Our IP & Technology Practice, which includes a vibrant Telecommunications practice, has been busy advising on a range of transactions in IP and technology over the past month, and we have been briefed on several IP transaction and advisory matters as well as Fintech, Crypto and payments matters.
Technology, Media and Telecommunications
Kenya
Communications Tribunal expected to rule on mobile tariffs cut on 5 August 2022
Telecommunications firms fighting over the proposed reduction of mobile termination rates (MTR) will know their fate in less than six (6) weeks, the Communications and Multimedia Appeals Tribunal (Communications Tribunal) has revealed.
The Communications Authority of Kenya (CA) announced it will cut the MTR per minute to Sh0.12 from Sh0.99 at the start of this year, but the decision was temporarily suspended after Safaricom filed an objection at the tribunal. The regulator said it expects a reduction in MTR to also lower calling rates for consumers.
MTRs are the charges levied by a mobile service provider on other telecommunications service providers for terminating calls on its network. Safaricom argues that the regulator ignored the cost of doing business and instead relied on a benchmarking methodology in making the decision. Its rivals, Airtel Kenya and Telkom Kenya, backed by consumer lobby group, the Consumers Federation of Kenya, have meanwhile supported CA, stating that no telco should make a profit from the MTRs.
To read more, click here.
Source: Business Daily (28 June 2022)
Bowmans comments: In order to facilitate a voice call to a user on another network, a network operator would have to negotiate and agree on interconnection charges with the other operator in order to recoup the costs of establishing and maintaining their network infrastructure. While a reduction in MTR rates is generally positive for consumers, it is also important to take into account that the operational costs that telecommunications firms incur. In determining the objection, the Tribunal should therefore take into account and achieve an appropriate balance between the incremental infrastructure costs incurred by operators as well as the rights of consumers.
President Kenyatta rejects controversial ICT bill as he signs ten (10) others into law
Kenya’s President, Uhuru Kenyatta, has rejected a highly contentious Bill that sought to have all local ICT practitioners licensed and registered by a council. The Head of State sent the Bill back to Parliament alongside the Insurance Professionals Registration Bill of 2020 and the Higher Education Loans Bill of 2020 with memoranda after they were presented to him for signing by State House Deputy Chief of Staff Njee Muturi.
The Information, Communication Technology (ICT) Practitioners Bill 2020 was passed by the House last week, sparking outrage within the ICT community who claimed that the Bill sought to prevent some professionals from practicing. This prompted a petition to stop the signing of the Bill that has so far garnered over 12,000 signatures on the Change.org platform. At the same time, President Kenyatta assented into law ten (10) Parliamentary Bills among them the 2022 Appropriation Bill, Supplementary Appropriation Bill and Finance Bill.
To read more, click here.
Source: Citizen Digital (21 June 2022)
Bowmans comments: The President’s decision to reject the enactment of the ICT Bill is welcome as it serves to ensure that the wide sweeping Bill is subjected to further consideration and amendment. As currently drafted, the ICT Bill sought to regulate ICT practice in the country by requiring ICT practitioners to hold a university degree, have at least three (3) years’ experience and to pay an annual registration fee. Introducing vague and overbroad regulatory requirements poses the danger of acting as an obstacle to the growth of development and innovation in the ICT sector. Further, imposing stringent registration requirements would also hamper the growth of the local digital economy.
Africa
South Africa to introduce a new banking payment system this year
The South African Reserve Bank is working on a new Rapid Payments Programme (RPP) which is set to significantly shake up payments in South Africa. The programme, which was mentioned in the South African central bank’s 2022 annual report, forms part of the SARB’s ‘vision 2025’ plan as an industry-led payments modernisation initiative.
“This RPP, when fully implemented, will offer a cost-effective instant payment service across banks, a proxy service to embed user banking details, a request to pay service, as well as support for several known retail payment use cases,” the Reserve Bank said.
“The payment industry, under the leadership of the Payments Association of South Africa (PASA) and BankServ Africa, has developed the legal construct, namely the formation of the payment clearing house and the establishment of the RPP scheme.”
