High Court Upholds Freeze of Collecting Society’s Bank Accounts: Ruling in MCSK v Chief Magistrate, Inspector General

Music-Copyright-Society-of-Kenya-MCSK-CEO-Maurice-Okoth People Daily

This blogger has recently come across an astute ruling by the High Court in the case of Music Copyright Society of Kenya v Chief Magistrate’s Court & Inspector General of Police [2015] eKLR. Justice L. Kimaru sitting in the High Court was approached by the authors’ collecting society, Music Copyright Society of Kenya (MCSK) to stay orders issued by the Magistrate’s Court freezing all the bank accounts of MCSK following a request by the Serious Crimes Unit under the Directorate of Criminal Investigations (DCI). DCI requested that MCSK’s accounts be frozen as it investigates complaints made by MCSK members in regard to alleged misappropriation and theft of funds at the collecting society.

After carefully evaluating the facts before him, Kimaru J ruled that the investigations were lawful and based on several complaints received by DCI from MCSK members and that the orders to freeze MCSK’s accounts were within the precincts of the law.

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Quick Thoughts on “Zindua Cafe”: Safaricom’s New Idea Submission Portal

zindua cafe safaricom homepage

This week, Safaricom launched “Zindua Cafe”, an idea submission web portal which allows registered users to submit ideas, applications or prototypes to Safaricom Limited, Kenya’s leading mobile network operator. Once these submissions are made to Safaricom, the telecommunication giant will review them internally and send either a ‘interested’ or a ‘regret’ response to the user. If Safaricom is ‘interested’ in any submission, the user will be offered a non-disclosure agreement and commmercial contract governing Safaricom’s intended implementation of the submission.

Having taken Zindua Cafe for a test-run, this blogger has a few thoughts on Safaricom’s new innovation portal:-

1. Intellectual property (IP) advice: Zindua Cafe is an excellent source for unsolicited legal advice on IP rights protection. The portal reads in part: “We strongly recommend that you patent your idea or get your IP in place”. The portal then explains the distinction between WIPO, KIPI and KECOBO and provides links to their respective websites. In the case of IP- protected submissions, the terms of use on the portal clearly state that users “irrevocably grant Safaricom the unrestricted right or license to use any idea or material [submitted] for the purpose of improving it, assessing its viability and determining its progression to the next stage within the Innovation Cycle”. In this regard, users of the portal agree that such use by Safaricom under the above license “shall not be deemed a violation of the user’s rights or the rights of any third party or give rise to any claim based on such alleged violation.”

2. Proof of IP protection: Zindua Cafe requires users to disclose whether submissions are protected as patents, trade marks or copyright in addition to providing the registration numbers of any certificates received from WIPO, KIPI and KECOBO. Copies of these certificates must also be submitted by users. This is a really smart way for Safaricom to establish the extent of IP protection involved in all submissions made on the portal. More importantly, Safaricom is in a better position to determine what steps would be necessary to exploit and/or acquire any intellectual property rights in the submissions.

zindua cafe safaricom brewing ideas

3. What’s the big idea?: As part of the submission process, Zindua Cafe requires users to provide a name for the idea/product/service/solution and select the applicable industry from a list including Agriculture, Education, Energy, Entertainment, Financial Services, Health, ICT, Manufacturing, Retail, Transport, among others. This section also requires the users to describe the idea/product/service/solution in 200 characters as well as explaining the need/problem that will be solved by the idea. Finally, users are required to itemise any similar or competing ideas/products/services/solutions already in the market and explain why their submissions are better! This is a really smart way for Safaricom to reduce on the amount of time spent in meetings with people pitching their ideas.

So, what do the users get in return after going through this rigourous 3-step submission process? Nothing. The terms and conditions of use on the portal ensure that Safaricom is fully protected from any claims arising from users and third parties while imposing several obligations on users including indemnity to Safaricom, assurance to Safaricom of IP ownership, among others.

Following the Vodacom “Please Call Me” case in South Africa and the numerous IP infringement cases involving Safaricom here in Kenya, this blogger applauds the move to introduce Zindua Cafe particularly because of the emphasis the portal places on protection of IP by its users prior to submitting their creative and innovative ideas to Safaricom.

What remains to be seen is whether this new portal for brewing ideas will deter future innovators and creators from bringing IP-related suits against Safaricom.

Non-Existent Intellectual Property Financing: Blame it on the Banks or on the Innovators?

Recently, the Business Daily and the Star published articles discussing the boom of mobile apps in Kenya and how young developers are finding it hard to access financing to support their software innovations.

While the Business Daily points an accusing finger at the banks for not appreciating the value of IP, the Star argues that the problem is not the banks but the software developers themselves and their lack of understanding of the basics of running and building a business, including understanding your target market and how to reach it.

Below is an except from the Business Daily article: “Breaking into mobile apps market an uphill task for young developers”:

“Hardly a day passes without a news report that a new mobile application has been developed in Kenya. However, behind this success is the untold story of the challenges that developers face as they seek to break into the market and access funding to develop and market their inventions. Top on the list is lack of support from corporate organisations.
Most of the developers are either college students or fresh graduates and often lack the money to complete their projects. To compound this is the fact that financial institutions don’t offer loans for software enterprises since most banks are yet to appreciate that intellectual property is something they can put money on.”

