ACCESS TO OPPORTUNITIES IN THE NIGERIAN POWER SECTOR : THE SUB-FRANCHISING MODEL

INTRODUCTION

Over the years, Nigeria's power sector has experienced numerous issues, including insufficient generation capacity, inadequate transmission and distribution facilities, and limited access to electricity. To address these issues, the Nigerian Electricity Regulation Commission (“NERC”) has put in place a number of regulations and initiatives, including sub-franchising.

Sub-franchising is a business concept in which a company (the sub-franchisee) invests in and administers the distribution network of another company (the franchise holder). This technique has been utilized to improve electricity supply in various countries, and the collaboration between Connexa Energy and Kano Electricity Distribution Company (“KEDCO”) in Nigeria is a good example of sub-franchising in action.

This article will attempt to discuss the business model of “Sub-Franchising” as a tool to improving electricity distribution in Nigeria.

UNDERSTANDING SUB-FRANCHISING IN THE NIGERIAN POWER SECTOR

• Sub-Franchise Definition

Sub-franchising is a business strategy in which a franchisee is given the right to open and operate the business model of the Sub-franchisor in a defined geographical area. Sub-franchising in the Nigerian power industry entails awarding a third-party operator the right to facilitate the distribution of electricity in a certain area or zone. The facilitation could include metering, billing, distribution, maintaining distribution lines etc. This strategy is an efficient method of increasing private sector participation in the power sector and improving electricity delivery.

• The Legal Framework for Sub-Franchising in Nigeria 

In 2020, NERC released guidelines for sub-franchising in the power sector. The guidelines outline the procedures for licensing and regulating sub-franchise operators, as well as the roles and responsibilities of all parties involved in the sub-franchising agreement. These guidelines provide a legal framework for sub-franchising in the power sector, which helps to ensure transparency and accountability in the sub-franchising process.

• Benefits of Sub-franchising in Nigeria

Sub-franchising has various advantages for the Nigerian power sector, including the following:

1. Sub-franchising permits private sector operators to participate in the power industry, which can help to raise investment and enhance service delivery.

2. Sub-franchising can lead to increased electricity supply by enhancing competition and fostering service delivery innovation.

3. Enhanced accountability: The sub-franchising agreement defines the roles and obligations of all parties involved, which contributes to increased accountability and transparency in power distribution.

4. Job creation: Because sub-franchise operators frequently hire local workers and contractors, sub-franchising can offer job possibilities in local communities.

5. Increased revenue: Because sub-franchise operators are required to pay licensing fees and other costs, sub-franchise operators can raise revenue for the government and other stakeholders.

THE COLLABORATION BETWEEN KONEXA AND KAEDCO AS A CASE STUDY

• Background Information on Konexa and KAEDCO

Konexa is an energy company that partnered with the Kaduna Electricity Distribution Company (KAEDCO) using the sub-franchising model to create the relationship. The ECOF Kaduna Ltd is the special purpose vehicle created for the purpose of delivering on the sub-franchise agreement. The project consists of the generation, distribution, and marketing of electricity in the Zaria road and Kudenda areas (Konexa’s sub-franchise area) of Kaduna City.

• Details of the Two Companies' Sub-Franchise Agreement

Konexa was granted the right to distribute power to some parts of Kaduna State as part of the sub-franchise deal. Konexa was in charge of providing metering, billing, and collection services in the sub-franchise areas together with the construction of 2.5 MWp solar photovoltaic plant, 8 mini-grids and approximately 285 solar home systems (SHS) as well as upgrading, replacing and installing of network distribution equipment, the rollout of smart metering infrastructure, and the implementation of an integrated cutting-edge information and operations technology platform. and had to pay a franchise fee to KAEDCO. The agreement also defined each party's tasks and obligations, including Konexa's technical and commercial responsibilities and KAEDCO's regulatory and supervisory function.

• The Sub-Franchise Agreement's Outcomes

The sub-franchise deal between Konexa and KAEDCO has improved Kaduna State's energy supply. According to reports, the sub-franchise model has enhanced revenue collection by increasing metering and billing accuracy, reducing technical and commercial losses, Customers' happiness has also increased as a result of the strategy, as they experienced greater service delivery and shorter outage times. The success of the Kaduna State sub-franchise concept has prompted calls for its replication in other parts of Nigeria.

Why are more DISCOs choosing the Sub-franchising model over the standard PPAs (Power Purchase Agreements)

For a variety of reasons, Nigerian Distribution Companies (Discos) may prefer sub-franchising to a regular Power Purchase Agreement (PPA). Some of the reasons are outlined below;

• Sub-franchising allows Discos to delegate some technical and economic obligations to the sub-franchisee, resulting in more efficient distribution network management. This can assist in addressing the issues of technical losses, low collection rates, and poor customer service that have plagued the Nigerian power sector, as well as improving electricity supply in unserved and underserved areas.

• Sub-franchising permits the private sector to participate in the electricity industry, potentially leading to higher investment and innovation. Private sector participation can help to introduce fresh cash and experience into the sector, as well as enhance competition and efficiency.

• Through the collection of franchise fees from the sub-franchisee, sub-franchising provides Discos with an additional revenue source. This can aid the Disco's financial viability and support its ongoing operations and distribution network investments.

