insights



CHALLENGES IN ENFORCEMENT OF TRADEMARK RIGHTS IN KENYA

  1. Introduction

A Trade Mark is a sign which serves to distinguish the goods or products of an industrial, commercial or organizational enterprise or a group of such enterprises from others in the same market. The sign may consist of one or more distinctive works, letters, numbers, drawings or pictures, monograms, signatures, colors or combination of colors.

The following marks can be registered in Kenya:

  1. Trademark for goods;
  2. Trademark for services;
  3. Collective trademarks;
  4. Certification trademarks;
  5. Defensive registrations;
  6. Parts of marks; and
  7. Series of marks

The advantages of the registration of a trade mark is that the registered owner gets the exclusive right to use the registered mark, distinguish between competing goods and services in the market and is entitled to institute proceedings and recover damages for infringement.

Kenya applies the Nice Classification (11th edition – 2017), and a trademark proprietor may apply to register a mark in more than one class through a single application. The registration process involves examination, advertisement and possible opposition by members of the public before issuance of the certificate of registration. Where a notice of opposition is filed against an application, the registration process will stop and opposition proceedings will commence in which the applicant bears the burden of proving that the opposition lacks merit or is not justified. Trademark registrations are valid for 10 years and may be renewed for further consecutive periods of 10 years each.

  1. Legal Framework for Enforcement of Trademarks
National Framework * The Constitution of Kenya, 2010

* The Trademarks Act (CAP 506)

* Anti-Counterfeit Act (No. 13 of 2008)

* Penal Code (CAP 63)

* Trade Description Act (CAP 505)

* Standards Act (CAP 496)

* Competition Act (CAP 504)

* Consumer Protection Act (No.46 of 2012)

* Pharmacy and Poisons Act (CAP 244)

* Food Drugs and Chemical Substances Act (CAP 254)

* National Flag, Emblems and Names Act (CAP 99)

* Industrial Property Act (No.3 of 2001)

International Framework * Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)

* Lusaka Agreement

* East Africa Community Customs Management Act 2004 (EACCMA)

 

  1. Institutional Framework for Enforcement of Trademarks
National Framework * Kenya Industrial Property Institute

* The Industrial Property Tribunal

* Public Health Standards Board

* Pharmacy and Poisons Board

* National Police Service

* Kenya Bureau of Standards (KEBS)

* Anti-Counterfeits Agency

* Kenya Revenue Authority

* Competition Authority

* Judiciary

International Framework * World Intellectual Property Organization

* World Trade Organization

* Africa Regional Intellectual Property Organization

 

4. Challenges in Enforcement of Trademarks

a. The provisions governing Trade Marks are fragmented in different statutes.

b. There are insufficient criminal sanctions. The penalties (both pecuniary and custodial sentence) for infringement of trademark rights are too lenient and do not act as a deterrent.

c. There is no single institution primarily tasked with the role of enforcing trademarks. They each handle different aspects or types of infringements. This can lead to laxity, turf-wars and confusion as to which body to approach to enforce the trademarks rights.

d. Lack of sufficient knowledge, expertise and capacity of trademark laws, rules and international best practices, by the enforcement institutions and the judiciary.

e. Corruption is rampant. For example, counterfeit goods are allowed to pass through our borders illegally under the watch of the police and customs officials.

f. There is limited funding and personnel at the enforcement agencies.

 

5. Recommendations

I. The Kenyan legal framework should be amended to include types of infringement of the trademarks, to expand the statutory law on trademark infringement and to enhance trademark offences.

II. The institutions tasked with trademark enforcement should be amalgamated to create a multi-sectorial agency to enforce the trademark rights.

III. Different initiatives should be created for capacity building of enforcement institutions, through training and secondment of these officials in countries and international organizations that have exemplary trademark enforcement practices.

IV. The judiciary should train and appoint specialized judicial officers who are knowledgeable and have expertise and diverse knowledge on trademarks in order for jurisprudence to be expanded in this area.

The Intellectual Property team is always available to provide more insight to the provisions of this Act. Should you have any queries or need clarifications on the contents of this alert, please contact Ms. Gakii Kaburu the Associate or Mr. Silas Gitari, the Managing Partner.




HIGHLIGHTS OF THE FINANCE ACT, 2019

The Finance Bill, 2019 was finally assented into law on the 7th of November, 2019. The Act expands the Government’s revenue base through the introduction of tax on income raised from the digital economy, re-introduction of turnover tax, expanding the scope of VAT among others. We extensively analysed the Act as follows:

  1. Taxation of Digital Economy

The Finance Act, 2019 amends Section 3 of the Income Tax Act, Cap 470 by introducing Tax on income accruing from the digital marketplace. The government targets the increased use of internet and electronic devices in marketing of businesses, and effective the 7th of November, 2019 levies tax on income accruing from the Digital marketplace. Under the Act, income chargeable to tax now includes income accruing through a digital marketplace. The Act defines digital marketplace as a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means.  Even as taxation of digital economy is a welcome move and necessary, it is not very clear which kind of digital businesses are targeted as most of them do not have physical places of business. The Cabinet Secretary has been tasked to provide regulations on the mechanisms through which the taxation will be effected.

