INTELLECTUAL PROPERTY ISSUES IN FINTECH
Over the last three years, there has been a rapid rise in the number of Financial Technology ("Fintech") companies in Nigeria. Within the last three years the number of Fintech companies in Nigeria has grown to over 60.2 The growth in recent years is mainly due to the introduction of modern and convenient payment services which is a much-needed improvement to customer experience in the digital space.
From transaction payments to lending, to insurance, virtual currencies and Blockchain, Fintech services are redefining the way businesses and consumers carry out routine transactions. The increasing adoption of these trends is positioning Nigeria as an attractive market worldwide.3 The industry has also experienced a rise in its Investment opportunities, for example, Paystack and Piggybank.ng, (two prominent Fintech companies in Nigeria) recently received both foreign and local investments worth over $9 million.4
There are various intellectual property (IP) rights associated with Fintech and like every other business it is essential that Fintech companies adopt appropriate IP strategies to protect their core innovations. Having a good IP portfolio does not only assist in protecting technical innovations, it also helps to boost the image and value of the company which in turn plays a critical role in attracting investors.5 Some of the various IP aspects of Fintech companies are briefly discussed below:
A Patent is an exclusive monopoly granted by a country to an inventor for his or her ingenuity/invention for a limited period of time usually 20 years.6 Patents are considered to be one of the core assets of technology related companies because it enables the company to exploit the patented invention exclusively within the stipulated time before releasing to the public domain and it precludes another person(s) from exploiting the invention without the inventor's consent or authorization.
Fintech companies often utilize patent rights to protect the core of their inventions. It can be used to protect devices such as ATM,7 POS,8 MPOS,9 tokens, etc. as well as the inventive steps or methods involved in the invention as well as the computer programmes that drive these innovations.10
One of the major benefits of patenting one's invention is that it helps to create market monopoly over that invention thereby providing the company the avenue to build its brand, attract customer confidence in the product and simultaneously increases the income and profit margins of the company. It also helps to boost a company's profile, making it more attractive to investors.
In Nigeria, for an invention to be patentable it must be new or an improvement on an existing invention; consist of an inventive step; must be capable of industrial application and must not be specifically excluded under the law.11 To obtain a patent, an application will be submitted to the registrar of the patent registry together with the prescribed fee. Upon careful examination of the application, if the registrar is satisfied that the statutory requirements are met, the patent over that invention will be granted. Once granted, the patent holder can enforce its rights against infringers.12
Typically, computer programs and software are categorized and protected under copyright law.13 Software such as computer codes, mobile banking applications, audio and visual guides, application programming interface structures etc., are some of the copyright assets of FinTech companies. Copyright over these computer programs subsists automatically the moment they are created and require no form of registration before it is enforceable. However, owners of copyright may take further steps to lodge their copyright with the Nigerian Copyright Commission (NCC) under its Notification/Depository scheme.14 This serves the purpose of bringing the existence of the work to the notice of the NCC and it also serves as proof of ownership in court when there are competing interests.
Furthermore, in order to better protect the copyright over their works, Fintech companies are advised to inculcate the practice of placing digital locks on copies of their works to provide additional security. Circumvention of digital locks is an offence in some jurisdictions and may provide relief against unauthorized parties.15 The Nigerian Draft Copyright Bill 2015 also prohibits circumvention of technological protection measures protecting a work and entitles the aggrieved owner to reliefs such as damages, injunction and accounts for profit. The companies should take more caution in drafting the provisions of its contracts with developers especially when incorporating third-party copyright, as this may affect the ownership of the technology and freedom to operate.16
The word mark, logos, domain names, icons etc., which forms the brand of a business should be registered and protected as trademarks because a good brand helps to distinguish a Fintech company from its competitors. Registration of the trademark of a company enables the company to successfully bring an infringement action against its competitors for passing off or for damaging or diluting the goodwill and reputation of the company.17
- Trade Secrets
Trade secrets are confidential business information that have economic or commercial value. Confidential backend server processes, algorithms, business methods, ideas, client details, code and secret recipes are some examples of trade secrets of a Fintech company. It is pertinent that a company takes reasonable and deliberate actions to protect its trade secrets especially those which gives it economic advantage over competitors.
Unlike other IP assets, trade secrets can offer perpetual protection so long as the secrecy is preserved, because the value of a trade secret is in its secrecy, and once it is revealed to the public or independently discovered by competitors, the right is lost.
A Fintech company can protect its trade secrets by entering into Non-Disclosure Agreements (NDAs) with potential clients, contractors or investors before providing them with any confidential information. It can also have confidentiality, exclusivity, non-competition / non-solicitation and intellectual property clauses in the agreements with its employees. Likewise, the company can implement an enforceable data security policy which will among other things restrict access to vital business information to a need-to-know basis.