• Sub-franchising allows for modification of the franchise price, performance standards, and other essential aspects, therefore sub-franchising can be more flexible than PPAs. This can assist in guaranteeing that the sub-franchisee has enough incentives to perform well and that the distribution network is handled in a way that maximizes efficiency and customer happiness.

Overall, sub-franchising has several advantages over normal PPAs for Nigerian Discos. While PPAs can offer power generators a long-term revenue stream, they may not be able to motivate the kind of investment in distribution infrastructure that is required to improve overall dependability and quality of energy supply, which is the Discos' primary role. Furthermore, sub-franchising can encourage private sector participation and innovation in the electricity industry, while also providing Discos with an extra revenue stream and allowing them to better manage their distribution networks.

IMPORTANT CLAUSES IN A SUB-FRANCHISE AGREEMENT

Sub-franchising is a legal agreement between a primary franchisor (in this case, a Disco) and a secondary franchisor (the sub-franchisee) in which the primary franchisor grants the sub-franchisee the right to operate a business in a specific geographical area using the primary franchisor's brand name, trademarks, and business systems. The sub-franchisee must pay franchise fees, follow operating requirements, and meet the parent franchisor's performance goals. The legal instrument that controls the connection between the primary franchisor and the sub-franchisee is known as a sub-franchise agreement.

Some of the important clauses that are often included in a sub-franchise agreement are as follows:

• Territorial Rights Clause: This clause defines the geographical area, in which the sub-franchisee may operate, as well as the rights and restrictions associated with that territory. It is critical that the territory be precisely defined, with no overlaps or disputes with other franchisees or the primary franchisor.

• Duration and Extension Clause: This clause specifies the length of the sub-franchise agreement as well as the criteria for renewing or terminating it. To avoid disagreements or misunderstandings, it is critical to have a clear understanding of the duration of the agreement, as well as the criteria for renewal or termination.

• Franchise Fees and Royalties Clause: This clause stipulates the amount and frequency with which the sub-franchisee must pay franchise fees and royalties to the primary franchisor. It is critical to ensure that the fees and royalties are reasonable and competitive, and that both parties understand the payment schedule.

• Training and Support section: This section specifies the training and support that the primary franchisor will provide to the sub-franchisee, such as initial training, on-going support, and access to marketing and promotional materials. It is critical to ensure that the sub-franchisee receives adequate training and support in order to run the business properly and uphold the standards established by the primary franchisor.

• Performance Standards Clause: This clause details the performance standards that the sub-franchisee must satisfy, such as service quality, customer satisfaction, and financial performance. It is critical to ensure that the performance requirements are realistic and attainable and that suitable incentives and sanctions are in place to encourage compliance.

• Intellectual Property Rights Clause: This clause protects the major franchisor's intellectual property rights, such as trademarks, copyrights, and trade secrets. To minimize legal problems and safeguard the brand's reputation, it is critical to ensure that the sub-franchisee understands and complies with the original franchisor's intellectual property rights.

IMPROVING SUB-FRANCHISING AND ELECTRICITY SUPPLY IN NIGERIA

Sub-franchising has been highlighted as a feasible solution to some of the Nigerian power sector's difficulties; however, the model is not without its difficulties. This sub-heading is going to attempt solutions to some of the difficulties.

• Addressing regulatory problems: The absence of a clear regulatory framework is one of the primary challenges confronting sub-franchising in Nigeria. The regulatory framework for sub-franchising must be examined and revised to suit the unique issues confronting Nigeria's electricity sector. This will offer investors with clarity and stimulate additional investment in the sector.

• Increasing investment: Successful sub-franchising necessitates a large investment. As a result, it is critical to foster an enabling climate that supports investment in the electricity sector. This can be accomplished by offering tax breaks, lowering regulatory barriers, and providing investor guarantees.

• Improving infrastructure: The status of infrastructure in Nigeria's power industry is a major impediment to sub-franchising success. The government must invest directly and indirectly in infrastructure improvements such as transmission lines, distribution networks, and electricity-producing facilities. This will improve power supply dependability and attract more investors to enter the power industry.

• Improving governance: Corruption and inefficiency have long plagued Nigeria's power sector. To improve sub-franchising and energy supply in Nigeria, governance must be strengthened and the sector must be transparent, responsible, and efficient. This will encourage more investors to enter the market and improve service delivery quality.

• Improved Security: There is a need to improve and ensure the security of electricity infrastructures and installations to curb and/or reduce the incidences of vandalism. This will encourage more investors to come on board and incentivize existing ones within the sector, as well as generally improve the quality and consistency of power supply to end-users. 

• Raising awareness: There is a need to raise investor, policymaker, and general public awareness of sub-franchising and its potential benefits. Workshops, seminars, and other forms of stakeholder engagement can help with this. Increased knowledge will encourage more investors to enter the sub-franchise sector, which will increase Nigeria's electricity supply.

CONCLUSION

Finally, sub-franchising is a potential concept for enhancing electricity delivery in Nigeria. Konexa and KAEDCO's collaboration has proved that sub-franchising can increase the efficiency and reliability of power distribution in Nigeria. Enhanced investment, improved infrastructure, and enhanced competition are all advantages of sub-franchising in the Nigerian power sector.

