Monthly Archives: June 2018

Why We Need Lawyers / Arbitrators In The Blockchain Space

27 Wednesday Jun 2018

Posted by in Blockchain

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*An article by Akram Mathu first published on medium.

Cryptocurrencies have really changed the way people transact. In this new age and time, one no longer needs a defined financial intermediary to send money. People have been given the power to transact at a peer to peer level. With new ways of transacting, comes challenges. This post will focus on arbitration using smart contracts.

An arbitrator is a person officially appointed to solve a dispute.

Currently, if Jane has some project work she’d like to outsource, she would post it on a freelancing website. Once the website helps Jane to look for a contractor, she eventually is able to find John.

Jane tells John that she will pay him using bitcoin instead of local currency. Jane negotiates that she will only pay once the job is done well. They both end up agreeing that Jane would send half the fee immediately and remaining half once the task is completed and reviewed for satisfaction. Their ownership of ether is associated with digital addresses.

Digital addresses are long strings of numbers that have two components; a public key that functions as an address and a private key that gives the owner exclusive access to any coins associated with that address.

Back to Jane and John. John then decides after getting half the payment, that he will not do the job. Jane becomes helpless because she can’t do anything to John because of her inability to detect John’s whereabouts. Jane, therefore, wouldn’t be able to go to court for a breach of contract. Even if John had a profile on the freelance website, he can still refuse or disappear from the platform.

In order to be able to transact using contracts, you need to be able to trust a dispute resolution mechanism or a trusted third party. Lately, multi-signature has been created in order to counter such incidences.

Multi-signature or ‘multi-sig’ is a form of technology that adds more than one layer of security for cryptocurrency transactions. This means that private keys are not one, they are two or more.

Multi-signature technology allows every contract to have private keys shared with both the peers and the arbitrator in case of any dispute or conflict arising.

Private key 1 – To help all parties (the two peers and arbitrator) see that the bitcoin to be sent to the other peer is first deposited in the escrow account/multi-signature address. But the bitcoin can’t be moved or withdrawn.

Private Key 2 – Is only accessible to the arbitrator and this key allows him/her to send the bitcoin to the party they think rightfully deserves the money if there’s a dispute or not.

When Jane wants to pay John, she sends her funds to a multi-signature address. This will require two signatures/ private keys from the group; Jane, John and the Arbitrator to redeem the money.

If Jane and John disagree on who should get the money meaning Jane wants a refund, while Bob believes he fulfilled his obligations and demands the payment, they can appeal to the arbitrator. 

The Arbitrator will grant his second private key/signature to Alice or Bob based on their previously agreed terms and therefore one of them will end up redeeming the funds fairly based on the arbitrator’s judging. For the service provided, the arbitrator will charge a service fee.

In order to contract regularly, one needs to have a certain level of trust that the system will enforce your rights under the deal. If you can’t trust the other party, you can trust the arbitrator also known as the dispute resolution mechanism or trusted third party.

Arbitration will really help during the use of smart contracts.

The bitcoin network have firms such as Hedgy that use multi-signature technology.

The Ethereum Blockchain has an arbitration firm known as Kleros.

Kleros involves the use of smart contracts to lock funds and those funds are only distributed right after the end of the initially agreed contract between the two peers.
Finally, the newly launched EOS.IO Blockchain will also have an arbitration process. The exact process is yet to be clearly stated.

Overall, arbitration is an opportunity for existing lawyers to tap into by learning how to apply their existing legal skills in the Blockchain protocol.

Tobacco Regulations, 2014: Balancing the Protection of Trade Secrets and the Right to Privacy.

04 Monday Jun 2018

Posted by in Guest Post, Intellectual Property, Trademark

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By Mercy King’ori**

The Tobacco Regulations of 2014, which were created to protect the health of smokers and “second hand smokers”, have been criticized for a lack of regard for the right to privacy for manufacturers’ trade secrets consequently stifling the rights of corporations engaging in otherwise legal business. This regulations came under scrutiny in the case of British American Tobacco Ltd v Cabinet Secretary for the Ministry of Health & 5 others [2017] eKLR where the appellants called for their annulment arguing that regulations 12-14, which require disclosure of key product information, violated their constitutional right to privacy and and may infringe on their intellectual property rights.

Part III of the regulations provides that the tobacco industry must provide the following information about their products:

  1. List of ingredients in tobacco products and tobacco product components;
  2. Reasons for including the ingredients;
  • All the toxicological data available to the manufacturer about the ingredients of the tobacco products and their effects on health and information on the characteristics of the leaves i.e. their type, percentage, percentage when expanded and changes made about tobacco product ingredients.

These requirements are a replica 2009 US law that granted the Food and Drug Administration (FDA) powers to direct tobacco companies to disclose ingredients in new products and changes to existing products. They also adhere to article 9 and 10 of the WHO Framework Convention on Tobacco Control (FCTC).

Whether the information that tobacco companies want to protect qualifies to be trade secrets is disputable. The law of confidence which is rooted in equity and legislated under article 39 of the Agreement on Trade- Related Aspects of Intellectual Property Rights (TRIPS) to which Kenya is a signatory to protects trade secrets. Article 39 of the Agreement stipulates that the following requirements must be met for information to be regarded as trade secrets: secrecy, commercial value and reasonable efforts to maintain secrecy.

The information held must be of a secretive nature though not absolutely secret. Employees, business partners and other persons can know the particulars, provided they keep them secret. Besides, ordinary and mundane information can be the subject of confidence so long as the information is private to the compiler. This was illustrated in Coco v AN Clark (Engineers) Ltd [1969] where the Court found that information that is common knowledge to a group of persons (in this case tobacco manufacturers) is part of the public domain and is not confidential. Therefore information regarding ingredients must be confidential to qualify as a trade secret.