- Industrial Designs
Industrial designs refer to the physical/aesthetic outlook of a product offered by a company. The designs on electronic cards, computer or machine interfaces are also protectable IP assets of the Fintech companies. Industrial Designs may also contribute to the distinctiveness of the brand.
Intellectual property forms the bulk of the value of any business and is recognized as the most important asset of a business.18 It is the foundation for the market dominance and continuing profitability of leading corporations.19 Fintech companies that desire to expand and increase income, market visibi`lity, clientele and investment portfolio must endeavor to manage and protect their IP portfolio as a form of business strategy because IP increases the competitiveness of a company and in turn affords it both economic and social advantages over its competitors.
The licensing and assignment for these IP rights to third parties will also provide a significant and valuable income stream. With the constant rise in M&A transactions in the Fintech space, having a strong IP portfolio increases the value of a firm when it is being evaluated during a potential merger or acquisition.20 Therefore, in addition to the protection accorded to the tangible assets and technical financial services of fintech, adequate attention must equally be directed towards protecting the intellectual property assets of the company. A company can adopt either one or a combination of the above-mentioned forms of IP protection for its business.
1 Oluwafunmilayo Mayowa, NYSC Intern, SPA Ajibade & Co., Lagos, Nigeria.
2 Medici, "56 Fintech Companies in Nigeria Enabling Inclusive Growth" available at: https://gomedici.com/56-fintech-companies-nigeria-extending-access-to-financial-products-for-inclusive-growth accessed 2nd November 2019.
3 Boye Ademola, "Fintech in Nigeria" available at: https://assets.kpmg/content/dam/kpmg/ng/pdf/ng-fintech-in-nigeria-understanding-the-value-proposition.pdf accessed 29th October 2019.
4 Emmanuel Benson, "Fintech companies to watch out for in 2019" available at: https://nairametrics.com/2019/01/22/fintech-companies-to-watch-for-in-2019/ accessed 4th November 2019.
5 Finance Monthly, "Intellectual Property: How to Protect Your Fintech Innovation" available at
https://www.finance-monthly.com/2017/07/intellectual-property-how-to-protect-your-fintech-innovation/ accessed 28th October 2019.
6 See section 7(1) Patents and Designs Act (PDA) 1970 cap P2 LFN 2004.
7 Yetunde Okojie and Oluwasolape Owoyemi, "How do I Register an Invention in Nigeria? Substantive and Procedural Requirements for Registration of an Invention" available at: http://www.spaajibade.com/resources/wp-content/uploads/2019/01/How-do-I-Register-an-Invention-in-Nigeria-by-Yetunde-Okojie-and-Oluwasolape-Owoyemi.pdf accessed 21st November, 2019.
10 The Canadian Federal Court of Appeal in Amazon.com, Inc. v. Canada (Attorney General) 2011 FCA 328, held that Amazon.com "one-click" buy interface feature is patentable.
11 Section 1 PDA Supra.
12 Yetunde Okojie and Oluwasolape Owoyemi, supra.
13 Section 51 Copyright Act Cap C10 LFN 2004.
14 Federal Ministry of Communications AND Digital Economy, "NCC unveils E-Registration Platform to Check
Piracy" available at https://www.commtech.gov.ng/news-and-media/daily-news-report/118-ncc-unveils-
e-registration-platform-to-check-piracy.html accessed 21st November 2019.
15 Financier Worldwide Magazine "Intellectual property strategy for FinTech" available at:
https://www.financierworldwide.com/intellectual-property-strategy-for-fintech#.XbxSDZpKjIU accessed 27th October 2019.
17 John Onyido, "Understanding Trademarks", Presentation to the IP LAW CLUB Obafemi Awolowo University"
2018, available at: http://www.spaajibade.com/resources/wp-content/uploads/2018/09/ Understanding – TrademarksIP-Club-Presentation-Obafemi-Awolowo-University-updated.pdf, accessed 21st November 2019.
18 Nexsen Pruet, "Intellectual property is 80% of the value of a business" available at: https://www.lexology.com/library/detail.aspx?g=6f7dd161-e101-4809-9cb6-af37b853aae8 accessed 27th October 2019.
19 WIPO, "The value of Intellectual Property, Intangible Assets and Goodwill" available at: https://www.wipo.int/sme/en/documents/value_ip_intangible_assets_fulltext.html accessed 27th October 2019.
20 Yetunde Okojie, "Importance of IP Due Diligence in Mergers and Acquisition" available at: http://www.spaajibade.com/resources/wp-content/uploads/2018/09/THE-IMPORTANCE-OF-IP-DUE-DILIGENCE-IN-MERGERS-AND-ACQUISITION-ARTICLE-Okojie.pdf accessed 20th November 2019.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.