While sub-franchising has numerous advantages over regular power purchase agreements, it is not without its drawbacks. Regulatory difficulties, financial constraints, and infrastructure limitations are some of the challenges that may be encountered in sub-franchising.

These issues must be addressed in order to improve sub-franchising and energy supply in Nigeria. Addressing regulatory barriers, increasing investment, enhancing infrastructure, improving security, and raising awareness of the benefits of sub-franchising are all ways to do this.

We anticipate additional sub-franchise agreements in Nigeria's power industry in the future as the government pursues its objective of expanding access to dependable and affordable electricity through programmes like Solar Power Naija. Sub-franchising has the ability to improve Nigeria's electricity sector and promote economic growth and development in the country with the appropriate policies and investments.

The Firma Advisory (currently providing consultation and legal services to developers in an ongoing SPN programme) is available to provide legal assistance and collaborate with individuals and organizations who are interested in leveraging the opportunities available in the Power Sector. Kindly reach out to us through our social media channels or email us at hello@thefirmaadvisory.com.

Written By:

CHIJIOKE ODU

Associate, Department of Energy Law, Corporate Commercial and Public Private Partnership.

The Firma Advisory

PARTNERSHIP ANNOUNCEMENT

We are thrilled to announce that we have entered into a global strategic partnership with Access Partnership Limited, the world's leading public policy firm dedicated to opening markets for technology.

This partnership aims to enhance service delivery, policy effectiveness and promote technological advancement in Africa's dynamic technology sector. The services that will be provided through this partnership will be tailored to meet the unique needs of various stakeholders, including Government ministries, Global tech companies, Startups, Venture capital firms, Private equity firms and companies operating across Africa.

Our partnership is built on a shared vision to drive positive change and foster sustainable development by focusing on the following key areas:

Policy Development: Our partnership will actively support the formulation of robust and effective technology policies. We will work closely with policymakers, government institutions, and industry stakeholders to foster innovation and digital inclusion and address emerging technological challenges.

Stakeholder Engagement: Inclusive policy development is at the core of this partnership. We aim to foster communication and teamwork among various stakeholders, such as government entities, private sector organizations, civil society groups, and academic institutions.

Advocacy: We are dedicated to supporting policies that encourage technological progress, protect digital rights, and foster innovation. Our advocacy efforts aim to promote policies that promote economic growth and social development in West Africa.

Business Development: Our partnership aims to discover and pursue promising collaboration and business development prospects within the technology industry. We will utilize our networks and expertise to establish partnerships and investments, thereby cultivating a prosperous environment for technology companies in Western Africa.

"Our partnership with Access Partnership Limited presents a tremendous opportunity to enhance policy effectiveness and promote technological advancement in Africa. By combining our expertise and resources, we can address the challenges faced by the region's technology sector and create a thriving ecosystem for innovation and growth." Chinenye Uwanaka, Managing Partner, The Firma Advisory.

This strategic partnership represents a significant step towards enhancing policy effectiveness and promoting technological advancement across Africa. Join us in shaping the future of technology in Africa!

For more information, please contact us at hello@thefirmaadvisory.com

WHO OWNS YOUR SOFTWARE CODE? A GUIDE FOR STARTUPS AND BUSINESSES

Brooke is the founder of Bruqs, a fashion tech startup. With a pre-money valuation of ₦10,000,000, Brooke is working tirelessly to raise initial capital to bring her vision to life. And it seems her efforts are paying off, as an angel investor has expressed interest in providing the much-needed funds to kickstart Bruqs.

But when the investor asked a seemingly simple question - "Do you own this software?" - Brooke found herself pausing to consider her response. She had outsourced the development of her product to ZY Codes Ltd., and while she was thrilled with the outcome, she wasn't quite sure about the ownership of the software.

Thankfully, Brooke had entered into a software development agreement with ZY Codes Ltd., which included a clause transferring the intellectual property of the product to herself. With this clause in place, Brooke assumes the investor's question is a resounding "Yes!" But she has her doubts.

Let us dissect this and determine whether the question is a necessary one.

As technology continues to evolve and shape the business landscape, it is important for businesses to understand the legal complexities that come with developing software.

Developing an app involves a unique mix of software code and creative content like text and graphics, which are protected by copyright. However, copyright ownership only applies to original works that have been expressed in a permanent medium.  This means that a work, such as software, will only enjoy copyright if it has original character and has been expressed in a manner that can be accessed. (See Sections 2 and 3 of the Copyright Act 2020.) 

Businesses that commission the development of software must carefully navigate the legal intricacies of copyright ownership. When software code is written, the author immediately owns the copyright (see Section 28 of the Copyright Act). In practice, businesses often demand ownership through a software development agreement or IP transfer agreement. 

Ownership gets complicated when it comes to using code from various sources, like open-source or third-party libraries. This is because outsourcing development firms typically use a variety of code, including new code, free open-source code, third-party code, and proprietary code from their code bank. Each type of code has its own legal implications that businesses must consider. For example, if a developer uses open-source code, the software may be subject to certain licensing requirements.

To navigate these legal complexities, a well-crafted software development agreement should differentiate between "background rights" and "foreground rights." Foreground rights are specific to the app and can include graphics and proprietary code that give the app unique functionality. These are typically assigned or transferred to the business. Background rights, on the other hand, are not specific to the app and can include open-source or third-party code. These are often licensed to the business rather than assigned.

