KENYA: IP & TECH BIMONTHLY DIGEST: CAK IS LOOKING INTO REGULATING OVER-THE-TOP SERVICES (OTTS)

By John Syekei Wednesday, October 05, 2022
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Welcome to the latest issue of the Intellectual Property (IP) & Technology Digest. We hope that you will find the features in this Digest informative.

Snapshot of our Practice

Our IP & Technology Practice, which includes a vibrant Telecommunications practice, has been busy advising on a range of transactions in IP, privacy and technology over the past month, and we have been briefed on several IP transaction and advisory matters as well as on Fintech, Crypto, Telecommunications, and payments matters. We also continue to assist entities that are data controllers and data processors with registration with the Office of the Data Protection Commissioner (ODPC).


Updates from Regulatory Bodies

Communications Authority of Kenya is looking into regulating over-the-top services (OTTs)

The Communications Authority of Kenya (the CAK) has published a tender for a consultant to study Over-the-Top (OTT) services in Kenya, including online streaming services. OTTs offer film and television content over the internet and includes Netflix, Hulu, and Amazon Prime Video. The scope of work includes examining the current legislative framework to identify gaps in the regulation and make recommendations on appropriate regulations. The consultant will also be required to “develop a regulatory framework for the regulation of OTTs.” A link to the tender notice is available here.

Bowmans Comments: OTTs are the new focus for regulatory entities across the world. The Kenya Film Classification Board had published a draft co-regulation framework for broadcast and OTTs/video on demand (available here). A legal framework directly applicable to OTTs in Kenya is not far off and the CAK appears keen to explore the regulatory issues around the data protection, revenue and intellectual property issues applicable to OTTs. We will follow the developments and provide updates as we receive them.

Source: Communications Authority of Kenya (30 August 2022)

Office of the Data Protection Commissioner updates on registration of data controllers and processors

The Office of the Data Protection Commissioner (ODPC) has announced that, as of September 2022, there have been 382 entities successfully registered as data controllers and/or processors and another 1,328 entities at various stages of the application process. The ODPC has also published a list of registered entities on its website. To read the press release, click here. The list of registered entities is available here.

Bowmans Comments: There are approximately 47,429 companies and partnerships registered in Kenya.[1] Our experience is that entities are reviewing internal policies and documents to ensure compliance before registering. This is the proper course of action as the registration form requires entities to disclose, among other items, the measures for protecting personal data. For any assistance with respect to the registration process, please contact John Syekei, Ariana Issaias, and Daniel Mwathe or your relationship partner at Bowmans Kenya if you would like to discuss this further.

Source: Office of the Data Protection Commissioner (2 September 2022 and 26 September 2022)

Central Bank of Kenya update on registration of digital credit providers

The Central Bank of Kenya (CBK) announced that the deadline for digital credit providers to apply for a license ended on 17 September 2022. 288 applications had been received and 10 entities had been granted a license. The CBK has ordered entities that have not applied for the license to cease operations in Kenya. To read the press release, click here.

Bowmans Comments: The CBK, unlike the ODPC, has decided to immediately enforce the law. Due to the data protection, consumer protection, and other legal implications, a collaboration between the CBK, the ODPC and other regulators would ensure adequate supervision of the companies. It is also worth noting that the CBK has indicated that one of the factors that it will consider when reviewing applications is whether an applicant has complied with other regulatory requirements, such as registration with the ODPC.

Source: Central Bank of Kenya (19 September 2022)

Kenya Copyright Board advisory on memes and copyright implications

The Kenyan Copyright Board (KECOBO) issued a public advisory on the implications of the use of memes in copyright law. A corporate body using a meme could be interpreted as attempting to market or otherwise derive commercial benefit for itself from material owned by another through copyright. This would incur civil liability for the entity and render it liable to compensate the copyright holder for the meme used for commercial purposes. To read the advisory, click here.