Secondly, the information must have commercial value i.e. there must be some utility obtained from the information being secret. The manufacturer must be able to use it to acquire a business advantage over other manufacturer(s) in the same industry. Therefore, the information must only be known to the manufacturer to have commercial value. Disputably, players in the tobacco industry could argue that the information they guard has commercial value to them as it is what gives one company an edge over a competitor that uses different ingredients and manufacturing processes

Lastly, the owners of the secrets must carry out steps to ensure that the information is well secured. According to WIPO, some of the reasonable steps that can be taken to secure trade secrets include: non-disclosure agreements, training and capacity building with employees, instituting an information protection team, having a trade secret SWAT team, establishing due diligence and continuous third-party management procedures among others.

Kenya, as a signatory to TRIPS, is obligated to protect trade secrets. These regulations do not however protect trade secrets and business ‘know-how’ once it is revealed; meaning once revealed it loses its secrecy. This leaves trade secrets and business ‘know-how’, such as the list of ingredients and percentage of leaves expanded, vulnerable to appropriation.

In taking the role of devil’s advocate, it is worth considering whether the information that the tobacco industry is required to reveal under Part III really falls within the scope of trade secrets. Let us go back in history to understand the situation as it was that caused the emergence of such requirements. In 1998, 35 million pages of what was considered confidential information were revealed as a result of the Minnesota’s Tobacco Trial in the US. This information was on the harmful ingredients that tobacco companies used in the products. In what was considered the Master Settlement Agreement, the U.S. agreed not to sue the corporations in exchange of the corporations revealing all documents considered to be confidential to the public. It is important to note that one of the companies involved in the Supreme Court application to throw out the regulations was implicated in this law suit for failing to reveal to consumers harmful ingredients contained in their tobacco products.

Moreover, research carried out between 1937 and 2001 of tobacco companies, some of which operate in Kenya, revealed that tobacco ingredients are not secret rather the companies simply reverse engineer their competitor’s brands to create their own. This report argues that since the reverse engineering process is done routinely, it does not meet the threshold of secrecy for information to be a trade secret. The report implicates some multinationals that operate in Kenya. If this is anything to go by, then it negates the fact that the information in question has commercial value and is secret.

It is thus important to strike a balance between consumer protection measures and the protection of corporations’ intellectual property. Overzealous consumer protection regulations result in laws that infringe on corporations right to privacy and violate their intellectual property rights, to the detriment of their revenue and the country’s economy as a whole. Since the appeal was dismissed at the Supreme Court, it will be interesting to see whether the companies shall abide by the regulations.

** Mercy King’ori is a 3rd Year Bachelor of Laws student at the Strathmore University.

WHAT IS A ‘PUBLICATION’?

04 Monday Jun 2018

Posted by in Guest Post

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By Christopher Rosana**

Strange! That a man who has wit enough to write a satire should have folly enough to publish it.” These words by Benjamin Franklin ring in my head every moment I have to analyse defamation claims and the nuances of media in the digital age. The requirements for libel have not fundamentally changed for centuries; its principles have happily held sway. Those whose reputations have suffered walk away with their assigned damages – a solatium to their injured reputation. Principles may have remained unchanged, modified to new situations even, but there are corresponding misapprehensions on the meaning of ‘publication’ that have crept into the public mind.

For a successful defamation claim the following conditions must be present (1) the statement must be made to a third party – published; and (2) the statement must lower the claimant in the estimation of right-thinking members of society. In the second condition, it may be sufficient if the statement exposes the claimant to hatred, ridicule, contempt, or to be shunned.
What amounts to a ‘publication’? On this question rests all the blame for the massive amounts of damages that defendants have to pay. The rise of alternative forms of disseminating information, for instance Twitter, Facebook and their ilk, seems to have altered the understanding of what qualifies as a ‘publication’. In our minds we still picture an old dingy printing press churning away pieces of propaganda but never do we feel convinced that our tweets, blog posts, screenshots are actually ‘publications’.

As a legal term of art, ‘to publish’ is simply to make something known to a third party. To publish is not limited to paper and ink. Whatever form a person utilizes to communicate libelous information would not absolve them in a defamation claim. The libelous information must refer to a living client as you cannot defame the deceased.
The misapprehension leads to defences in the line of ‘It is not us saying it, we are just quoting x’. In Nicholas Biwott v Clays Limited & 5 Others, Bookpoint was held to be responsible for defaming the plaintiff even though they were merely selling a book which it did not author. Therefore, meaning of publication implicates the person even when they are not, technically speaking, the person ‘saying’ what is libelous in the circumstances. In the eyes of the law, if statements are libelous and one disseminates them to another, one must prove the truth of those statements. In the spread of libelous information, the question before the court is not whether the words were actually said but whether the words said are provable as true. When one spreads defamatory information, they are taken to have adopted and endorsed those words as their own.

Thus, sharing a defamatory tweet is publication in the selfsame way a printed newspaper would be. It is curious how we easily describe an online article as ‘published’ but we do not extend this to tweets, and Facebook posts. A common pitfall is when a newspaper publishes the revelations of an anonymous user that are ‘juicy’ but also happen to be defamatory to the person in reference. The defamed claimant would sue the newspaper since those words are taken as its own and since the original source has anonymised their online account, the newspaper will be at pains to prove the claims. In a similar instance with the same facts, you may share the defamatory claims on your Twitter or Facebook thinking that it is not a ‘publication’. There is no safety in numbers as the aggrieved party can choose to sue any one of the defaming defendants as shown in Nicholas Biwott v Clays Limited.

Christopher Rosana is a Legal Assistant at Nation Media Group (Legal Department)