To protect their rights, businesses must negotiate for a license of the background rights (open source code, third-party source etc.,) that grants worldwide rights, allows for modification of the software, and permits sub-licensing to other developers or agencies. It is also important to ensure that the licence does not have a time limit and that the business can pursue claims against third parties who infringe on their copyright.

Now, we can appreciate the purport of the question posed to Brooke by the angel investor. Business owners like Brooke must be mindful of the different types of code used in their software and clarify ownership and licensing terms in their software development agreements. This ensures that they understand their foreground and background rights and have the appropriate license to use the codes in the background rights. By understanding the legal complexities of software development, businesses can develop apps with confidence and truly own their intellectual property. The upside to this is that lawsuits that may come up in the future regarding copyright infringement are averted. 

SEXUAL ASSAULT AWARENESS MONTH, APRIL 2023

THEME: DRAWING CONNECTIONS, PREVENTION DEMANDS EQUITY

Sexual assault is a pervasive and deeply troubling problem affecting millions of people in modern society. It is a traumatic experience that can cause long-term emotional and psychological harm to victims. Despite the fact that it is a widespread problem, it is still a topic that is often avoided or not talked about openly. As such, it is vital to raise awareness about this issue and promote prevention strategies that demand equity. In this article, we will explore the importance of equity in sexual assault prevention and the various efforts being made to make the world a safer and more equitable place for everyone.

Sexual assault is a complex issue that cannot be fully understood without examining the intersectional nature of the problem. It is an act of violence that can be experienced by anyone, regardless of gender, race, age, or socio-economic status. While sexual assault affects people of all genders, sexual orientations, and backgrounds, certain groups are disproportionately impacted by this issue. They include children, individuals with disabilities, and people living in poverty. This is due to the intersection of various forms of oppression, such as racism, sexism, homophobia, ableism, and others. The intersectional nature of sexual assault means that we must take a multi-faceted approach to address the issue. 

Drawing connections between sexual assault prevention and equity means acknowledging that everyone should have equal rights and opportunities. It means understanding that individuals who are marginalized or oppressed are more vulnerable to sexual violence. Therefore, preventing sexual assault requires addressing systemic inequalities and discrimination that exist in our society.

Forms of sexual violence include rape, sexual harassment, unwanted sexual contact, sexual exploitation and trafficking, exposing one’s genitals or naked body to others without consent, nonconsensual image sharing, as well as words and actions of a sexual nature against a person’s will. 

Preventing sexual assault requires addressing the root causes of the problem. This means addressing the societal inequalities that make certain groups more vulnerable to sexual assault than others. We must recognize that sexual assault is not an isolated event, but rather, a symptom of broader social injustice. Addressing these injustices requires the demand for equity in all aspects of our society. 

One of the main factors that contribute to sexual assault is inequality. Inequality in terms of power, resources, and access to opportunities can create an environment where some individuals feel entitled to dominate and control others. This can lead to sexual violence and assault.

• One way to prevent sexual assault is by promoting a culture of consent. This means ensuring that all sexual encounters are consensual and that everyone involved has given their full and enthusiastic consent. We must teach people about the importance of affirmative consent and encourage open and honest communication in sexual encounters.  It also means recognizing that consent can be withdrawn at any time and respecting that decision. Educating people about the importance of consent and how to practice it in their relationships is also an important step in preventing sexual assault. 

• Another way is by empowering marginalized communities by giving them a voice and a seat at the table. This means supporting the leadership of survivors, promoting diversity and inclusion in all areas of society, and creating safe spaces for marginalized groups.

• Challenging harmful gender norms and stereotypes is another way to tackle sexual assault. These norms and stereotypes can contribute to an environment where sexual assault is normalized or excused. For example, the belief that men should be dominant and aggressive, or that women should be submissive and passive, can lead to a culture where sexual violence is seen as acceptable or expected. By promoting gender equality and challenging harmful gender stereotypes, we can create a society where sexual assault is less likely to occur.

• We must also educate people about the various ways they can support survivors and promote prevention. We must hold perpetrators of sexual assault accountable for their actions by supporting survivors in reporting their assaults, prosecuting perpetrators, and promoting restorative justice practices.

As we work towards a future without sexual violence, we call on all individuals, communities, organizations, and institutions to change the systems surrounding them in order to build racial equity and respect. We must change the culture and attitudes which allows sexual assault proliferate. It will only take ending all forms of oppression to end sexual harassment. Take action today!

#SAAM2023

THE FIRMA 2022 NEWSLETTER

A lot happened in our Firm in the year 2022 and we did a recap of that in our special end-of-year newsletter. In this newsletter, we just want to tell you a bit more about us, what we achieved in 2022, and our hopes for the new year.

Kindly click on the box above to access it. We wish you a prosperous new year.

CLIMATE JUSTICE: PRESERVING HUMAN RIGHTS IN A WARMING EARTH

The atmosphere is the essential physical and chemical environment for life, and changes to the physical and chemical properties of the atmosphere have the potential of affecting directly the quality of life and even the very existence of some forms of life. These changes and effects bring to the fore the very concept of climate change.

