MTN, BOU on spot over patent for mobile saving
|Daniel Byamukama, managing director EDAD e-Payment limited|
EDAD e-payment limited, a Kasese-based startup company, is accusing MTN Uganda and Bank of Uganda (BOU) for infringing on its intellectual property right, claiming unspecified damages.
The company, which says it created and patented a virtual space on which mobile money users can divert some of their savings, notes that MTN Uganda’s Mokash product has a strikingly similar version of the patented invention.
As such, the company has written to the minister of Science, Technology and Innovation as it prepares to go to court to plead its case.
“I am sad to report that I have been faced with unjustified interference from the regulators, particularly Bank of Uganda,” reads a letter from Daniel K. Byamukama, the managing director of EDAD e-Payment ltd, to the minister of Science, Technology and Innovation on October 28, 2016.
“In view of the seriousness of BOU’s actions, we have been forced to consider taking legal steps, but knowing that court matters can take very long to be resolved, I am eager for my company and patent legitimacy to be cleared,” the letter adds.
The battle could break new ground in shading light on whether Ugandan innovators with their unique products have enough protection within an ICT market dominated by large multinationals.
Most companies in Uganda are embracing the use of ICT technologies within their institutions and businesses. Innovators are developing applications to develop valued propositions to meet the aspirations of an evolving ICT market.
But this emerging industry could be stifled and innovations rendered worthless if issues regarding patent are not properly addressed.
Mokash is a mobile finance service available for MTN mobile money customers to save and borrow money. MTN Uganda partnered with Commercial Bank of Africa to roll out this product in August this year, which, Byamukama says, is akin to the EDAD saving box invention.
We have repeatedly asked MTN Uganda management to comment on this story but the process has been futile.
In 2012, Byamukama says he discovered a vacuum in the mobile money ecosystem that could be used for savings. He started developing the product and notified BOU of his invention that he believed would be key in deepening financial inclusion, especially among rural Ugandans.
“We have a plan of setting up an electronic piggy bank in Uganda and would like to seek guidance from your institution on how best we can achieve our objective,” he wrote to one of the directors in BOU, on June 8, 2012.
Byamukama started developing the product bearing in mind that non-banked persons would save in small amounts to accumulate over time. He named it EDAD saving box, an idea, he says, was derived from dropping physical coins or bank notes into a static saving box.
Charles Okello, a director at BOU, wrote back on October 11, 2013 saying that BOU could not deal with EDAD e-payment. This was because EDAD did not fall directly under the mandate of the central bank, and thus could not help much with the innovation.
“BOU does not approve of platforms for non regulated financial institutions like EDAD e-payment ltd. This is outside the mandate of BOU,” Okello said.
This position did not dampen Byamukama’s mood at all. Mindful of how his product would be extraordinary in the market, Byamukama on March 5, 2014 filed for a patent with the Uganda Registration Service Bureau, who later forwarded his request to African Regional Intellectual Property Organization (ARIPO), a body that assesses the originality of an invention.
Byamukama made a major breakthrough when he received a thumbs-up from ARIPO on April 25, 2014.
“The examination of the identified application has revealed that it does meet the requirement of patentability with respect to novelty and inventive step,” ARIPO said in a letter.
Byamukama continued to engage MTN Uganda over a possible partnership. After developing the full functionality of the product, he asked MTN Uganda whether he could run a test of the product before he could roll it out. The whole system was developed on the MTN network, he said.
According to Byamukama, for MTN Uganda to approve the system, part of the requirement was to disclose in his proposal a “process flow of how users will use the service.”
“The proposal has been submitted to the product development team for review and feedback,” Sumaya Nakendo, a sales and distribution official at MTN, wrote to Byamukama in an e-mail on May 21, 2014.
An on June 12, 2014, URSB awarded Daniel Byamukama a certificate of patent for being the inventor of EDAD mobile money saving box in accordance with section 21 (1) of the Patents Act.
However, only two days later, Byamukama wrote a letter that questioned whether MTN Uganda had infringed on his patent.
In a June 14, 2014 letter to MTN Uganda, he said he had learnt that MTN Uganda was planning to roll out a similar product in the market. This, he says he discovered when he pressed #165* on his cellphone and an option of saving was available.
On that same day Phase Lubega, the MTN Uganda sales and distribution manager, wrote to Byamukama, explaining that MTN Uganda had moved ahead to work on a loans and savings product way before any engagements with EDAD e-Payments ltd had started.
