The High Court has ordered Safaricom PLC to pay Peter Nthei Muoki, an innovator, Sh 1.4 billion for copyright infringement in the Mpesa child account service.
Justice Josephine Mong’are also ordered the Telco to pay Muoki and Beluga Limited 0.5 percent of its Mpesa gross revenue from March 31st 2025 for as long as it continues to operate the Manage Child account or any similar parent-child functionality.
The judge ruled that damages equivalent to one percent of Safaricom’s Mpesa revenue for the 2024 financial year was a commercially reasonable award.
In addition, the judge found that Muoki’s product which had been documented in detail and registered with the Kenya Copyright Board qualifies as a literally work protected under copyright law.
However, the judge declined to shut down the service saying doing so would disrupt millions of users .
“Millions of Kenyans including parents and minors now rely on this functionality and a shutdown would cause disproportionate disruption,” the judge said.
Muoki’s case was that sometimes in October 2020, through the funding of Beluga Ltd, he embarked on developing a mobile software product dubbed “M-TEEN MOBILE WALLET USSD CODE”.
The product was aimed at creating an M-PESA sub wallet for persons within the age bracket(s) of 13-17 years and 18-24 years popularly termed as “Digital Satives or Generation Z” to enhance parental control on their spending behavior and/or patterns.
The court heard that sometimes in February 2021, subject to their business arrangement, they agreed to have the product registered in Muoki’s name.
“It was an understanding between the parties that Beluga shall be entitled to all intellectual property and other propriety rights including, but not limited to, patents, copyrights, and trademarks with regard to products, inventions, ideas, know-how, or documents and other materials which Muoki has developed” said plaintiff in court documents.
The Mpesa API
Muoki stated that Safaricom has a product named M-PESA API (Application Programming Interface) listed on their website through which it encourages innovation and allows third party applications to be plugged onto their M-PESA platform.
The palintiff claimed that on 13th March 2021, in line with the M-PESA API product he approached one Sylvia Mulinge, then a high ranking executive of Safaricom with the idea of having the product embedded within the M-PESA portfolio.
“That on the same day he sent the said Sylvia Mulinge high level insights on the product with the hope that he would be able to secure a meeting to discuss the product in depth,” the court heard.
It is alleged that Mulinge did not respond. “Despite the silence, his hopes to see the product hit the market were not doused and so he kept knocking on various doors with full hopes that lady luck will eventually smile upon him”.
However, in the period between March and June, 2021 he managed to get through to the then Safaricom Chief Operations Officer Mr. Sitoyo Lopokoiyit to whom he sent detailed insights of the product.
Muoki further states that the said Mr. Sitoyo who by then had been appointed as The Chief Executive Officer of M-PESA Africa reverted back sometimes in May, 2021 claiming that the product was not implementable for the reasons (inter alia) that since it is a product involving teenagers between the age of 13-17 years without Identification Cards one vould need an Approval from the Central Bank of Kenya (“CBK”) for them to have and/or own an M-TEEN account.
It was his contention that he requested if it could be possible to have a physical neeting with Mr. Sitoyo so as to explain the inner workings of the product and to dispense with the latter’s misgivings about the same.
Mr. Sitoyo acceded to his request and they met on 22nd June 2021 at the Mediterraneo Restraurant, Junction Mall.
That during the meeting, Mr. Sitoyo claimed that Safaricom had been thinking about a similar product and offered to link Muoki to some other entity which he said would be in a position to consider the product (a Microfinance Bank).
According to the plaintiff, Mr. Sitoyo’s claim that Safaricom had been considering developing a similar product almost four months after he had sent them his initial insights of the product (with a mind map after claiming that M-Teen was not possible) was an indication that the telco was contemplating or had strong intentions to copy paste his product and claim the same together with the attended financial benefits as their own innovation (infringement on copy rights of the Plaintiffs).
The innovator said he was recently shocked to see the Defendant’s officers conducting a test run of a copy/paste product dubbed “Manage Child Account which it later changed to Manage Junior Account” under the USSD CODE *334# which bears an uncanny resemblance and functionality as the Plaintiffs “M-TEEN MOBILE WALLET USSD CODE” shared in advance with Safaricom.
Safaricom’s defense
In their response, the telco giant denied the allegations claiming that on or about 2020, it initiated the process of creating a parent-child control functionality to its M-PESA product.
Consequently, it received a proposal from Huawei Technologies Co. Ltd for the incorporation of a parent-child control system. The proposed system elaborately set out the
features within the system’s functionality including inter alia, the option to register and deregister a child, opt in’ opt out services for a child, and the option to limit the amount of spending per day, week or month.
The defendant argued that the conceptualisation of the “Parent Child” control system occurred prior to Muoki’s attempt to propose the “M-Teen Mobile Wallet USSD Code” as an add-on to our client’s *M-PESA product.
According to Safaricom, the move to develop the service was as a result of what it described as a verbal request from the CBK governor concerning minors’ access to betting platforms.
However, the court ruled that it is not the duty of the CBK governor to advise the telco on product features or any other entity for that matter.
The judge further questioned why a major telecommunications firm would act on undocumented verbal instructions.
It was the telco’s argument that in respect of originality and novelty, banking institutions offer a similar functionality, allowing their customers to link minors to their accounts, hold separate accounts and to avail the account’s features for the minor’s benefit. Consequently, the Plaintiff’s idea is not new, unique and/or original.
Huawei, (named as interested party in the case, also denied knowledge of Muoki’s concept, saying it independently developed the functionality from September 2020, around six months before the applicant said he pitched his proposal to Safaricom.