The United Nations defines Climate change as the long-term shifts in temperatures and weather patterns. These shifts may be natural, such as through variations in the solar cycle, but since the 1800s, human activities have been the main driver of climate change, primarily due to burning fossil fuels like coal, oil and gas, as well as the greenhouse gas emissions which has resulted in diverse effects ranging from sea level rise, coastal erosion, food shortage, devastating storm, extinction, increased health issues, poverty and forced migration.

Climate change, an inherently social issue, can upset everyone’s daily life, but not all climate impacts are created equal nor distributed equally. This differential impact which has greatly influenced human rights, gave room for the emergence of the movement on climate justice. Climate justice is therefore a concept that addresses the just division, fair sharing, and equitable distribution of the benefits and burdens of climate change, and the responsibilities to deal with same. It requires that climate action be consistent with existing human rights agreements, obligations, standards and principles. Those who have contributed the least to climate change have been made to unjustly and disproportionately suffer its harms and so they must be made meaningful participants and primary beneficiaries of climate action, and must also have access to effective remedies.

Climate Justice

Some of the rights in which climate change poses serious threats to, includes right to life, right to self determination, right to development, right to food, right to water and sanitation, right to health, right to housing, right to education, right to meaningful and informed participation. The Office of the High Commissioner for Human Rights (OHCHR), which is the leading United Nations entity on human rights, highlights the essential obligations and responsibilities of States and other duty-bearers for climate change-related agreements, policies, and actions in order to foster policy coherence and help ensure that climate change mitigation and adaptation efforts are adequate, sufficiently ambitious, non-discriminatory and otherwise compliant with human rights obligations. These highlights includes;

● To mitigate climate change and to prevent its negative human rights impacts, States have an obligation to respect, protect, fulfil and promote all human rights for all persons without discrimination. Failure to take affirmative measures to prevent human rights harms caused by climate change, including foreseeable long-term harms, breaches this obligation.

● To ensure that all persons have the necessary capacity to adapt to climate change, States must ensure that appropriate adaptation measures are taken to protect and fulfil the rights of all persons, particularly those most endangered by the negative impacts of climate change such as those living in vulnerable areas.

● To ensure accountability and effective remedy for human rights harms caused by climate change, the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, and other human rights instruments require States to guarantee effective remedies for human rights violations. Those affected, now and in the future, must have access to meaningful remedies including judicial and other redress mechanisms.

● The UN Charter imposes upon States the duty to cooperate to ensure the realization of all human rights. Climate change is a human rights threat with causes and consequences that cross borders; thus, it requires a global response, underpinned by international solidarity. States should share resources, knowledge and technology in order to address climate change issues.

● The UN Framework Convention on Climate Change calls for States to protect future generations and to take action on climate change on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities. While climate change affects people everywhere, those who have contributed the least to greenhouse gas emissions (i.e. the poor, children, and future generations) are those most affected. Equity in climate action requires that efforts to mitigate and adapt to the impacts of climate change should benefit people in developing countries, indigenous peoples, people in vulnerable situations, and future generations.

It is now beyond dispute that climate change caused by human activity has negative impacts on the full enjoyment of human rights. The fight against climate change effects is a global one, and not every region, country, society, and continent would experience the same level of damage even though everyone is responsible for these changes. It is therefore the collective responsibility of every individual to see to the total elimination of the impacts of climate change all over the world.

CORPORATE GOVERNANCE: THE RISE AND FALL OF STARTUPS

INTRODUCTION

Starting a business can be an incredibly daunting task, and the success of a startup depends heavily on the strategies and decisions the business owners make. Corporate governance can help startups grow and thrive by providing structure and direction to the business. Corporate governance involves a set of rules and regulations that guide how a business is managed and how its resources are allocated. This can include everything from setting out processes for decision-making to establishing ethical standards and creating a company culture that encourages collaboration and innovation. Corporate governance can also help protect the interests of shareholders, encourage transparency, and promote ethical and responsible  behavior. Not only does corporate governance help startups succeed, but it can also provide a competitive edge in the marketplace. With the right corporate governance practices in place, startups can be better prepared to handle the challenges of an ever- changing market and stand out from the competition.

STARTUPS AND CORPORATE GOVERNANCE

In practice, there are numerous examples of lack of good corporate governance leading to a company’s downfall. The most recent example is the collapse of one of the cryptocurrency behemoths, FTX.

FTX was the world’s second largest cryptocurrency exchange prior to its collapse. Due to lack of a good corporate governance system in place, FTX was forced to declare bankruptcy. The initial announcement of the company’s failure resulted in a nearly 25% drop in the price of Bitcoin, a panic in the market, and FTX  losing a rumored $1 billion in customer funds. 

The company did not maintain accurate books and cash accounts and currently is not able to locate accurate accounts and transaction history to verify its positions. There were also auditing failures and a lack of clear employee and contractor records. The company failed to represent the best interests of its stakeholders, which resulted in its collapse. This demonstrates the significance of having a good corporate governance structure in place, as poor corporate governance can lead to the collapse of a fast rising company.