To read more, click here.
Source: Business Tech (28 June 2022)
Bowmans comments: The proposal by the South African Reserve Bank to introduce its own payment system is a positive step for financial inclusion as it would mean that customers will not need a bank account number or a branch code to transfer money. Rather, customers will be able to use a cellphone number or any other piece of personally identifiable information – to make a payment. The new payment system is also expected to lead to security benefits by reducing cash-based transactions, which still account for a large portion of the total monetary transactions in South Africa.
Global
Massachusetts court rejects ballot to define gig workers as contractors
In a major setback for app-based gig economy companies like Uber, Lyft and DoorDash, a Massachusetts court has rejected a bid to ask voters whether app-based ride-share and delivery drivers should be treated as independent contractors rather than employees.
The Massachusetts Supreme Judicial Court’s unanimous decision found that the ballot initiative violated state law and was therefore ineligible to put to voters this fall. The move, which has ended a $17.8 million campaign by gig companies to support the measure, signifies a major win for labor rights activists who argue that companies have been failing to provide proper worker protections and benefits, like workers’ compensation or even a basic minimum wage. One study found workers in Massachusetts could earn $4.82 per hour if the measure passed.
To read more, click here.
Source: Tech Crunch (15 June 2022)
Bowmans comments: The question of whether the individuals working for app-based technology companies should be classified as employees poses a number of legal implications. Where such workers are deemed to be employees, this would subject the employees and the companies to applicable labour laws regulating aspects such as minimum wage, statutory benefits, hours of work, sexual harassment, etc. Where such gig workers are classified as independent contractors, they are not subject to employee protections but have other advantages, such as having a flexible working schedule and the ability to terminate the engagement at any time. However, this often means that such gig workers face substantial challenges in enforcing their workplace rights and benefits.
Updates from Regulatory Bodies
KECOBO
Resumption of charges for copyright registration
The Kenya Copyright Board (KECOBO) launched the National Rights Registry Platform ((NRR platform) in April 2020 through an amendment to the Copyright Act (Chapter 130 of the Laws of Kenya) (the Copyright Act) to create a database of all authors and their works. The NRR platform allows KECOBO to issue a copyright holder with a certificate in respect of each work that is registered. These certificates can be accessed and downloaded by the copyright holder on the NRR platform.
With a view to incentivize rights holders to register their works, KECOBO introduced a temporary waiver for free copyright registration and extended the period of the waiver through a press release to 30 June 2022. The legal regime under which KECOBO shall charge fees for such registration is Section 49 (3) of the Copyright Act as read together with Regulation 8 (7) of the Copyright Regulations, 2004 (the Regulations), which provide that an application for registration of a work shall be accompanied by the prescribed fees set out in the Second Schedule of the Regulations.
It is important to note that copyright automatically arises once a work has been created and reduced to material format, e.g., written down or recorded. Therefore, it is not mandatory to register one’s works in order to obtain copyright registration. However, registration grants the holder an evidentiary advantage in terms of prima facie proof of ownership of works in case a dispute arises. In addition, registration also allows easier commercialization of copyright as it enables an author and their commercial partners to verify the ownership of such works on the NRR Portal. Further, registration also allows one to use their copyright as collateral to access credit facilities under the Moveable Property Security Rights Act (Number 13 of 2017).
Since the free registration window lapsed on 30 June 2022, all rights holders will now be required to pay the requisite registration charges. For any assistance in undertaking the copyright registration process, please contact any of the members of the IP & Technology team at Bowmans.
To read more, click here.
Anti-Counterfeit Authority
World Anti-Counterfeiting Day
The Anti-Counterfeit Authority (ACA) commemorated the 2022 World Anti-Counterfeiting Day on 9 June 2022 by launching public outreach campaigns under the theme “Leveraging technology to combat counterfeiting.” The ACA also hosted a sensitization program for county and national government officers.
