For Your Own Protection: Why Proposed Anti-Counterfeit Act Amendments Make Sense

Nairobi-Fashion-Hub-Disconnect-Movie_1

The word ‘Disconnect’ (see caption image above) may be the title of the latest Kenyan blockbuster film but it also embodies the current raging debate over proposed changes to The Anti-Counterfeit Act No. 13 of 2008. In our previous blogposts here and here, we have largely dwelt on the demerits of the proposals contained in the Statute Law (Miscellaneous Amendments) Bill 2018, which if enacted, would radically affect intellectual property (IP) enforcement in Kenya, principally undertaken by Anti-Counterfeit Agency (ACA).

Meanwhile, some readers of this blog, who happen to be IP practitioners specialising in brand enforcement and anti-counterfeiting matters, have rightly pointed out that it is equally important to consider the merits of and benefits expected from the proposed changes to the Act if and when the omnibus Bill is enacted. In particular, this blogpost will focus on the proposals relating to offences and the ‘recordation’ requirements.

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Customs Officers Cannot Enforce Intellectual Property Rights: Court of Appeal Judgment in Kenya Revenue Authority v Doshi Iron Mongers

doshigroup-630x315

In the case of Kenya Revenue Authority v Doshi Iron Mongers & another [2016] eKLR, the Court of Appeal was called upon to determine whether Section 5 of the Customs and Excise Act gives an officer of the Appellant (KRA) under the Act powers, rights and privileges akin to those given to a police officer in execution of his duties under Cap 84 of the Laws of Kenya, in particular that such an officer can enforce intellectual property (IP) rights including raids, arrests and seizure of goods not listed under Schedule 8 of the Customs Act.

In the lower court, the respondents had complained that their warehouses in Mombasa and Nairobi were raided between 1996 and 2006 by the appellant for no rhyme or reason, purporting to search for counterfeit, substandard and uncustomed goods particularly ‘BIC’ biro pens, battery cells, and other items at the behest of companies such as Haco Industries who were the assigned users of the trade mark.

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Tax Law and Intellectual Property: “Shell” Trade Mark Licensee Vivo Energy v. Kenya Revenue Authority

vivo energy shell licensee africa - Copy

 

The High Court recently delivered its judgment in the case of Vivo Energy Kenya Limited v Kenya Revenue Authority [2016] eKLR holding that the Commissioner of Domestic Taxes erred for concluding that a non-exclusive and non-transmissible license to use “Shell” trade marks was a sale of a property giving rise to royalty within the meaning of Section 2 of the Income Tax Act and hence chargeable to tax.

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Proposed 2015 Intellectual Property Law Amendments: Kenya Copyright Act

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Recently, the Statute Law (Miscellaneous Amendments) (No. 2) Bill, 2015 was published in Kenya Gazette Supplement No. 165 (Bills No. 58). The Bill seeks to one section of the Copyright Act, namely section 30(8). A copy of this Bill is available here (See pages 3229-3230). This proposed amendment inserts the following words at the end of the section: “and the compensation shall be collected by the Board and distributed to the respective copyright collecting society registered under section 46.”
According to the Memorandum of Objects and Reasons in the Bill, the proposed amendment to section 30(8) is intended to provide for structured compensation of performers and producers of sound recordings for private copying of works in line with international norms and practices.

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KEMRI Ordered to Pay Researchers 30 Million Shillings for Constitutional Infringement of Intellectual Property Rights

KEMRI-Wellcome Trust Research Programme KWTRP

In the recent case of Dr. Samson Gwer & 5 others v. Kenya Medical Research Institute (KEMRI) & 2 others Petition No. 21 of 2013, the Industrial Court at Nairobi found that KEMRI-Wellcome Trust Research Programme (KWTRP) had violated the constitutional rights to intellectual property of six Kenyan research doctors and ordered KEMRI to pay each of the doctors a sum of 5 million shillings as compensation. A copy of the court’s judgment is available here.

After an in-depth review of this case from an intellectual property (IP) perspective, this blogger concludes that this case sets an important precedent for the State’s obligations to protect the right to property under Article 40 of the Constitution of Kenya.

