Fintech in South Africa has undergone significant growth over the last three years or so.
The majority of fintech start-ups provide payments and money transfer services, with the rest of the market roughly divided between trading, investment and crowdfunding; blockchain and Bitcoin; and lending, financing and retail banking services.
While there is no specific fintech regulation, contrary to popular belief, a number of Fintech activities are, or soon will be, regulated. For instance, a number of provisions regulating anti-money laundering already apply to fintech businesses, as do cyber security and data privacy laws.
As regards IP, many believe that it can be onerous to legally protect fintech inventions, such as apps and other software-related inventions. However, this isn't necessarily true, and there are a number of IP tools, such as patent protection, copyright and trade mark registrations, that can help protect your fintech ideas and prevent future legal battles.
Patents: novelty is key
Patents protect new inventions and typically give the owner the right to exclude others from making, selling, using, or importing the invention without the authorisation of the owner. The invention does not need to be a physical object – you can also obtain patent protection for a method or process.
The most important element of patenting an invention is novelty – an invention must be new. This is true for any type of invention (not only fintech innovations). If you have a potentially patentable invention, it must be kept secret until a patent application has actually been filed. This means that the invention must also not yet have been disclosed to the public by the inventor or anyone else. If you have to disclose the invention prior to filing, be sure to have a confidentiality or non-disclosure agreement in place.
In addition to novelty, there is the "inventive step" requirement, also known as non-obviousness. The distinguishing feature of your invention, or the "newness", must be a step forward and not be obvious to someone skilled in that particular field.
In terms of apps and software-related inventions, it is important to note that certain types of inventions are simply not patentable, even if they can be seen as new and inventive. In many countries, including South Africa, this includes computer programs and business methods as such. The words "as such" are very important here. This essentially means that if your invention falls solely within an excluded area, for example, if the inventive part of your invention lies only in the new software you have developed, it will not be patentable. But if your invention includes one or more inventive technical features that go beyond the excluded area, it may be patentable.
For example, if your invention is used to implement a new mobile banking security process that solves a technical problem encountered when using existing systems, or if your invention improves the efficiency of a mobile banking system, it may well be patentable.
In many countries, software must produce a so-called "technical effect" in order to be patentable and must be more than a mere abstract idea. Examples of a technical effect may that be the invention reduces memory requirements, speeds-up processing, results in enhanced control over something physical, or improves signal reception or decoding. If you are taking a known business process and simply implementing it by way of an app, your invention would not typically be patentable.
The laws and regulations governing the patentability of apps and software-related technologies differ from country to country and can be an important factor in determining an international protection strategy if you intend trading outside of your home country.
Copyright: who is the owner?
The second element which can be important to secure protection for new technology in the fintech space is copyright.
Copyright is one of the more abstract forms of IP rights as there is usually no formal registration process and it comes about automatically upon the creation of a new work, regardless of its inventiveness or novelty.
Copyright legislation in many countries specifically mentions the protection of "computer programs", which essentially refers to protection of the source and/or object code in a software invention or app.
Ownership rules around copyright are critical and specific exclusions and formalities apply to software type inventions. The ownership may, for instance, vest in different people or entities depending on whether the creator is under a contract of employment or acting as a consultant.
In South Africa, the general rule is that the author of a copyrighted work is the first copyright owner. According to the definition section of the Copyright Act, 1978, the "author" of a computer program is the person who exercises control over the making of the computer program. However, if a computer program is created in the course of the author's employment, the author's employer owns the copyright. Clearly, this can be rather technical and the rules and application may differ slightly from jurisdiction to jurisdiction.
The existence, ownership and commercialisation of copyright is generally dealt with under specific IP agreements. It is therefore extremely important to make sure that software development agreements clearly deal with all relevant IP aspects, particularly the ownership and assignment of copyright.
Trade marks: protecting your brand
Trade marks also have an important role to play in the protection of fintech products and platforms – think high profile brands like MPESA, BANK ZERO, JUMO, YOCO, LUNO, MONZO, MONESE, STARLING BANK, CLEO and CURVE. In an increasingly crowded marketplace, a brand or trade mark plays a critical role in distinguishing one service offering from another. Logos or icons become instantly recognisable on phones, websites and other platforms and are important in attracting consumer attention as well as growing the reputation of the product offering. The value of the brand often outgrows the value of the underlying technology, which can be transient in the fintech space.
Words, logos (static and non-static) and sounds can all conceivably be used as trade marks and be registered. Given that the device screen is the window to the product, this interface must receive particular attention both from a design and trade mark registration perspective. The purpose of registering a trade mark, often a company's most valuable asset, is to obtain a monopoly in it and to assist with the enforcement of the rights in the trade mark.
ENSafrica has deep multidisciplinary expertise in the fintech space, not only in terms of IP advice, registration and enforcement, but also with various other nuances in this specialist field including finance and technology. We are ideally situated to guide you through this (in many cases) unchartered territory, including navigating the complex regulatory environment in cross-border matters that require innovative solutions.
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.