 

  1. Extension of Tax exemption to investee Company of Real Estate Investment Trust (REIT)

The Income Tax Act exempts a REIT from all taxes except for withholding tax on interest and dividends. The Finance Act, 2019 extends the exemption to an investee company of a REIT. An investee company of REIT is a company fully owned or controlled by that REIT. REITS hold property through such companies and its income flows directly to the REIT. This additional incentive effective the 7th of November, 2019 will enable REITs to acquire properties with minimal capital gains tax cost on the part of investors, and therefore will attract more investors to REIT. This will in turn boost growth of REITS in Kenya.

 

  1. Capital Gains Tax.

The Finance Bill 2019 proposed to increase Capital Gains Tax rate from 5% to 12.5% in order to align it with that of East African region. The proposal was rejected and the initial rate of 5% retained under the new Act. This is comforting to the property sellers and developers who would have paid more tax on the sale of their property.

 

  1. CGT exempt for property transferred in the course of group restructuring/reorganization.

A transfer of property that is necessitated by a transaction involving the incorporation, recapitalization, acquisition, amalgamation, separation, dissolution or similar restructuring of a corporate entity, where such transfer is:

(a) legal or regulatory requirement; (b) as a result of a directive or compulsory acquisition by the government; (c) an internal restructuring within a group which does not involve transfer of property to a third party; or (d) in the public interest and approved by the Cabinet Secretary; is exempted from capital gains tax.

The exemption from the tax encourages business growth and smoothens such entities’ operations. This provision, an amendment to the eight schedule of the Income Tax Act, is effective from the 7th of November, 2019.

  1. Turnover tax

Turnover tax was repealed by the Finance Act 2018 and replaced with the presumptive tax to persons issued with a single business permit by the county government at 15% of the single business permit fee in order to widen revenue range in the informal sector. The Finance Bill, 2019 proposed to re-introduce turnover tax at 3% for businesses whose turnover does not exceed Kshs 5 million. The Finance Act 2019 retains this proposal. Therefore, as from the 1st of January 2020, Turnover Tax shall be levied simultaneously with Presumptive Tax despite the latter’s low yields and implementation challenges since its introduction.

However, turnover tax shall not apply to rental income; management or professional or training fees; the income of incorporated companies; or any income which is subject to a final withholding tax under the Finance Act, 2019.

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The Finance Bill

INTRODUCTION
Following the reading of the Budget Statement for the financial year 2018/19 by the Cabinet Secretary for the National Treasury, The Finance Bill, 2018 (“the Bill”) has gone through Parliamentary vetting and is currently awaiting the President’s Assent. Under the Provisional Collection of Taxes and Duties Act, the provisions of the Bill will come into force on different dates between 1 July 2018 and 1 January 2019.

We have carried out an in depth analysis of the Bill and have noted the following:

a. The President’s Big Four Agenda (Food Security, Affordable Housing, Manufacturing, Universal Healthcare) is alive and kicking and this is highlighted in different sections of the Bill. For example, 130% of the electricity expenses incurred by the manufacturers will now be deducted from their taxable income. In addition, plant and machinery used for the manufacture of goods, parts imported or purchased locally for the assembly of computers, goods used in construction and equipping of hospitals with more than 50 bed capacity will be exempt from excise duty;

b. Stiffer penalties have been imposed to discourage non-compliance and in some instances to discourage production of counterfeit goods;

c. The Government’s appetite to expand its tax base has increased. The Bill introduces the presumptive tax which will target small business owners and informal businesses. It also increases taxes on money transfers made through the bank and mobile money transfers; and

d. The Sports, Arts and Social Development Fund has received a major boost since all the tax collected from the taxes charged on money transfers and from betting, lotteries and gaming activities will be remitted to this fund

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TAX LAWS (AMENDMENT) ACT, 2018

Introduction

One of the development items in the President’s Big Four Agenda is Affordable Housing. There is no better indicator that this is a very important agenda for the government than the Tax Laws (Amendment) Act, 2018 which was passed on 18th of July, 2018 which promotes affordable housing amongst other things. Some of the key amendments are as follows:

Income Tax Act

1. Home Ownership Savings Plans If you save up to Kshs. 8,000 per month or Kshs. 96,000 per year in a home ownership plan you are eligible for a tax rebate. The Kshs. 8,000 will be deducted from your monthly taxable income.
2. More Tax Exemptions in the Special Economic Zones (SEZ) Licensed developers or operators in SEZs will now be exempted from capital gains and compensating tax.

Stamp Duty Act

Good news for first time home owners. They will now be exempted from stamp duty on their first home purchase under the affordable housing scheme.

