Safaricom ordered to pay innovator Sh1.4b over Mpesa Go copyright dispute

Safaricom has suffered a major legal setback after the High Court ordered the telecommunications giant to pay Sh1.4 billion in damages to inventor Peter Nthei and Beluga Limited for infringing copyright in the development of its child-focused Mpesa product.

In a judgment delivered by Justice Josephine Mongare found that Safaricom unlawfully used Nthei's copyrighted "M-TEEN Mobile Wallet" concept in creating its "Manage Child Account" and "Mpesa Go" products.

"I therefore hold that Safaricom has infringed the Plaintiffs' copyright in the M-TEEN Mobile Wallet by developing and launching its product without a license from the Plaintiffs," the judge said, before awarding the innovators over Sh1.4 billion in damages.

The dispute arose after Nthei claimed he developed a mobile wallet platform targeting teenagers and young adults and later pitched the idea to Safaricom executives in 2021.

He told the court that despite sharing detailed information about the product with Safaricom executives, including former CEO Sitoyo Lopokoiyot, the company never responded to his proposal.

Nthei said he was later shocked to discover that Safaricom had launched the Manage Child Account and Mpesa Go products, which he argued bore striking similarities to his concept.

He accused the telecommunications giant of appropriating his idea and subsequently launching a substantially similar product without his consent, authorization or compensation.

The judge agreed with the innovators, holding that while ideas themselves are not protected under copyright law, the specific expression of those ideas through detailed system architecture, menu structures and operational flows is protected.

The court found that the plaintiffs had successfully established ownership of the copyrighted work, originality of the product and access by Safaricom to the concept through meetings between Nthei and senior company officials.

According to the judgment, Nthei shared details of the product with former Safaricom CEO Lopokoiyot between March and June 2021.

The court noted that Safaricom did not call Lopokoiyot to testify and rebut the allegations.

Justice Mongare questioned Safaricom's claim that the product originated from concerns allegedly raised by the Central Bank of Kenya regarding minors accessing betting platforms.

"First, I find it unbelievable that a telecom giant like Safaricom would handle major product changes based on casual verbal requests without any official records," the judge stated.

The court was equally critical of Safaricom's reliance on Huawei as evidence of independent development, finding gaps in the company's documentation trail.

"I refuse to accept that a Project of such magnitude between two telecom giants can be initiated without formal instructions and the inevitable inference the court can draw is that the Huawei proposal was a belated attempt to create a paper trail to defeat the Plaintiffs' claim," the judge said.

The court found that although Huawei had submitted proposals relating to a parent-child control function in 2020, Safaricom failed to produce crucial documents demonstrating an independent development process that predated Nthei's disclosure.

Justice Mongare concluded that the timing of Safaricom's rollout and the similarities between the two products pointed to copying rather than independent creation.

"The temporal proximity of disclosure in March-June 2021, followed by Safaricom's test run and eventual launch in November 2022 is highly suggestive and indicative of a pattern in intellectual property disputes where an innovator shares an idea, the large corporation initially rejects it, and then, months later, launches a strikingly similar product," the court held.

While the court found infringement, it declined to issue a permanent injunction stopping Safaricom from operating the product, citing public interest considerations.

"Millions of Kenyans, including parents and minors, now rely on this functionality and a shutdown would cause disproportionate disruption," Justice Mongare said.

Instead, the judge awarded the plaintiffs Sh1,400,067,000 in damages, equivalent to one per cent of Safaricom's Mpesa revenue for the 2024 financial year.

In addition, Safaricom was ordered to pay the plaintiffs an ongoing royalty of 0.5 per cent of its gross M-PESA revenue annually for as long as it continues operating the Manage Child Account, Mpesa Go, or any substantially similar parent-child control product.

The judge described the case as a lesson for both innovators and large corporations.

"This case is a cautionary tale for innovators and corporations alike. For innovators, it demonstrates that even David can prevail against Goliath when the evidence is marshalled properly and the truth is on his side," he said.

"For corporations, it is a reminder that good ideas do not only originate in boardrooms."

The court also awarded the plaintiffs the costs of the suit, bringing to a close a legal battle that began in 2022 and could have significant implications for intellectual property disputes involving technology and innovation in Kenya.