The researchers alleged that the respondents “routinely violated the Petitioners’ right under Article 40(1) of the Constitution by taking away the Petitioners’ right to intellectual property resulting in the Respondents, its servants, employees and students taking credit for the work and scientific innovation of the Petitioners by:

(i) (a) disregard syndrome; (b) Mathew Effect (Discovery credit inadvertently reassigned from the original discoverer for a better known researcher)

(ii) disapproval by the Respondent of the Petitioners and other local scientists innovations or work to apply for grants;

(iii) misappropriation of the work of local scientists to benefit expatriate scientists

(iv) frequent unfair administrative action

(v) Inability to veto adverse decisions by the scientific team leader

(vi) redeployment and chastisement through mail from the Director of KEMRI on the account of raising these grievances.

As a result the Petitioners submitted that the cumulative effect was to forever stifle the progress by Kenyan researchers and to impede their autonomy and dream of Kenyanising scientific innovations.

Therefore the petitioners sought the following reliefs, inter alia, a declaration that the Respondent’s conduct, acts and/or omissions are unlawful, illegal and/or unfair and the same violates Article 40 of the Constitution as well as an order that the Petitioners are entitled to compensation for the above alleged violation of the Constitution.

With regard to allegation (i) on the ‘disregard syndrome’, the petitioners submitted that the most rampant scientific misconduct by the Respondents against the Petitioners was plagiarism, a behaviour the latter termed as ‘citation amnesia’, ‘disregard syndrome’ and ‘bibliographic negligence’ on the part of the Respondents.

In this connection, the Petitioners alleged that the Respondents “arm-twisted the Petitioners to give up their intellectual property rights and cede their passwords to research and innovation” and that “the contracts of employment do not entitle KEMRI to the intellectual property of the Petitioners and the appropriation outlined is unlawful.”

The Respondents flatly denied these allegations arguing that there was not an iota of evidence before the court to substantiate the petitioners’ claims.

In its determination, the learned court noted that whereas KEMRI as an employer is a public institution, the funding under the KEMRI Wellcome Trust Research Programme emaned from external donors. These external donors attached specific terms and conditions to the grant and administration of the Wellcome Trust Research Programme which terms and conditions became subject of grievances by the Petitioners. However the Court found in favour of the Petitioners and stated thus at paragraph 82:

“The 1st Respondent as a state employer is bound by the Constitution to protect the right of the Petitioner and not allow a policy that appropriates their intellectual property as has been ably demonstrated by the Petitioners herein contrary to Article 40(1) of the Constitution.”

Therefore the court ordered that each of the Petitioners is entitled to compensation for the said constitutional violation in the sum of KES 5 Million within thirty days of the judgment date, including interest at Court rates from the judgment date to payment in full. Further the court ordered that the Petitioners are entitled to access all the outcomes of their scientific research and to the credit and benefit attached to the outcomes under Articles 35 and 40 of the Constitution. KEMRI was also ordered to pay the costs of the Petition.

Comments:

From the above, it is submitted that the petitioner’s case for scientific misconduct and denial of intellectual property (IP) rights by KEMRI raises a number of important issues. Furthermore, the learned court’s determination that the petitioner had ably made a case for infringement of the constitutional right to property under Article 40 is quite significant as it reinforces a dangerous precedent set by the Court of Appeal on constitutional enforcement of IP rights.

To begin, the petitioners’ case is problematic as it does not disclose which specific intellectual property rights have been infringed by KEMRI. This case is further complicated by the petitioners’ conflation of plagiarism and alleged IP infringement. As previously discussed by this blogger here and here, copyright infringement may also amount to plagiarism but plagiarism can never amount to copyright infringement. However the petitioners appear to have successfully misled the court to make a finding that KEMRI’s scientific misconduct of plagiarism amounts to infringement of the petitioners’ intellectual property rights as enshrined in the Bill of Rights.

This leads us to consider the impact of the court’s IP-related findings in this case. The present judgment in the Gwer v KEMRI case appears to be in line with the recent Court of Appeal decision in the digital migration case where the majority of the appellate judges found that the alleged infringement of intellectual property rights could be the subject of a constitutional Petition. However as this blogger has argued here, the reasoning by the Court of Appeal on IP (and seemingly adopted in the Gwer case) was flawed.