The World Anti-Counterfeiting Day was established to raise awareness of the damage that counterfeit products and certification marks pose to innovation and national and global economies, and the steps that can be taken to prevent the proliferation of such products. Bowmans has significant experience in anti-counterfeit investigation and is willing to assist rights holders to conduct anti-counterfeiting raids against infringing parties in coordination with officers from the ACA and law enforcement authorities.
To read more, click here.
Developments in the Intellectual Property Arena
Trademarks
Ohio State University secures trademark for use of the word ‘THE’ on clothing
Ohio State University (Ohio State) has officially registered a trademark for the most common word in the English language: “THE.” Ohio State began to pursue a trademark in August 2019, after fashion retailer Marc Jacobs filed an application for the word a few months earlier.
Initial trademark applications by Ohio State were rejected by the patent office on the basis of the word being “ornamental” and because of Marc Jacobs’ prior filing, which OSU challenged. Marc Jacobs and Ohio State reached an agreement in August 2021 that would allow both parties to use the branding. Marc Jacobs is primarily engaged in high-end fashion, while Ohio State’s focus is on athletic and casual wear.
With the conflict settled, it still took the university almost another year to justify to the patent office that ‘THE’ is more than an ornamental part of their massive brand. The trademark approval now gives Ohio State permission to use THE for clothing, namely, t-shirts, baseball caps and hats; all of the foregoing being promoted, distributed, and sold through channels customary to the field of sports and collegiate athletics.
To read more, click here.
Source: The Columbus Dispatch (22 June 2022)
Bowmans comments: This ruling by the United States Patent and Trademark Office (USPTO) serves as a landmark case on how national and international IP offices delineate the limits of descriptiveness in trade mark applications. While trade mark practice usually dictates that a trade mark application for the word “THE” would fail as it would be deemed generic, the registration path taken by the OSU can serve to teach important lessons on how ordinarily generic marks can obtain trade mark protection. In this instance, the word “THE” does not describe any features of the goods which OSU sought to protect, i.e., clothing. As such, OSU would not have received registration for “THE” unless it used the mark prominently in a way that created a separate commercial impression from the school’s name.
Patents
WTO approves vaccine-patent waiver to help combat Covid
The World Trade Organization (WTO) has agreed on an “unprecedented” package of trade deals touching on health, reform and food security, after disagreements between countries on key issues forced the trade body to extend negotiations by two (2) days. The agreement came after WTO Director-General Ngozi Okonjo-Iweala had earlier urged countries to compromise, after negotiations failed to reach consensus on ending environmentally damaging fishing subsidies and fully waiving patents for COVID-19 treatments. Under the package, members agreed to loosen intellectual-property protections for COVID-19 vaccines and limit subsidies for illegal fishing for at least the next four (4) years. The agreement prompted notable opposition from other WTO member states on the ground that the final text adopted largely differed from the initial proposal.
To read more, click here.
Source: Al Jazeera (17 June 2022)
Bowmans comments: In October 2020, South Africa and India proposed a broad waiver of the Trade-Related aspects of the Intellectual Property agreement (TRIPS Agreement) with respect to the importation of COVID-19 vaccines, test kits, and treatments. The EU, United Kingdom (UK) and Switzerland blocked the proposal, while the US supported an IP waiver for only vaccines. The main reason for the uproar amongst WTO member states is that the final text that was adopted was a watered-down waiver of one (1) clause of the TRIPS agreement relating to exports of vaccines.
The initial proposal would have allowed countries to produce lower-cost generic vaccines and other COVID-19 medical tools without the risk of legal trade challenges. The waiver therefore does not include therapeutics, diagnostics and other essential COVID-19-related health products. Bowmans agrees that while a general waiver is needed to support the public health problems, regard must be had to the specific public health challenges facing developing countries and least-developed countries. As such, any waiver adopted at the global stage should be the outcome of inclusive and holistic discussions that address the needs of all member states and all stakeholders.
Trade Secrets
Reckiitt cleared of stealing trade secrets over K-Y spray
Reckitt Benckiser has prevailed in a case in which it was accused of stealing trade secrets from an independent pharmaceutical firm, Absorption, leading to the creation of its K-Y branded spray.