Corporate governance is a concept, rather than an individual instrument. It includes debate on the appropriate management and control structures of a company. It includes the rules relating to the power relations between owners, the Board of Directors, management and the stakeholders such as employees, suppliers, customers and the public at large.“ DR. Narayana Murthy, President Sec, INDIA.

 The Companies and Allied Matters Act, Cap c20, is a major law in Nigeria that governs corporate governance. It includes mechanisms for corporate governance such as appointing directors, removing directors, provisions for auditors and audit committees, and the mandatory participation of shareholders in corporate decisions.

Corporate governance has a significant impact on businesses and determines whether they succeed or fail. A number of startups in Nigeria have failed because they lacked clearly defined corporate governance structures. According to experts, the failures of Nigerian startups are not always due to lack of funds or a harsh environment, but also a lack of internal process that would ensure success.

Prof. Umar Garba Danbata has blamed some companies' failures on a lack of corporate governance structures, as seen in major companies around the world such as FTX, Enron, Worldcom, Arthur Anderson, Leeman Brothers, and Cadbury Nig. Ltd.

In order to succeed, startups need to adopt corporate governance practices at every level of conducting business. There are four different stages to a startup’s growth process which require governance structure at each stage, they include:

1.       Creativity stage

2.       The early stage(Minimum viable product)

3.       Traction stage

4.       Growth stage

Creativity stage

This is the initial stage where the ideas are conceived. At this stage, the market analysis is done to determine the problems the startup company intends to solve. At this stage, corporate governance focus will be on;

·         Roles and responsibilities of partners

·         Definition of equity interest

·         Ownership of the company’s intellectual property

The early stage(Minimum Viable Product)

This is the stage where all the ideas start to materialize. At this stage, the product has been created and is being tested. The governance focus at this stage will be on;

·         Getting investors and partners

·         Means of dispute resolution

·         Protection of intellectual property

Traction stage

At this stage, the MVP being tested is now validated. The next step will be searching for ways to generate revenue, and getting customers and new employees. The Corporate governance focus at this stage will be on:

Establishing a board

Defining hierarchy

Growth stage

At this stage, the company has been well established and is ready to move forward with business. The corporate governance focus at this stage will be on:

Implementing policies

Codes and ethics

Improvement of shareholder/investor relations

CONCLUSION

Okpara (2016) argued that weak or non‐existent law enforcement mechanisms, abuse of shareholders' rights, lack of commitment on the part of Board of directors, lack of adherence to the regulatory framework, weak enforcement and monitoring systems, and lack of transparency and disclosure are causes of CG failure in Nigeria.

The importance of having a solid corporate governance structure for startups cannot be overemphasized as it encourages success and business stability. It should also be noted that early integration of corporate governance at all stages of a startup’s growth is crucial for boosting productivity and attracting investors.

RECENT DEVELOPMENTS IN MIDSTREAM OIL & GAS UNDER THE PETROLEUM INDUSTRY ACT.

INTRODUCTION

The Nigerian oil and gas industry is divided into three sectors: upstream, midstream, and downstream, with several players and regulators operating throughout the value chain. With the oil and gas industry undergoing a transformation over the last few decades, there have been various changes in the way oil and gas are sourced, refined and transported to end users. This has led to the emergence of new players who focus on extracting hydrocarbons from depleted oil wells, pipelines, or other previously non-utilized sources. The midstream segment is one such part of the upstream oil and gas sector that focuses on filling operational gaps between the production of crude oil or natural gas and its end use as final products such as gasoline, diesel, or jet fuel.

International oil companies dominate the upstream oil and gas sector (IOCs). Shell, Chevron, Mobil, Agip, Addax, and Total currently control more than 80% of the country's crude oil production. The sector operates under a variety of agreements, including Joint Ventures (JVs) and Production Sharing Contracts (PSCs) with the Nigerian National Petroleum Corporation (NNPC). Contracts for sole risk and risk service are two other types of contractual arrangements. In addition, the IOCs control more than 90% of the oil reserves and operating assets. In addition, the IOCs control more than 90% of the oil reserves and operating assets. IOC production has declined by 4% per year on average over the last ten years, while marginal field players have increased production by up to 15% per year. (Marginal fields are discoveries that have not been exploited for a long time due to one or more of the following factors: very small reserve/pool sizes to the point of not being economically viable, lack of nearby infrastructure, and profitable consumers.)

DEFINITION OF TERMS

·         Downstream - Downstream operations are oil and gas processes that occur after the production phase to the point of sale. This sector of the oil and gas industry—the final step in the production process—is represented by refiners of petroleum crude oil and natural gas processors, who bring usable products to end-users and consumers.

·         Midstream - Midstream refers to points in the oil production process that falls between upstream and downstream. In particular, midstream activities include the storage, processing, and transportation of petroleum products. These may include companies that specialize in operating tanker ships, pipelines, or storage facilities.

·         Upstream - Upstream refers to the initial phases of oil and gas production, involving exploration, drilling, and extraction of crude oil and natural gas.

·         Production sharing Contracts or Agreements - Production sharing agreements (PSAs) or production sharing contracts (PSCs) are a common type of contract signed between a government and a resource extraction company (or group of companies) concerning how much of the resource (usually oil) extracted from the country each will receive.

·         Decommissioning and Abandonment - At the end of the production life, the project will be decommissioned and abandoned to restore the site to a safe condition that minimises potential residual environmental impact and permits reinstatement of activities such as fishing and unimpeded navigation at the site.

