Economy

KCB seeks arbitration in software piracy suit

KCB headquarters in Nairobi. FILE PHOTO | NMG
KCB headquarters in Nairobi. FILE PHOTO | NMG 

KCB Group has filed a petition to compel arbitration in a multi-million-shilling lawsuit where the bank has been accused of software piracy.

Nagalakshmi Solutions Ltd (NLS) sued KCB last Monday, alleging the bank is using its software without permission after terminating their five-year contract in November.

The bank, in court documents, says the contract agreement signed by NLS has an arbitration provision that should be used.

“The agreement provides that any dispute arising from the agreement connected to it should be referred to arbitration, whose decision shall be final and binding upon the parties,” said KCB.

“Consequently, this honourable court has no jurisdiction to hear and determine the dispute herein.”

NLS wants KCB, Kenya’s largest bank by assets, to uninstall the software that works together with its core banking application and be barred from developing a similar IT application.

The plea could affect banking operations such as withdrawals, cash and cheque deposits since the software at the centre of dispute works like a backup to the core banking application.

The High Court will tomorrow rule on the NLS application, but KCB wants its application heard first.

Mediation efforts fronted by KCB and NLS lawyers, Muriu, Mungai and Company Advocates and PLO Lumumba respectively, started in November, but have failed to break the deadlock.

NLS cancelled the contract In November after failing to agree on payment and suspicion that KCB was replicating its products and offering negative references issued to rival firms, court documents show.

The documents show that KCB has continued to use the software without NLS permission, leading to a daily claim of Sh2 million or Sh244 million for the 122 days the lender has used the software since termination of the agreement.

“The notice of termination lapsed on November 27, however the plaintiff has continued to use the software in breach of the agreement of March 2011 and plaintiff’s intellectual property rights,” says NLS.

NLS told the court that it incurred “huge losses from the loss of business and fraudulent use of its software” by KCB, and argued that it would suffer “irreparable loss” if an injunction stopping the bank is not issued.

It is demanding a further $51.6 million (Sh5.2 billion) in lost business after KCB, its first major client, allegedly offered unfavourable referrals to other banks, leading to cancellation of deals.

Arbitration is a private, faster and less expensive way of resolving disputes than going to trial.

In an arbitration, the case is heard by an arbitrator mutually agreed upon by the two sides.

The arbitrator has the sole authority to make a ruling, and generally speaking, the arbitrator’s decision cannot be appealed.