to turn a group of inexperienced, undisciplined misfits into Wall Street stock brokers. In order to illustrate to the basic fundamentals of making a sale, Belfort pulls out a pen and thrusts it in their faces, with the instruction: “Sell me this pen.” After one member of his team declines, another member of his team grabs the pen from him and states:

“Do me a favour and write your name on that piece of paper, there.”

When Belfort looks around for something to write with, the future salesman replies:

“Oh, you don’t have a pen anymore. Supply and demand, bro.”

This scene illustrates a fundamental point for all salespeople: Until a need is recognized, it simply doesn’t matter how great your product or service is. Therefore, there are essentially three parts to any sale: identifying the need, creating urgency and applying the need and urgency to the sale. In short, the role of the salesperson is to help the client reconnect with his/her needs and the urgency to act upon them.

In the case of content, the license is the most common sale because it allows users to enjoy certain rights in the content without transferring ownership in the content. In this connection, this blogger has in mind the four collective management organisations (CMOs) currently in operation within Kenya, namely the Reproduction Rights Society of Kenya (KOPIKEN)Kenya Association of Music Producers (KAMP), Performers’ Rights Society of Kenya (PRiSK) and Music Copyright Society of Kenya (MCSK). Each of these CMOs is in the business of selling licenses to users throughout Kenya with respect to the rights holders in the various categories of works they control. From the CMOs’ perspective, the ends justify the means when it comes to licensing users of copyright works: an increase in licenses issued means an increase in royalties distributable to copyright owners. Therefore licensing staff employ various tactics to create awareness on copyright law while emphasising the need for them to take out licenses for commercial exploitation of copyright works.

A common challenge among the CMOs is increasing the number of licenses issued while at the same time reducing their administrative (operational) costs. One possible solution is tele-licensing whereby licensing staff spend the majority of their time on the phone with potential licensees countrywide. The trick behind tele-licensing is to persuade a commercial user that it requires a copyright license to continue or commence its operations and making arrangements with the user for the CMO to dispatch a licensing staff to deliver an invoice and collect the license payments.

Once again, Jordan Belfort illustrates how tele-licensing could be done in the clip below where he sells penny stocks worth $40,000 in a non-existent company.

In the Kenyan context, a higher degree of salesmanship may be required than that displayed by Belfort in the above clip due to the ignorance of copyright law among a large portion of potential content users. In fact, some licensing staff argue that in some cases, unless they physically visit business premises in the company of uniformed police officers, content users will not take out copyright licenses. However, this blogger argues that despite the low levels of awareness among copyright users, there is still an important need for sales training among the licensing staff of all the CMOs to ensure that they understand the content licenses they are selling and how to create the need and urgency among content users to take out the licenses.

 

In the Kenyan context, a higher degree of salesmanship may be required than that displayed by Belfort in the above clip due to the ignorance of copyright law among a large portion of potential content users. In fact, some licensing staff argue that in some cases, unless they physically visit business premises in the company of uniformed police officers, content users will not take out copyright licenses. However, this blogger argues that despite the low levels of awareness among copyright users, there is still an important need for sales training among the licensing staff of all the CMOs to ensure that they understand the content licenses they are selling and how to create the need and urgency among content users to take out the licenses.

A Comparative Perspective: Why Business Method Patents Cannot Be Too Quickly Dismissed

moses njoroge muchiri advocate

IPKenya has received a commentary from Moses Njoroge Muchiri, Advocate and Researcher at the Max Planck Institute for Intellectual Property and Competition Law in Munich, Germany. Muchiri (pictured left) drew my attention to his paper which is comprehensive review of the current legal developments in the protection of computer implemented Business Method Patents (BMPs) comparing the U.S. and E.U. The paper titled: “Business Method Patents Revisited: Recent Developments in the Protection of Computer Implemented Business Methods in the U.S. – Between the Promotion of Innovation and Protection of Investments?” is available on SSRN here.

