Patent disputes with innovators sap company resources

Saturday July 20 2013

Patent disputes, usually over products and services, are threatening to hurt the companies’ hunt for bigger earnings in a highly competitive environment.

Patent disputes, usually over products and services, are threatening to hurt the companies’ hunt for bigger earnings in a highly competitive environment.  

By STEVE MBOGO Special Correspondent

The fast adoption of technology products has come with an unwelcome addition for Kenyan companies: A wave of costly intellectual property disputes pitting them against local innovators.

These disputes, usually over products and services, are threatening to hurt the companies’ hunt for bigger earnings in a highly competitive environment.

Over the past five years, Kenya’s leading mobile service provider Safaricom has faced at least four cases touching on copyright while other big corporations such as cigarette giant BAT, phone maker Nokia and edible oils manufacturer Bidco have also been dragged to court over similar matters.

Recently, on July 15, micro lender Faulu Kenya lost its bid to stop Safaricom from offering the savings and lending service M-Shwari, pending the hearing and determination of a court case over the ownership of the product.

Similar product

Faulu claims that it was the initiator of the M-Shwari concept, which Safaricom runs with the Commercial Bank of Africa. Faulu now has a similar product, Kopa Chapaa mobile loan service, with Airtel.

Safaricom has denied copying the idea. The court threw out the application by Faulu seeking to compel the mobile company to stop offering the service until the case is determined.

Increasingly, local and foreign investors are seeking a pie of world-class technology innovations in Kenya, fuelled by innovation and incubation facilities like iHub and NaiLab.

But poor knowledge and orientation on intellectual property rights has made the innovators lose out to big corporations with strong legal departments.

The piling up of these cases lends credence to the high ranking of Kenya as a hub for abuse of intellectual property rights.

A 2010 global study showed that 79 per cent of the software used in Kenya was pirated, a higher percentage than China’s 78.

Another study commissioned by the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy (BASCAP) in 2010 ranked Kenya 95th of 130 countries in the IPR Index, and 106th of 140 economies in the Global Competitiveness Index 2010.

The Kenya Industrial Property Institute (KIPI), the agency that registers patents, blamed the rise in intellectual property rights disputes on the innovators themselves, who it said often launch products and services before registering them.

While the public focus has been on disputes involving high profile companies, lawyers say there are hundreds of cases in the courts involving small enterprises or individual artistes.

Since 2004, there have been at least 30 high-profile intellectual property rights disputes filed in the Kenyan courts according to the National Council for Law Reporting, a legal information repository.

Most of these cases were filed in the past five years, indicating increasing theft of intellectual property rights and a corresponding awareness among innovators.

While most cases are filed in Nairobi, other major commercial centres have recorded their share of disputes.

Christine Kipsang, a Mombasa-based lawyer, said she had handled three high-profile cases in the first half of this year, compared with only two cases she handled in 2012.

“The frequency of intellectual property rights disputes is increasing,” she said. “There are many more cases that are of low scale, indicating an awareness of copyright issues among the population.”

Victor Nzomo, a specialist lawyer in intellectual property rights and consultant at Centre for Intellectual Property and Information Technology Law (CIPIT) at Nairobi’s Strathmore University Law School, said that big companies stood a better chance of having intellectual property cases decided in their favour not because they are big but because their opponents do not always gather enough evidence and proof to sustain their allegations.

Most of the high-profile cases in the past 10 years have involved information and communications technology-related inventions, with Safaricom, the largest mobile firm by customers and turnover, taking the most hits.

A similarity

Just this month, Dr Dedan Maina Warui sued Safaricom for infringing on an innovation called Med Dispenser, which he alleges he presented to the company in 2010 to help roll out. The application is meant to help patients contact doctors via phone. Dr Warui says Safaricom has partnered with AAR Health Services to launch a service that bears a similarity to his idea without his involvement.

In 2008, Christopher Ondieki sued Safaricom over the award-winning mobile money transfer system M-Pesa, which is being replicated in other countries, claiming it was his idea.

In 2004, Alternative Media Ltd also went to court accusing Safaricom of copying the idea of an HIV/Aids campaign printed on scratch cards.

The court ruled that Alternative Media had proved it was the owner of the copyright in the artworks used on the scratch cards and granted AM an injunction restraining Safaricom from infringing on the copyright.

In another case against the mobile firm, a musician had sued Safaricom for copyright infringement after they uploaded his music on their popular Skiza platform for ringtones and downloads without obtaining his consent. A court granted the singer, JB Maina, a temporary injunction and an order allowing him to enter its premises and seize records and other data for purposes of establishing his case.

Money transfer

Earlier in 2011, two Kenyans, Jack Khanjira and Joash Moruri, sued Safaricom for allegedly using an idea of mobile money transfer system they had presented to the telecoms company without their involvement. They claimed the M-Kesho product Safaricom launched with Equity Bank was similar to the concept they had presented — Chemi-Chemi na Safaricom — seeking a joint venture.

Last year, Google Kenya was accused of improperly accessing the customer database of a rival company, Kenyan listings firm Mocality, which has since ceased operations.

Google Kenya allegedly used the database to enrich its own Kenya business listings product. Google later apologised. The discovery led to the resignation of several Google staff in Kenya and in Zurich.

Other sectors have had their share of suits and disputes over IP.

His invention

Edible oils processor Bidco Oil, for instance was in 2010 sued by Ronald Angwenyi, a University of Nairobi graduate in food science and technology, over a baking powder brand that the consumer goods giant had launched in the Kenyan market.

Mr Angwenyi argued that the product, launched under the Mariandazi trade name, was his invention. Bidco, he said, had used a formula he invented while on attachment there to develop the product without compensating him for his skill, knowledge and originality.

But Bidco argued he had not registered the innovation as a patent and could therefore not claim ownership. Lady Justice Martha Koome ruled that, with oral evidence, it was impossible to know whether Bidco was using Mr Angwenyi’s research paper and ideas to make the product and threw out the case.

Earlier in 2007, British America Tobacco Kenya Ltd filed a suit against Cut Tobacco Kenya Ltd. Both parties are cigarette manufacturing companies operating in Kenya.

BAT said that the Cut Tobacco infringed on its trademark “Sportsman,” cigarette brand, by introducing a cheaper brand, “Horseman,” adding that the packets were substantively similar in colour and design.

As the suits pile up in the courts, lawyers say the public is more aware of intellectual property rights due to education through media.

Benard Murunga, a lawyer who handles intellectual property rights matters, also attributes the growing number of such disputes to a reforming judiciary.

“Judiciary is hearing these cases faster than before, and this has given the public more confidence to seek legal redress,” he said.

“The judiciary now has more judges, some of whom were recruited from private practice, where they were handling intellectual property disputes as lawyers.”

Weakness in law

But most of these cases have been lost by the plaintiffs due to many reasons, one of which, lawyers say, is a weakness in the law in protecting mobile phone-based innovations.

Section 21 of the Industrial Property Act states that patentable inventions do not include “schemes, rules or methods for doing business, performing purely mental acts or playing games” or “mere presentation of information.”