RECENT DEVELOPMENTS IN MIDSTREAM OIL & GAS

The PIA establishes clear distinctions between the operations of the midstream and downstream petroleum industries. The midstream sector includes the establishment and construction of refineries and lubricant and petrochemical production facilities. Construction of facilities for the transportation and storage of petroleum liquids is also included in this sector. The PIA informs players about the permissible activities in the sector, subject to obtaining the necessary licenses or permits.

·         Introduction of the NMDPRA (Nigerian Midstream and Downstream Petroleum Regulatory Authority)

The Nigerian Midstream and Downstream Petroleum Regulatory Authority was created in August 2021 in line with the Petroleum Industry Act 2021 which provides legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry as well as development of Host Communities.

NMDPRA’s encompasses a merger of three defunct regulatory agencies: Petroleum Products Pricing Regulatory Agency (PPPRA), Petroleum Equalization Fund {Management} Board (PEFMB), the Midstream and Downstream Divisions of the Department of Petroleum Resources (DPR). This birth has ushered a new dawn for establishing a progressive regulatory framework that encourages investment and full optimization of the midstream and downstream sector of the petroleum industry in Nigeria.

The Authority is responsible for the regulation of the midstream and downstream petroleum operations in Nigeria which includes technical, operational, and commercial activities.

·         Introduction of fines and penalties

Section 174(4) of the Act introduces specific penalties for engaging in activities without obtaining approvals to operate within the sectors. Penalties include sealing of office premises, dismantling of unapproved facilities, confiscation of equipment, or imposition of penalties prescribed by regulations under the Act. The promoters of the company may also be prosecuted with imprisonment of up to 1 year or a fine as prescribed in by regulation to the Act. License holders are expected to apply to the authority for appropriate license within 2 years of the effective date of the Act. 

·         Accessing infrastructure, facilities and transportation network

The Act Introduces right of way permits. It stipulates network codes to govern access to facilities, pipelines and transportation networks between users including applicable charges and tariffs for access. Qualified 3rdparties can also gain access rights to any facility and infrastructure used in the midstream sector at commercials rates. Access to facilities should be granted without discrimination and based on availability.

·         National strategic stock

Section 181 of the PIA introduces a levy to be charged to operators within the sector for financing the National strategic stock. The costs will form part of the retail price of petroleum products. Designated locations across the country will be allocated for keeping the stock. Companies will also be required to maintain an amount of stock as provided by guidelines. The Act does not provide the rate of the levy but it is expected to be determined and published through a regulation.

·         Specific licenses to be obtained to operate in the midstream sector.

Sections 183-202 and section 204 of the PIA provides the specific licenses that an operator will require to play in the various segments of the midstream sector of the petroleum industry.  These licenses will be granted subject to the approval of the application and payment of fees. These relate to the following specific activities: crude oil refining, bulk storage, transportation pipeline, transportation network operations, wholesale petroleum liquids supply, petroleum product distribution and operation of facilities for production of petrochemicals.  It is notable to mention that the license for crude oil refinery needs to be approved by the Minister. The sections further stipulate the duties of the license holders and the conditions for granting the licenses. The tenure of each license and the conditions for granting a renewal is expected to be published through a regulation.

·         Pricing regime and power to regulate tariff

This eliminates government’s regulation on pump price of petroleum products and allows the market forces to determine price. The authority will however regulate prices and tariffs on products in the interest of the public where monopoly exists, or the market is at an infant stage.

Transactions between suppliers and customers are required to be at arm’s length. Suppliers will be required to furnish the authority with details of bulk sales within 14 days including the cost of making the supply. False declaration attracts a fine.

The authority will be expected to provide guidelines on prices based on guided principles. Licensees will also be required to publish prices for their customers.

·         Decommissioning and abandonment Fund

License holders in midstream operations are required to set up a decommissioning and abandonment fund which must be held by a financial institution that is not related to the license holder. The regulator will have access to the funds in settling such obligations where the license holder fails to do so. The amount to be contributed will be based on the decommissioning and abandonment plan provided to the authority.

·         Insights -connecting the dots

Players in the petroleum industry are now required to set up separate companies for carrying out their upstream, midstream and downstream operations. This provides clarity of regulation and fiscal regime applicable to midstream activities which are often regarded as incidental to upstream petroleum operations.

Transitioning existing license holders to the new licensing regime should be seamless to avoid negative impacts to current license holders.

It is also important to consider the tax impact of business reorganizations that will be required for companies that currently operate across different streams. Given that they are now mandated to separate these activities, assessment will have to be made on the transfer of tax attributes of the separating entity, the potential VAT, GCT and stamp duties.

There is the argument that separating the business operations help to manage risk by situating assets according to the risk profile of investors, however, the fiscals are not marked differently and the tax leakages on transfer can be significant. In the absence of any group reliefs, ring fenced losses cannot be utilized within group entities.

Pioneer status and gas utilization are some of the incentives targeted at encouraging investment in midstream operations. Tax leakages and additional costs such as the new levy under the PIA may be counterproductive to achieving this objective by making investments more expensive. Investors as well as other stakeholders will be on the lookout to see how well the funds generated will be managed to meet the set objectives.