Therefore on this issue of constitutional enforcement of IP rights, this blogger respectfully submits that the earlier decisions by the learned Majanja J. in the High Court cases of Sanitam Services (EA) Ltd v Tamia Ltd Petition No. 305 of 2012 and Royal Media Services Ltd & 2 others v Attorney General & 8 others [2013] appear to be more cogent and correct in law compared with the findings in the present judgment and that of Court of Appeal in the digital migration case.

As a parting shot, this blogger notes that one unintended consequence of this emerging jurisprudence of constitutional enforcement of IP rights particularly in the employment context is that ex-employees such as Samson Ngengi (See our analysis of Ngengi v. KRA here) have an added avenue to obtain damages and compensation from public sector ex-employers in IP-related disputes. This blogger is informed that arbitration proceedings in the Ngengi’s case are still on-going.

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.

Revenue Service and Copyright Office: Strange bedfellows?

Over the past couple of years, one of the most problematic provisions in the Copyright Act has been, without doubt, section 36, which reads, in part:

“36.

(1) A manufacturer or producer of sound and audio-visual works or recordings shall apply
to the Board. for the authentication of copyright works.

(2) The Board shall authenticate copyright works according to all required documents
furnished to it by the applicant for that purpose and shall issue an approval certificate in the prescribed form to the applicant for authority to purchase an authentication device from the Kenya
Revenue Authority
.

(3) A manufacturer or producer of sound recordings or audio-visual works shall purchase
such authentication device from the Kenya Revenue Authority as may be required to cover the
number of copyright works he intends to sell or distribute.”

10 years since the drafting and enactment of the Copyright Act, section 36 has not been implemented as envisaged with the Kenya Copyright Board (KeCoBo) handling the issuance of the authentication stickers without any involvement from Kenya Revenue Authority (KRA). KeCoBo launched the authentication stickers in 2010 and called it “Anti-Piracy Security Device (APSD)”. This APSD is composed of both a hologram and barcode stickers, sold together by KeCoBo. Earlier this year, IPKenya discussed the APSD here.

KeCoBo has in the past argued that there are two angles to having a voluntary registration system accompanied with authentication of copyright works through the APSD: 1) revenue collection; 2) deterrent against piracy. However the reality is that KeCoBo lacks the resources and infrastructure to ensure that the APSD is available for purchase throughout the country. In addition, the non-involvement of KRA as provided for in the Act has resulted in a number of court cases filed against KeCoBo for acting ultra vires and in breach of the statutory provisions.

The rationale behind section 36 was based on Ghana’s Copyright Office which chose the national internal revenue service to be in charge of issuing authentication stickers to be affixed on all copyright works being sold. The internal revenue service KRA would therefore be best placed to issue these stickers because it was considered that KRA has the necessary infrastructure already in place including offices countrywide as well as measures for security, storage and distribution.

Another compelling factor behind KRA’s consent to be part of the copyright administration process was that it would allow it to levy tax on the audio-visual and musical copyright industries. This sector largely operates in the informal sector of the economy, which is largely untaxed. The added advantage of KRA is also that its Customs Department works at the national borders and can enforce authentication of all imported copyright works coming into the country.

In light of this, KeCoBo will be forced in the very near future to approach KRA and come up with either a Memorandum of Understanding (MoA) or an Agent-Principal Agreement so as to give full effect to section 36. Regardless of what name or shape this agreement takes, it is clear that KRA will solely be responsible for issuing the APSD in all its branches countrywide, collecting the proceeds from the sales of the APSD and accounting for the same to KeCoBo. However, it is almost certain that KRA will levy tax from the proceeds of the APSD sales since those monies are not considered as ‘exchequer revenue’ and also for purposes of covering its costs involved in collection.

KeCoBo on its part would remain the enforcement authority and therefore would have to expand its enforcement actions countrywide to ensure that the APSD is being purchased and affixed on each copyright work being sold, in line with the Act.

It is worth mentioning that KeCoBo has, at several times this year, undertaken to use a portion of the proceeds from the sale of the APSD to set up an “Artists’ Fund” which would be used to conduct awareness campaigns and provide some financial assistance to copyright holders in Kenya. Therefore a meaningful partnership with KRA would ensure that KeCoBo is able to collect enough money to set up this fund as well as run its other operations as mandated by the Act.