Bowmans Comments: KECOBO’s advice is timely and a reminder to corporates of the need to evaluate the legal risk and exposure in any action involving the use of memes. Due to the fact that profit-making is usually the goal of corporate entities, it is difficult for legal persons to disassociate their actions from the end goal of profit. Seeking legal advice before taking any action can help avert potentially lengthy and damaging court cases. See the Machakos University case below, which discusses the issue of corporates and intellectual property.

Source: Kenya Copyright Board (5 August 2022)

Copyright Tribunal appointments

The Chief Justice has appointed Elizabeth Mkamboi Lenjo as the chairperson of the Copyright Tribunal and Helen Kiende Mungania, Wilfred Ogot Lusi, Caroline Apiyo Omaya and Joseph Ndungu Kihanya as members of the Tribunal for a period of 5 years from 1 October 2022. To read the Gazette, click here.

Bowmans Comments: The Copyright Tribunal hears and determines cases where a person is denied registration by KECOBO. It also determines cases where a collective management organization unreasonably refuses to grant a licence or imposes unreasonable terms for grant of a licence for a copyright work. The Copyright Tribunal is now properly constituted to undertake its mandate.

Source: Kenya Gazette (23 September 2022)


Developments in the Intellectual Property Arena

Trademarks

Uganda Registration Services Bureau to automate trademark filing

The Uganda Registration Services Bureau has affixed to its website (link below) a pop-up on public notice of changes to its trademark filing process. The changes involve the Bureau’s migration from the traditional filing method involving the receipt of emails for application, renewal, opposition, registration, and extensions of time, to an online filing system for the same via the online portal. The changes take effect from 1 October 2022.

To access the notice, click here.

Bowmans Comments: Moving the filing process online is a commendable move that will make the process more cost effective for the filing of trademarks. Uganda joins countries such as South Africa which allow for electronic filing of trademark applications. The filing of trademarks in Kenya is still a process involving physical delivery of documents to the Kenya Industrial Property Institute (KIPI). This can result in physical documents piling up at KIPI, which may sometimes be lost or take time to locate. During the COVID-19 pandemic, government departments such as the Judiciary developed online platforms for use in filing cases. Automating the filing process can be crucial in enhancing efficiency at KIPI.

Electronic Trademark Certificates Launched in Zambia

Effective 1 September 2022, the Zambia Patents and Companies Registration Agency (PACRA) shall discontinue the issuance of paper (hardcopy) trade mark certificates and issue electronic certificates instead. The certificate will be authenticated through security features and QR codes. For now, only trade mark certificates will be issued in electronic form.

To read more, click here.

Source: Adams and Adams (15 September 2022)

Bowmans Comments: It is commendable that Zambia has chosen to introduce electronic certificates. Zambia joins Tanzania and Morocco among countries in Africa that issue electronic certificates. The use of electronic certificates is likely to reduce costs that foreign companies would have incurred on courier costs for delivering hardcopy certificates to their offices. In Kenya, the certificates issued are still in hardcopy form. In view of emerging trends, adopting electronic certificates could lower the costs of obtaining a trademark certificate in Kenya particularly, for non-resident companies.


Patents

UK guidance on patent applications relating to artificial intelligence

The UK Intellectual Property Office (UK IPO) has released a guidance for examining patent applications relating to artificial intelligence and inventions by an artificial intelligence (AI). The AI should reveal or be likely to reveal a technical contribution in the relevant field. To read the guidance, click here.

Bowmans Comments:  The UK IPO has not clarified whether an AI can be registered as a patent holder. The European Patent Office Boards of Appeal (EPO) rendered a decision on the patentability of an invention by the AI system Dabus and noted that a named inventor must be a person for the grant of a patent. The EPO rejected the claim that the invention was conceived autonomously by Dabus and noted that the human creator and owner of Dabus ought to have applied for the patent. The decision is similar to others in New Zealand, the United States and the UK. On the other hand, South Africa granted Dabus the patent rights, noting that the invention was autonomously generated by an artificial intelligence (see here). Despite Australia initially granting Dabus the patent through a court decision, a five-judge bench of the Australian Federal Court unanimously reversed the decision. The court found that an inventor must be a natural person for the purposes of applying for a patent. The court noted that an inventor is defined in ordinary English as a person who makes or devises a process or product. In Kenyan law, it remains unclear whether an AI machine would be deemed a person given that the Industrial Property Act defines an inventor as a person who actually devises an invention, including a legal representative of the inventor. While the guidance steers clear of the discussion of who can be registered as an owner, it forms an important resource for patent examiners to determine whether an invention is patentable. The guidance provided by the UK IPO which is based on UK cases may be useful in other countries that utilize common law, such as Kenya. This is a welcome development as companies can continue improving their AI knowing that it is possible to secure a patent.