Lubega explained to Byamukama that MTN Uganda conducts research and monitors where the markets are heading, and therefore develops similar products for their customers.
“Your product might behave in a specific way but patenting savings and loans when banks already operate the same...means you patented your own product which you understand how it works and have never disclosed to MTN Uganda,” he said.
From thereon, Byamukama’s relationship with MTN Uganda broke down, with the telecom company blocking communications related to EDAD.
“Team, please halt all engagements with EDAD until further notice,” Lubega directed his team.
When Byamukama wrote back to BOU to test and recognise EDAD mobile money savings box as an effective tool of enhancing financial inclusion, with a patent over the product, BOU advised Byamukama to partner with a regulated banking institution to offer the service.
“We hereby advise EDAD e-payments to enter into partnership with regulated financial institutions. The regulated financial institutional will then obtain regulatory approval for the above service,” said Mackay Aomu, the director commercial banking at BOU, on January 28, 2015 letter.
The partnership with any regulated commercial bank was to open an account for the EDAD saving product, just as how telecoms and banks have partnered over mobile money services.
EDAD then kicked off its operations under the regulation of the Uganda Communications Commission (UCC) through a *278# short code. All savings were being directed to the MTN Uganda mobile money loop which had an account in Stanbic bank. However, BOU declined Prime Microfinance limited to operate the account despite an earlier advice to partner with a regulated financial institution.
“BOU declined your proposal to open an escrow account with Pride Microfinance limited,” said Benedict Ssekabira, Ag executive director for supervision, in April 29, 2016 letter.
“BOU has, however, noted with concern that you ignored our advice and you are advertising your services through the social media to the public and have commenced your operations in areas of Kasese. This is to direct you to immediately discontinue the provision of the above illegal service to the public,” he warned.
Although Byamukama says he laboured to explain the nature of the business to BOU as being in its pilot phase and that customer funds go directly to MTN Uganda teleco’s mobile money account, BOU asked UCC to revoke the short code that had been provided to EDAD e-Payment.
“The above mentioned authorization is hereby suspended pending the submission by EDAD of approval for its operations by BOU...,” said Godfrey Mutabazi, the executive director at UCC on May 10, 2016.
A week later, BOU warned the public against doing business with EDAD, saying the service was illegal.
“The public is warned to refrain from any financial dealings with EDAD e-Payment ltd as it is not dully authorized by BOU to take customers deposits in the form of mobile money savings,” Emmanuel Tumusiime-Mutebile, the governor BOU wrote in a press statement on May 16, 2016.
At the time, at least 150 people had subscribed to the platform with approximately Shs 1.3m, an amount that is now blocked as result of BOU’s public announcement.
In August, just two months later, BOU allowed Commercial Bank of Africa and MTN Uganda to launch Mokash.
In their joint statement to the press, Samuel Odeke, the chief executive officer of CBA, said: “The story of Mokash is not entirely new, it is a furtherance of the tremendous success CBA has achieved with similar products in Kenya and Tanzania.”
Byamukama says BOU’s actions have cost him his entire career.
“My kids are not going to school. I don’t have any income because all I had is now gone. I am running from one office to another for help,” Byamukama says.
Byamukama says he fears for his life because he believes that there are some unscrupulous persons who might have pushed him out of business.
“I know these are not easy people [I am dealing with]. I am even afraid for my life. Anything might happen to me for pursuing this matter because all lawyers I am engaging are bailing out on the case. I don’t know what goes wrong in the process,” Byamukama explains.
“The last lawyer I had just stopped receiving my calls and disappeared with some of my documents of the case,” he adds.
In Kenya, M-shwari itself has been subjected to patent scrutiny with re-knowned micro lender, Faulu, which dragged Safaricom to court seeking recognition as one of the originators of the highly successful product.
However, Faulu lost the case, according to CIO East African magazine website. The judge ruled that since Faulu had failed to bring proof that it owns any copyright in the concept paper or provide proof of infringement of alleged copyright or other intellectual property rights, Faulu had failed to establish a prima facie case.
According to Edgar Tabaro, a business development partner at Karuhanga, Tabaro and Associates, patents are granted over a particular inventive stage.
“To prove it, they have to bring expert evidence in court. The critical issue is when persons are engaging companies, they ought to guard themselves and enter specific contractual obligations for confidentiality,” he says
“Where they are absent, the court is left with presumptions and they can arise if evidence is brought to that direction,” he adds.