Recently Muchiri came across IPKenya’s commentary on the CIPIT conference on Software Patents and thought it useful to add his voice briefly to the discussion, as follows:

1. There is a plausible reason why many of the participants in the CIPIT conference would elaborate more on the pros and cons of patenting software patents (of which BMPs are a subset). And one of the main reasons behind that is purely economic in nature. Patent law is the one area of law where the relationship between law and economics is very visible and highly dynamic. To discuss whether ‘property rights’ should be extended to such ‘new age inventions’ as software and even business method patents (many of which are embodied within software patent claims or in reverse) one has to consider that ultimately, property rights are justified only to the extent to which their existence is economically justified as beneficial to the greatest number of economic concerns and situations. This theory lies at the heart of fundamental both traditional and neo- economics as can be seen in the age old literature of Adam Smith. Infact, to a greater extent, I have come to believe that the issue of patentability of BMPs and Software patents is one that should be discussed and possibly answered more by economic analysts. This view was discussed at my institute and I shared this view with a senior Professor of Law who shared this thought. Perhaps lawyers should be less involved with this issue at a policy level, being a more policy oriented question demanding an understanding of the intricate balance between law and economics required to create the broadest space for innovation possible. Which then at a micro-economic level, would also involve an analysis along Competition law lines to analyse for instance whether the creation of quasi-property rights would foreclose certain markets where those rights have been created and thereby pre-empt any possibility for legitimate inter-brand competition. Only where such market foreclosures exist in sufficient scales, would there be a reason to question the existence of a particular patent.

2. It is not whether patents on BMPs should generally be or not be granted; but rather whether a SPECIFIC or a particular business method patent (or a specific software patent) should or should not be granted. This debate has been on-going in academia, business and even among stakeholder professionals in the relevant fields. I disagree that the only people who like these sorts of patents are lawyers or even patent examiners. This line of thinking was actually made by an opponent of BMPs in 2002 after the U.S. Federal Circuit decision in State Street Bank v. Signature Financial 149 F.3d 1368 (Fed. Cir. 1998). Note: Many opponents of BMPs have cited this decision, inaccurately I might add, as the decision through which the Supreme Court allowed patents to be obtained for business methods. Firstly, the patent in issue in State Street was an already granted patent, it was not allowed by the judiciary. Secondly, BMPs can traced to exist from as early as the 19th Century in the U.S. Thirdly, the patent in State Street was not strictly speaking a business method patent. Opponents also cite that Article 52 (2) (c), EPC (European Patent Convention) expressly provides against BMPs and Software Patents. However, many forget to consider Article 52(3), EPC where such patents will not be granted only to the extent that they relate to such subject matter “as such.” Meaning that pure BMPs and Software patents cannot be granted by the EPO. As a result there are currently in excess of over 40,000 BMPs and Software patents granted by the EPO. Why would such number of patents still be granted by an institution that is renown for having one of the strictest patent examination procedures? This is because patents will be examined INDIVIDUALLY not in general terms.

3. The US Supreme Court in Bilski v. Kappos (2010) had a momentous occasion to do away with BMPs once and for all but they did not do so for several reasons. Although they did deduce that the method patent at issue was not patentable, they arrived at that conclusion by holding chiefly that the machine and transformation test was not the main test for patentability of business method AND software patents. What does this mean then? While it is true that one is more likely to get a patent for hardware than software, this has little to do with the tangibility or intangibility of the invention being claimed. This further also elaborates the point that it is not the business of the judiciary to decide what is or is not patentable technology. The judiciary can only interpret the boundaries of the application of patent protection for a specific claimed invention.

4. Tests of patentability. Invariably the issue now rests not upon whether business methods and software patents should be granted protection, but rather reducing the flow and influx of these sorts of applications. But how should this be achieved? Two ways. (i) rigorous pre- grant examination tests. In the US they have developed quite a number of these tests to supplement the machine or transformation test e.g. the Useful-Concrete-Tangible test; teaching-suggestion-motivation test and other technical tests based on §§101 and 102 of the US Patent Act. (ii) secondly; rigorous post grant tests e.g. secondary post grant review. The Supreme Court has endorsed the use of various tests and not just the machine transformation test to the exclusion of the others. in the wake of the new America Invents Act and recent Supreme Court and Court of Appeal for the Federal Circuit (CAFC) decisions, recently the USPTO has implemented various administrative reforms such as secondary review procedure for all granted BMPs. Again in the EU, the reason why BMPs exist is because of the requirement for technical effect.