Source: UK Intellectual Property Office (22 September 2022)


Trade Secrets

Greater chance of criminal liability for stealing trade secrets in China

The Tianjin Intellectual Property Court recently tried a criminal case involving an employee, surnamed Zhao, who was deemed to have appropriated his employer’s trade secrets. The court held that Zhao had infringed the company’s trade secrets and sentenced him to 10 months’ jail and a fine of RMB 60,000 (USD 8,900). Zhao’s case shows that China determines the amount of loss suffered by the rights holder based on a reasonable licence fee. To read more, click here.

Bowmans Comments: In most countries, the damages payable for IP infringement depends on what the court/relevant tribunal deems a reasonable licence fee. China has now adopted this practice with respect to the requirement to always prove the amount of loss suffered. The approach offers rights holders better protection for their proprietary knowledge where damages may not be easily proven. Kenya has yet to codify trade secret protection in a single statute. However, in Kenyan law, trade secret protection exists on the basis of common law protection of confidentiality, the constitutional protection of the right to property and international law provisions such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), to which Kenya is a party. The TRIPS Agreement provides that the information must not be generally known or readily accessible to circles dealing in the information and must have commercial value because it is a secret. The person in lawful control of the information should have taken steps to keep the information secret. Remedies available to a person holding trade secrets includes civil remedies such as an injunction preventing others from using the trade secrets and damages for the losses suffered as a result of a person revealing the trade secrets. Depending on the nature of the trade secret, criminal sanctions such as theft can be pursued through reporting the individual that stole the trade secrets to the police.

Source: China Business Law Journal (8 August 2022)

Copyright

Provisions of South Africa’s Copyright Act declared unconstitutional

South Africa’s apex court has held that the Copyright Act 98 of 1978 is unconstitutional to the extent that it infringes on the rights of persons living with disabilities. Until Parliament amends the law, government, non-profit, and educational institutions are allowed to make formats or copies of any literary work, that they have lawful access to, for supply to persons living with disabilities. The conversion of the literary work can be done without the authorization of the owner of the copyright in the literary work. To read the judgment, click here.

Bowmans Comments: We note that the court clarified that the institution making the copy available to persons living with disabilities should first have lawful access to that work or a copy of the work. The requirement for the copyright holder’s authorization can be limited to ensure that it does not result in discrimination. In our view, the court struck an important balance between protecting copyright and advancing the rights of persons living with disabilities. Kenyan law in 2019 introduced the same provisions granting access to literary works to persons living with disability. Under the Copyright Act of Kenya (the Act), a beneficiary is defined as a person living with disability. Section 26C of the Act allows non-profit entities to reproduce, make, or distribute formats that are copies or sound recordings of a previously published literary work for the sole and exclusive use of persons living with disabilities. However, the copy or recording should bear a notice identifying the copyright owner, the date of the original publication, and stating that further reproduction other than in the specialized format for the sole use of persons living with disabilities will be copyright infringement.

Source: Constitutional Court of South Africa (21 September 2022).


Technology, Media, and Telecommunications

Kenya

Machakos University ordered to pay former student KES 0.7 million for using her images on ads

Students or former students can now sue their education institutions for using their images without consent for marketing purposes. The court held that the portrayal of a student in a positive manner was immaterial given that the university published the image without her consent and used her image in marketing the computer packages courses for financial gain. To read more, click here.

