Developer wins Sh1.4b case & awarded percentage of M-PESA revenues

The High Court in Nairobi has found telecommunications giant Safaricom PLC liable for copyright infringement in a landmark dispute over a mobile money feature, awarding the plaintiffs more than Sh1.4 billion in damages and ordering an ongoing royalty payment tied to M-PESA revenues.

In a judgment delivered at the Milimani High Court, Justice J.W.W. Mongare held that Safaricom unlawfully used and implemented a copyrighted concept for a “teen mobile wallet” system without permission from its creator, Peter Nthei Muoki and Beluga Limited.

The court, however, declined to issue an injunction that would have halted the product’s use, citing the potential disruption to millions of users who rely on the service.

The case, HCCOMM/E407/2022, was filed by Muoki and his company, who accused Safaricom of copying their idea for a “M-Teen Mobile Wallet USSD Code,” a system designed to allow parents to monitor and control teenagers’ spending.

They claimed that after pitching the idea to Safaricom officials in 2021, the company later launched a similar product under its M-PESA ecosystem, branded as “Manage Child Account” and “M-PESA Go” under USSD code *334#.

The plaintiffs argued that Safaricom’s product mirrored their original design, structure, and user flow, and that the company had used their detailed proposal without consent.

Safaricom denied the allegations, maintaining that its parent-child control feature had been independently developed in 2020, before any engagement with the plaintiffs. It also argued that copyright law protects expression, not ideas or functional concepts, and that similar features already existed in banking systems.

Chinese technology firm Huawei, which was joined in the case as an interested party, also denied any involvement in copying the plaintiffs’ work, saying it had independently developed its proposal for Safaricom.

In her ruling, Justice Mongare found that while general concepts such as parental control wallets are not protected by copyright, the plaintiffs had demonstrated that their specific expression of the idea—particularly the detailed USSD menu flows and system structure—was original and protected.

The court held that the plaintiffs had established ownership through a registered copyright certificate and that their work had been sufficiently documented to qualify as a protected literary work under Kenyan law.

The judge also found that Safaricom had access to the plaintiffs’ idea through meetings with company officials in 2021 and that the company’s explanation of independent development was not supported by credible documentation.

The court drew adverse inferences from Safaricom’s inability to produce key internal design documents and what it described as inconsistencies in its account of how the product was developed.

On Huawei’s involvement, the court noted gaps in the documentation presented regarding Safaricom’s development timeline and concluded that Safaricom had failed to demonstrate a fully independent design process predating the plaintiffs’ disclosure.

Justice Mongare awarded the plaintiffs Sh1,400,067,000 in general damages, calculated as 1% of Safaricom’s M-PESA revenue for the 2024 financial year.

The court said Safaricom’s M-PESA earnings demonstrated the scale of benefit derived from the service and that the award was “commercially reasonable and proportionate.”

In addition, the court ordered Safaricom to pay a continuing royalty of 0.5% of annual M-PESA revenues for as long as it continues operating the contested functionality or similar parent-child control services.

However, the court declined to order an account of profits, noting that Safaricom does not separately track revenue from the feature.

The court emphasized the distinction between ideas and their expression, reiterating that copyright does not protect concepts but can protect detailed implementations where originality is proven.

It concluded that the plaintiffs had demonstrated access, similarity, and copying through circumstantial evidence and rejected Safaricom’s claim of independent creation.

The ruling is among the most significant intellectual property decisions involving a telecom operator in Kenya, particularly in relation to fintech features embedded within mobile money platforms.

Safaricom has not yet indicated whether it will appeal the decision.