5. Most of the criticism leveled against BMPs is almost entirely directed at the quality of such inventions i.e. issues dealing with these claims being obvious in light of the prior art. It is not a question about whether or not BMPs should be patented, It is a question on Patent EXAMINATION procedures and review standards. The right focus should be on improving the quality of examination standards and making these patents difficult to obtain. It should also be possible for the public and 3rd parties (essentially anyone with information on useful prior art) to object to patent applications for business methods and software. Again, the institutional capability of patent granting institutions should be improved by engaging highly qualified staff patent examiners who are familiar with the arts in these industries and fields. This way questionable patents will be avoided in the long run. It is these sorts of reforms that the USPTO has currently began to entrench successfully. In a few years we should expect to see a very streamlined patent granting process not just in the US, but also in Japan and Europe regarding these sorts of inventions. We should expect to see many dubious method patents to be invalidated.

6. A requirement for closer scrutiny: Unfortunately many people cite patents without really taking a closer look at the contents of these patents. I read through hundreds of patent claims for hundreds of business method invention claims. And admittedly some are very obvious. But those are but a small minority compared to the broad range of classes for business method inventions. US Patent Examination Class 705 which is the broad class under which most business methods are granted has over 15 sub-classes and each of them contains tens of thousands of granted method patents.
Example: the Amazon 1-Click patent is often cited for being obvious. But for argument sake; if this BMP is stifling to innovation, then we could legitimately expect other e-commerce business players’ efforts to establish themselves as serious contenders in the same market of e-commerce to be prevented from entering the market or at the least face dwindling customer base. But that is hardly the case. One would need to analyse: (i) whether Amazon gained any additional customers as a result of the 1-Click patent (ii) whether other competitors (eg Barnes and Noble or eBay) would face reduced returns as a direct or indirect result of amazon’s patent. I doubt whether this patent has had any such effect at all. But this emphasizes my earlier note, that this has a lot more to do with economic analysis as it does law. There are some substantial economic and legal scholars who have analyzed the economics of this issue, and their articles crunch heavy numbers to answer it. Please see my SSRN paper and symposium Slides for more details.

7. Every patentable technology has had its own peculiar misgivings at one time or another. What are the marginal boundaries of patentable subject matter? This is where law certainly comes in, LEGAL INTERPRETATION. It is not to be forgotten that even the US Constitution and Patent Act have both been framed very widely to be as accommodative as possible while still retaining some restraints. Now here is where it all depends on schools of legal interpretation. Between literal positivists and purposivisim. What is patentable technology? This is the wrong question to ask and its merits or demerits lead us nowhere really. The right question should be, “Can this invention be patented?”

Lastly, I do understand Dr. Rutenberg’s position. And in some aspects, even I share a sort of hunch that these sorts of patents should not exist. But it is only some of the reasons that are often loudly adduced in attacking BMPs that I do not agree with. Furthermore, I completely agree on the importance of branding over patenting and indeed also seeking out alternative forms of protection for which I strongly advocate.

Both Kenya’s National Intellectual Property Offices now on Twitter

It’s been almost a year since Kenya Copyright Board (KECOBO), the national copyright office officially launched it’s twitter page, a move which was widely applauded. A twitter presence has allowed KECOBO to reach the wider public and spread awareness about copyright and related rights in Kenya. KECOBO has managed the account exceptionally well with almost daily tweets on activities, events, programmes and most importantly they have engaged with twitter users with queries, questions and complaints.
All in all, twitter has been an important platform for KECOBO to carry out its mandate of administering and enforcing copyright and related rights in Kenya.

Now, Kenya Industrial Property Institute (KIPI), the industrial property office has also launched its official twitter account. Follow KIPI: “@KIPIKenya”

IPKenya is happy that KIPI has finally embraced this important social media tool. Unlike KECOBO which enjoys a fair amount of mainstream media coverage for its enforcement actions and its supervision of collecting societies, KIPI has always been shrouded in mystery. That said, the recently launched KIPI website has allowed members of the public to learn more about KIPI, its mandate and its services. However KIPI’s events, activities and programs are not widely publicised which makes public participation and discussion difficult.
IPKenya hopes that KIPI will use twitter to freely communicate and engage with the public on issues of industrial property and other related IP matters so as to demystify them and encourage the public to taje advantage of the IP system.