Bowmans Comments: Kenyan Courts have taken a consistent approach on the issue of image rights. Generally, the two rights attached to a person’s image are the right to privacy and the right to publicity, each of which underpins several other associated rights such as dignity, freedom of expression, association, and information. A person has an inherent right to know how their image will be used because a person's image is recognized as one of the chief attributes of their personality. Image rights ensure that a person’s image and likeness is not exploited without compensation or permission of the owner of the image. In this case, the court recognized an additional dimension through linking image rights to the Data Protection Act. Use of a person’s image without their consent violates data processing principles. Before a commercial entity undertakes to use a person’s image or likeness in advertising, the individual should be identified, and their permission sought. Furthermore, the individual should be adequately compensated for the exploitation of their image rights.

Source: Kenya Law (3 August 2022)

Africa

South Africa publishes draft Next Generation Radio Frequency Spectrum Policy

The Minister of Communications and Digital Technologies for South Africa has issued a draft Next Generation Radio Frequency Spectrum Policy for Economic Development (the draft Spectrum Policy). The policy proposes a shutdown of the 2G network by 31 March 2024 and a shutdown of the 3G network by 30 March 2025. A link to the draft Spectrum Policy is available here.

Bowmans Comments: The drive to promote technological developments in the telecommunications space in South Africa should be emulated by other countries. However, the criticism that some of the deadlines are impractical may be valid with the penetration of the internet and technology infrastructure not being 100%. The law may need to be revised to take a more reward-based approach than the coercive approach currently adopted. This is particularly because the government should consider differences in income and allow internet access for all rather than immediately shutting down the available options.

Source: South Africa Government website (8 September 2022)

Global

India's digital lending rules spark disruption

The Reserve Bank of India (RBI) has said a borrower must deal directly with a bank, dealing a blow to prepaid card providers and shopping websites, which act as intermediaries and instantly process deferred loan payments. Large brands such as Tiger Global-backed Slice have partnered with banks and allowed users to split purchases into interest-free easy repayments, a feature not available with typical credit cards. To read more, click here

Bowmans Comments: The introduction of stricter digital lending rules in India may have the effect of affecting the seamlessness of the provision of credit services. The regulation may disincentivize certain larger players who may provide repayment schemes. The RBI justified the regulations on the basis of consumer complaints regarding cyber security, data protection, and consumer protection lapses by the digital lenders. The RBI’s solution is to assign responsibility to the banks to ensure a more robust enforcement system to address consumer complaints. In Kenya, as the reader will note from the second news item in this Digest, the digital credit providers regulations have entered into force, placing all digital credit providers under the regulation of the CBK. It is the CBK that will supervise data protection, cybersecurity, consumer protection, and corporate governance for the digital credit providers. However, a collaborative framework with industry players would ensure that stakeholder support for the proposed regulation is enlisted before being rolled out. Further, countries should recognize the importance of regulatory sandboxes and pilot periods before full enforcement of regulations and launching into unchartered technological waters. We will keenly follow the process of regulation for the digital credit providers in Kenya and provide updates as we receive them.

Source: Reuters (26 August 2022)

Cryptos, AI, Blockchain +

Stablecoin Issuer Tether Ordered to Produce Documents Showing Backing of USDT Stablecoin

Tether has been ordered by a U.S. Judge in New York to produce financial records relating to the backing of USDT Stablecoin. The lawsuit accuses Tether (USDT issuer) and cryptocurrency exchange Bitfinex of conspiracy to issue its stablecoin to pump the price of Bitcoin. To read the order, click here.

Bowmans Comments: The case is one to watch as it is a reminder to issuers of cryptocurrencies about potential regulatory exposure arising from their operations. It has been erroneously reported that new technologies are entirely unregulated. However, there are numerous laws in place that apply to traditional businesses, which should be taken into account by companies leveraging technologies to improve or develop their operations.

Source: US Government Courts (19 September 2022)


[1] Business Registration Service https://brs.go.ke/statistics-2022.php