Safaricom has been ordered to pay innovator Peter Nthei Muoki Sh1.4 billion in compensation after the High Court found the telco liable for copyright infringement over an M-Pesa child account product.
The court also directed Safaricom to pay Mr Muoki and Beluga Ltd 0.5 percent of its gross M-Pesa revenue in each financial year from March 31, 2025, for as long as it continues to operate the Manage Child Account, M-Pesa Go, or any similar parent-child control functionality.
However, Safaricom secured a 30-day suspension of the judgment to allow it to challenge the ruling at the Court of Appeal.
Mr Muoki sued the telco in 2022, seeking compensation for profits allegedly derived from infringement, royalties and licensing fees. He argued that Safaricom launched the product under a USSD code that closely mirrored his innovation after he had pitched the concept to the company.
His product, dubbed M-Teen Account, is an M-Pesa sub-wallet targeting teenagers aged 13 to 17 and young adults aged 18 to 24, allowing parents to monitor and control spending.
Mr Muoki told the court that he approached Safaricom in March 2021 with the proposal, but was informed that implementation would be difficult because the intended users lacked identification cards, requiring approval from the Central Bank of Kenya (CBK).
Months later, he told the court, he discovered the company was testing a product with near-identical functionality under a different name.
He said Manage Child Account product has an uncanny resemblance and functionality to his M-Teen Mobile Wallet USSD code.
In its ruling, the court said damages equivalent to one percent of Safaricom’s M-Pesa revenue for the 2024 financial year represented a commercially reasonable award.
“Considering these factors and adopting a conservative approach, the court finds that reasonable damages of one percent of Safaricom’s M-Pesa revenue for the financial year 2024, being the first full financial year during which Safaricom’s product was operational, would be appropriate in the circumstances,” the judgment said.
The court noted that the award was modest relative to Safaricom’s overall service revenue, given the scale of the company’s business.
“Whereas I would agree with Safaricom’s submission that there is no equity to compel someone who has not made profit to account for a profit which he has not made, it is common knowledge that M-Pesa transaction fees generate revenue,” the court said.
“Safaricom’s product, by facilitating transactions for millions of minors, contributes to the defendant’s overall revenue stream.”
The court also found that Mr Muoki’s product, which had been documented in detail and registered with the Kenya Copyright Board, qualified as a literary work protected under copyright law.
Safaricom rejected the claims, arguing that the idea was neither novel nor original.
The company told the court it had contracted Huawei in 2020 to develop a parent-child control solution for M-Pesa after what it described as a verbal request from the CBK governor concerning minors’ access to betting platforms.
“It is not the duty of the CBK Governor to advise Safaricom on product features or any other entity for that matter,” the judge said, questioning why a major telecommunications firm would act on undocumented verbal instructions.
Huawei also denied knowledge of Mr Muoki’s concept, saying it independently developed the functionality from September 2020, around six months before Mr Muoki said he pitched his proposal to Safaricom.
In a partial reprieve for Safaricom, the court declined to issue a permanent injunction stopping the product.
“Millions of Kenyans, including parents and minors, now rely on this functionality and a shutdown would cause disproportionate disruption. I therefore decline to grant this prayer.”