The New Jersey federal court jury found in favor of Reckitt, ruling that Absorption’s claims that Reckitt committed fraud by making misleading assertions about its intentions to buy Absorption; was privy to trade secrets during negotiations leading to the launch of K-Y. Absorption had sought more than US $450 million in damages. The jury found that Absorption failed to show that the information it shared with Reckitt was protected as a trade secret or that Reckitt acted dishonestly.
To read more, click here.
Source: Global Cosmetics News (22 June 2022)
Bowmans comments: In this instance, the New Jersey federal court found that the information shared during the negotiations were not protected as trade secrets. This ruling therefore highlights the significant challenges that companies face in protecting trade secrets when undertaking substantial corporate restructuring, such as acquisitions, mergers or bankruptcy. For instance, employee departure may increase the risk that the departing employees will depart with the company’s trade secrets and other confidential commercial information. Secondly, companies may also face a challenge in terms of maintaining well-established protocols for restricting access to documentation containing trade secrets and other confidential proprietary information. Lastly, without proper legal expertise, companies may also fail to enforce or exercise proper oversight over trade secret misappropriation. For instance, companies may hurriedly enter into vague confidentiality letters that fail to extend adequate protection over trade secret information.
Copyright
Belgium introduces ER right on streams
On 16 June 2022, Belgium’s Parliament updated the country’s copyright laws to bring them in line with the 2019 European Copyright Directive. In doing so, the Parliament also added a performer equitable remuneration (ER) right for streaming. This means that performers in the country will receive at least some of their streaming royalties directly from the services, most likely via the collective licensing system.
In most countries, artists receive all their streaming royalties via whichever record labels or music distributors they have done deals with. As such, the percentage they receive of any streaming money their recordings generate will depend entirely on those deals. However, many artists have argued for a system in streaming more like what usually happens in radio, where performers receive royalties directly via the collective licensing system at industry standard rates, meaning the specifics of any one record or distribution deal are irrelevant.
To read more, click here.
Source: Complete Music Update (17 June 2022)
Bowmans comments: Article 18 of the EU Copyright Directive provides that performers should receive “appropriate and proportionate remuneration” from the exploitation of their work. Once an EU directive has been passed, member states are usually expected to update their national laws to conform to the new European laws. However, the broad language of this provision means that where most countries adopted a ‘literal transposition’ of the provision, this would not create an active obligation in practice as the words ‘appropriate and proportionate remuneration’ have a wide meaning.
However, with the increasing popularity of music streams as opposed to traditional copyright labels, it could be argued that laws relating to copyright and related rights should be specifically updated in order to ensure that creatives (artists, musicians and in this case, performers) receive fair and adequate remuneration for the commercialization of their intellectual property rights.
Cryptos, AI, Blockchain +
EU agrees on landmark regulation to clean up crypto ‘Wild West’
The European Commission, EU lawmakers and member states reached an agreement on regional cryptocurrency regulation on Thursday 30 June 2022. The new law, known as Markets in Crypto-Assets (MiCA), is the first attempt at creating a comprehensive regulatory framework for digital assets in the region.
Under the new rules, stablecoins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals. Stablecoins that become too large also face being limited to two hundred (200) million euros in transactions per day.
The European Securities and Markets Authority will be given powers to step in to ban or restrict crypto platforms if they are seen to not properly protect investors, or threaten market integrity or financial stability.
To read more, click here.
Source: CNBC (30 June 2022)
Bowmans comments: This announcement by the EU is a major decision as it is likely to be the first major regulatory framework for the cryptocurrency industry. The EU law is ambitious in that it attempts to bring crypto-assets, crypto-assets issuers and crypto-asset service providers under one regulatory framework. While the law contains certain strict policies/obligations, particularly for cryptocurrency firms, the comprehensive (harmonized) legislation is generally a positive step, especially in the wake of the recent collapse of algorithmic digital tokens such as TerraUSD, which was pegged to existing assets such as the U.S. dollar.
Source: CNBC (30 June 2022))
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