Value Added Tax (VAT)

The following notable items have been added to the VAT zero rated list:

a. Construction supplies for the direct and exclusive use of constructing more than 5,000 housing units or a hotel by a licensed SEZ operator, developer or enterprise.

b. Transfer of a business between two parties that are both registered for VAT

c. Supply of liquefied petroleum gas (LPG)

d. A personal car which the owner has used outside Kenya for at least 12 months

The Tax team is always available to provide more insight to the provisions of this Act. Should you have any queries or need clarifications on the contents of this alert, please contact Mr. Mohammed Abdullahi and Silas Gitari. The contents of this alert are intended to be of general use only and should not be relied on without seeking specific legal advice from the contacts above.




DIGITIZATION OF LAND TRANSACTIONS

The Ministry of Lands and Physical Planning has upgraded the Electronic Management System to ease the processing of Land Transactions at the Ministry.

Late last year, a Public Notice was issued informing land owners within Nairobi and Central Registries that from 4th December 2017 all fees and duties would be paid online within the e-citizen portal. This was effectuated from the said date. The Ministry further issued a Public Notice informing landowners that from 13th April 2018, the following services shall ONLY be available online:

  • Application for Registration ( Transfer, Charge, Lease, Caution/Caveat, Court Orders and any other services as may be communicated from time to time)
  • Issuance of Consent to Transfer, Charge, Lease etc. will be created automatically upon application
  • Valuation requests will be created automatically upon application for Transfer;
  • Payment of Land Rent and Issuance of Land Rent Clearance Certificate
  • All payments (Payment of Stamp Duty, Registration Fees, Consent Fees)
  • Application for official searches (Nairobi and Central Registries – Nairobi Properties)

Target Group

The Land Information Management System targets all land owners and potential investors in land within the Republic of Kenya. Operations of the online platform commenced in the Nairobi and Central Registry with Land Owners within Nairobi being given up to 13th April 2018 to finalize pending manual transactions. The Ministry is working to effect the same in other registries within the Republic of Kenya.

How to Transfer Property Online

As from 13th April 2018, all property owners within Nairobi and Central Registry shall have their land details listed in their profile under ‘Manage Property’ menu in the LIMS via the e citizen portal. The owner shall be required to verify and authenticate their Tittle by uploading a copy of the Tittle and the Transfer Document. Once the Land details are approved at the registry, the proprietor shall be able to access it under ‘Manage Property’ and make an application against it.

For purposes of effecting the Transfer, the Land Owner should scan the following documents to the LIMS portal; Copy of Tittle, County Clearance Certificate, Transfer Instrument ( drawn by an Advocate), Land Control Board Consent ( For Agricultural land only) Land sketch Map for valuation visit, Proof of Occupation ( For New Grants only).

 

Once the application for registration is submitted online, the original instrument and Tittle Document thereof, shall upon payment of Stamp duty where applicable, be presented at the Land registry for registration.

Properties with active encumbrances (charges, Leases and subleases), inhibitions (court order, restrictions and caveat/cautions are not transferable. This will require application for their removal separately.

All other requirements for transfer e.g. consent approval, valuation of land, stamp duty assessment are already automated and need to be applied separately.

What are the Benefits of Land Information Management System?

  • The online land transaction system eliminates the cost associated with keeping of manual records and reduces unnecessary costs associated with land transactions.
  • Digitization saves valuable time as it eradicates bureaucracy of the manual system while making payments and processing of land rent and land rates clearances, stamp duty as well as other routine administrative processes.
  • With regard to record keeping, the online platform is effective as it minimizes any chances of lost files or fraudulent manipulation of records.

What are the setbacks associated with the Online Platform?

No legal framework for E- Conveyancing

The Land Act No 6 of 2012 and the Land Registration Act No 3 of 2012 came into operation prior to the digitization process therefore failing to regulate electronic conveyancing. There is need for legal and regulatory reforms that will enable the successful implementation of e-conveyancing platform by protecting and promoting the integrity of the land registry system safeguarding and guaranteeing the sanctity of the every Tittle document.

Lack of Public Participation & Involvement of Key Stakeholders

The Ministry of Lands failed to conduct public participation and involve the Law Society of Kenya, as a key stakeholder in determining the mode and methodology of digitization of land transactions.

Lack of Guidelines to Regulate the Digitization Process

Pursuant a Legal Notice No.278 (Land Registration (General) Regulations, 2017 on electronic registration and conveyancing, the Cabinet Secretary in consultation with the National Land Commission is required to issue Guidelines regulating the procedure to be followed in keeping of the register in an electronic format, applying for information or registration and the procedure to be followed by the registrar relating to the various applications.

Conclusion

Digitization of land transactions in Kenya is a positive transformation that will improve the efficiency of our processes. However, there is need to streamline the legal and regulatory framework and to put in place proper e-conveyancing regulations to ensure that the proprietary rights and interests of Land owners are upheld and the sanctity of Tittle documents is maintained.