Safaricom Ordered to Pay Ksh.1.4 Billion for USSD Infringement

Key facts

• Safaricom ordered to pay Ksh.1.4 billion in general damages.
• Court found Safaricom infringed on a businessman's rights under Kenya's Copyright Act.
• The infringement involved features embedded in the M-TIN Mobile Wallet USSD code.
• Safaricom must pay 0.5% of gross M-Pesa revenue annually as royalties from March 31, 2025.
• M-Pesa revenue rose from Ksh.82 billion (FY2021) to Ksh.140 billion (FY2024).
• The court cited Safaricom's shifting explanations and failure to produce documents.
• A permanent injunction was declined in favour of royalty payments.

Court Finds Safaricom Violated Copyright Law

A Kenyan High Court has ordered Safaricom PLC, the nation's leading telecommunications company, to pay Ksh.1.4 billion in damages. The landmark ruling found the company liable for infringing on the intellectual property rights of a local businessman through its M-TIN Mobile Wallet USSD application. This decision marks a significant moment for intellectual property disputes in the region, highlighting the potential for independent innovators to challenge corporate giants. The court's judgment centers on the unlawful use of features embedded within the M-Pesa Mobile Wallet's USSD code. Justice Josephine Mongare detailed how Safaricom's actions constituted a violation of the plaintiff's rights under Kenya's Copyright Act. The ruling underscores the importance of respecting intellectual property, even in the fast-paced digital economy. This substantial award is intended to compensate for negligence and Safaricom's continued operation of the disputed service. The court's decision also mandates ongoing royalty payments, signalling a shift towards practical remedies that acknowledge the widespread integration of such services into daily commerce.

A 'David and Goliath' Victory for Innovation

The court's decision was framed as a cautionary tale, emphasizing that innovation does not exclusively originate from corporate boardrooms. Justice Mongare noted that the businessman had been denied a crucial opportunity to negotiate licensing terms after Safaricom allegedly adopted the innovation without seeking prior permission. "Safaricom did not seek a license, they simply took it and the plaintiffs were deprived of a negotiating opportunity," the judge stated. This sentiment was echoed in the judge's observation that "For innovators, it demonstrates that even David can prevail against Goliath when evidence is marshalled properly and truth is on his side." The ruling serves as a powerful affirmation for individual inventors and entrepreneurs who may feel dwarfed by the scale of major corporations. Safaricom's conduct during the proceedings drew particular criticism. The court faulted the company for presenting shifting explanations and failing to produce critical documents. This lack of transparency and the decision to roll out the product while litigation was ongoing were deemed to fall short of the standards expected of a market leader.

Royalty Payments to Continue

While ordering substantial damages, the court declined to issue a permanent injunction that would halt Safaricom's use of the M-TIN Mobile Wallet features. Instead, a compulsory licensing arrangement through ongoing royalty payments was deemed a more practical remedy, given the service's extensive commercial integration and widespread use. Beginning March 31, 2025, Safaricom is directed to pay royalties equivalent to 0.5 percent of its gross M-Pesa revenue every financial year. This payment obligation will continue for as long as the disputed service, or any substantially similar parent-controlled account functionality, remains in operation. The court acknowledged Safaricom's argument that it did not directly profit from the plaintiff's product and that separate accounts were not maintained for the service. However, it was evident that M-Pesa transaction fees, facilitated by millions of users including minors, contribute significantly to the company's overall revenue stream.

M-Pesa Revenue Surge Under Scrutiny

The court's assessment of damages was informed by Safaricom's publicly available financial records, which revealed a substantial increase in M-Pesa revenue during the period in question. In the financial year 2021, before the plaintiff disclosed the product concept, M-Pesa revenue stood at Ksh.82 billion. Following the development and launch of the disputed product, revenue saw a notable increase to Ksh.107 billion in 2022, representing a 30 percent rise. The figures continued to climb, reaching Ksh.117 billion in 2023 and a significant Ksh.140 billion in the 2024 financial year. Considering these financial trends and adopting a conservative approach, the court determined that reasonable damages of one percent of Safaricom's M-Pesa revenue for the 2024 financial year would be appropriate. This calculation led to the Ksh.1.4 billion award, which the judge described as commercially reasonable and proportionate to Safaricom's considerable financial capacity.

Market Leader's Conduct Questioned

Justice Mongare's ruling explicitly addressed Safaricom's conduct throughout the legal proceedings. The court expressed disappointment with the company's "shifting explanations" and its failure to produce critical documentation. Such actions, the judge stated, "falls short of the standards expected of a market leader." Furthermore, the court cautioned companies upon receiving and rejecting proposals. It stressed the importance of ensuring that any internally developed products are genuinely independent and do not mirror concepts presented by external innovators. This directive aims to prevent the appropriation of ideas without due process or fair compensation. The judge's remarks serve as a stern warning to dominant market players about their responsibilities towards smaller innovators and the legal frameworks designed to protect intellectual property. The case highlights the potential repercussions for companies that fail to adhere to ethical business practices and legal obligations.

The bottom line

• Safaricom has been ordered to pay Ksh.1.4 billion for infringing on a businessman's copyright related to an M-Pesa USSD feature.
• The court found Safaricom violated Kenya's Copyright Act by unlawfully using features from the M-TIN Mobile Wallet USSD code.
• Ongoing royalties of 0.5% of gross M-Pesa revenue will be paid annually from March 31, 2025, as long as the service operates.
• Safaricom's conduct, including shifting explanations and failure to produce documents, was criticized by the judge.
• The ruling emphasizes that innovation can come from individuals, not just large corporations, and serves as a 'David and Goliath' precedent.
• M-Pesa revenue increased significantly from Ksh.82 billion in FY2021 to Ksh.140 billion in FY2024, a period coinciding with the dispute.