In a response to this article, the Star published a piece titled: “Why It’s So Hard for Software Developers To Get Loans” which reads in part:

“the [Business Daily] article cites ‘lack of support from corporate organisations’, specifically that banks don’t offer loans for software enterprises because they don’t understand the value of intellectual property. That is not really correct: Banks will not finance straight-from-uni-developer start ups, mostly because banks just don’t finance start ups in any industry, period. They do business with software enterprises, but a straight-from-uni-developer start up – or more specifically, a mobile app – is not an enterprise.”

Both these articles bring out several key problems that IPKenya believes should be underlined:

1. The problem of IP valuation: The assumption here is that banks and other financial institutions would only be willing to loan money to an inventor if the inventor can put a monetary figure to its registrable IP. As we’ve discussed before, Kenya does not have any credible institutions that carry out IP valuations.

2. The lack of marketing and branding: The argument here is that banks and other lending institutions would be more willing to invest in a mobile app that has a brand name backed by creative and agressive marketing strategies. This view of the role of trademarks in Kenyan software development was well articulated in a recent article on the patentability of MPesa by Isaac Rutenberg on the Afro-IP blog.

3. The lack of a business-minded approach to software development: As the Star article above rightly notes, software developers, by and large, lack business know-how and the entrepreneurial skills necessary to develop software and mobile application solutions that respond to the needs of their target market. The examples cited in this article show that software developers failed to carry out any sort of market research, market survey or market sampling. This isn’t just a problem for software developers but indeed creators and innovators in all areas of IP. Indeed, there is a growing need to educate IP owners on basic business skills and practices to enable them to fully commercialise their IP. New business models with respect to various forms of IP have arisen and IP owners must be alive to the practicalities of their consumer markets so as not to be exploited or to make financial losses.

In sum, while it is promising to see young Kenyans leading the way in software development, IPKenya believes that these developers must not neglect the business aspect of innovation and therefore they must work towards building their products, brands and businesses in order to attract real investment and financing.

Safaricom and Intellectual Property Theft: Some Thoughts

The Business Daily reveals that there are currently two accusations of intellectual property theft levelled against Safaricom, Kenya’s leading mobile telephone company:

a. “Maliza Storo”: a service that enables pre-pay subscribers to access airtime on credit for a fee of 10 per cent for each request.

b. “M-Kesho”: a mobile-based platform allows customers to perform basic banking transactions.

The accusations in both cases are more or less the same. Innovators pitched these ideas as business proposals to Safaricom. Safaricom accepts the proposals. Several months later, the innovators in question see their ideas have been implemented without Safaricom seeking their consent or paying any form of compensation.

IPKenya would like to make the following three overlapping points:

1. Patentability of business methods?:

There is/was an argument that mobile phone generated innovations such as Mpesa could be protected as process patents in Kenya. However, the Industrial Act is clear in Section 21 (b) that patentable inventions do not include:
“schemes, rules or methods for doing business, performing purely mental acts or playing games”

So IPKenya wonders why Justice Musinga has referred the mPesa case to the Industrial Property Tribunal. The Tribunal’s hands are tied. It will only confine itself to the four corners of the Industrial Property Act, 2001 which will not work in favour of the innovator.

2. The role of the IP offices:

The IP offices namely KIPI and KECOBO still have a long way to go as far as awareness creation is concerned. The challenge is to demystify IP and give all members of the public basic information on how they can use the IP system to safeguard their intellectual assets. Other information that the IP offices need to pass on to the general public is on the use of non-disclosure agreements, licensing agreements and other relevant forms of contracts.
These offices must also be more pro-active in lobbying for funding for innovators, creators, inventors with great ideas and projects but lack adequate funding.
IPKenya is also concerned about the peculiar practice at KECOBO where individuals are allowed to register business proposals, concepts, TV show plots and events as literary works. These individuals register these works under the false presumption that they are obtaining a monopoly over the ideas contained in their proposed works.
Instead IPKenya argues that the IP offices should put more emphasis on the role of branding. Inventors and creators must be encouraged to brand their innovative goods and services using the trademark system. The public needs to understand that copying can only be countered by establishing goodwill and brand loyalty as the pioneer and quality benchmark in a particular market.

3. The role of the Judiciary:

IPKenya would like to believe that the courts can help put an end to a disturbing trend of Safaricom’s exploitation of the ideas of innovative Kenyans. Here we pause to recall the case of Alternative Media Ltd v Safaricom, Civil Case 263 of 2004. The plaintiff alleged that the defendant had used the plaintiff’s artwork on the defendant’s scratch cards without the plaintiff’s authority. The plaintiff claimed that the defendant had infringed the plaintiff’s copyright and asked the court for compensation and to permanently restrain the defendant from committing further infringement. The court found in favour of the plaintiff, stating that it had proved it was the owner of the copyright in the artistic works in issue and that the defendant had infringed this copyright.

However, the present cases require the courts to go beyond interpretation and to actually create new law in the area of industrial property. Although section 21 of the Industrial Property Act purports to exclude “methods of doing business” from the scope of patent protection, it is undeniable that mobile technology in Kenya particularly mobile money transfer, is/was a process that is/was novel, inventive/non-obvious and industrially applicable. In the present case, all indications are that Safaricom has been unjustly enriched from the mPesa idea and other ideas it has turned into business products without giving any form of compensation to the innovators concerned.
More fundamentally, IPKenya argues that the industrial property law must be re-examined in light of this mPesa case with the possibility of allowing grants of patents to be issued for business methods.

UPDATE: Isaac Rutenberg over at Afro IP Blog has just published an article titled: “Safaricom, mPesa and business method patents: another view” in which he disagrees with the position I have taken on business methods patents in Kenya. Kindly share with us your views on this debate.