On a positive note, there is the expectation that the introduction of a national strategic stock will help to address price stability and avoid stock outs or unending queues. It can also provide a buffer in the event of vandalizations.

CONCLUSION

With pump prices open to the forces of demand and supply, the expectation is that more players will be willing to invest in these sectors. However this may not play out as expected given the potential disincentive created by increased costs and regulations. Operators are likely to pass their costs on to customers subject to regulatory restrictions on market based pricing. Potential tax costs resulting from asset transfers will also have a negative impact on current players who are caught in this net.

HIGHLIGHTS OF THE AFPC-UNGA EVENT 2022

Chinenye Uwanaka, Managing Partner The Firma Advisory

Hon. Otunba Niyi Adebayo, Minister of Industry, Trade and Investment, Nigeria

On the 19th September, 2022, our Managing Partner, Chinenye Uwanaka who doubles as the Co-Founder of the Africa Policy Conversation, a non profit organization focused on finding fitting solutions to problems that affect economic growth and development across Africa; hosted an event on the sidelines of the United Nations General Assembly, in New York, USA, with the theme: Leveraging The Power of the African Youth (As a viable solution for realizing the potential of the continent).

The goal of the event was to facilitate conversations on viable and significant policy reforms, infrastructure improvements, and trade facilitation measures across African countries in order to help the continent realize its full potential. The event served as a platform for constructive engagement between the African youth in the continent, leading African decision makers and thought leaders.

Hon. Sunday Akin Dare, Minister of Youth and Sports, Nigeria

In attendance were leading African decision-makers, corporate executives, and thought leaders. Highlights of the event featured Fire-side Chats with the Minister of Industry, Trade and Investment, Nigeria, Hon. Otunba Niyi Adebayo who emphasized the need for African diaspora to encourage the transfer of expertise and knowledge for capacity development, educational development, entrepreneurship development and mentoring programs. Also in attendance was the Minister of Youths and Sports, Nigeria, Hon. Sunday Akin Dare who discussed the topic: Globalization and the Future of the African Youth. He emphasized on various initiatives that have been introduced under his leadership to promote the socio economic development of the African youth.

From Left:

Anie Akpe, Founder African Women in Tech and IBOM LLC.

Abiola Oke, Founder and CEO, Adisa Consultants and Co-Founder Okey Media

Bolatito Akinroluyo, CEO Otitolabs, CEO Just Like Home Senior Care Inc, Image Consultant, Business Consultant

The speakers were grouped into two Panels, having the first panel discuss on Infrastructure and Growth - Developing the Critical Infrastructure for Africa’s Growth. The confirmed speakers for this panel were Nneka Chime, Principal at Crossboundary, and Ambassador Olusiji Aina who analyzed the US Strategy Towards Sub-Sahara Africa, 2022.

The second panel discussed the topic: The New Economy: Realizing the potentials of the Technology and Creative Economy. The speakers for this panel were Audu Maikori, Founder Chocolate City; Anie Akpe, Founder, African Women in Tech; Abiola Oke, Founder and CEO Adisa Consultants, and Co-founder Okay Media; and lastly Bolatito Akinroluyo, CEO Otitolabs, CEO Just Like Home Care Inc., Image Consultant, and Business Consultant.

Cross-section of in-person attendees

From left to right

Abiola Oke, CEO Adisa Consultants, and Co-founder Okay Media; Hon. Otunba Niyi Adebayo, Federal Minsiter of Industry, Trade and Investment, Nigeria and Audu Maikori, CEO Chocolate City Group

NATIONAL E-COMMERCE POLICY WORKSHOP

Our Managing Partner, Chinenye Uwanaka was the lead consultant for the facilitation of the E-commerce Multi-stakeholder Workshop alongside the National Advisory Committee on E-commerce and Digital Economy, which was themed: Stakeholders Dialogue on E-commerce and Digital Trade Policy for Nigeria, held on the 26th of August, 2022 at the Chelsea Hotel, Abuja.

In attendance were representatives of GIZ, the Central Bank of Nigeria, Federal Ministry of Industry, Trade and Investment (FMITI Nigeria), Federal Ministry of Justice, World Bank, Federal Competition and Consumer Protection Commission, NITDA Nigeria, NCC, Standard Organization of Nigeria, National Export Promotion Council, Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) among other parastatals in the public sector. The private sector was represented by Flutterwave, Paystack, Jumia Nigeria, AfriLabs and a host of other e-commerce operators.

The workshop addressed pertinent policy concerns of e-commerce in Nigeria in light of the Africa Continental Free Trade Agreement (AfCFTA)

Industry leaders, policymakers and other stakeholders proffered policy solutions to the identified issues. The Firma Advisory is dedicated to pushing forward new frontiers in the policy discourse on e-commerce and business models that leverage new technologies.

AN OVERVIEW OF LAWS GOVERNING ICT PRACTICE IN NIGERIA

Advancements in information and communication technology (ICT) are catalyzing the Nigerian economy and becoming a critical driver of innovation, productivity, and growth. ICT is being utilized by both the public and private sectors to improve trade, services, and other  aspects of the economy. Given the federal government's determination to transition Nigeria to a non-oil economy, it is important to identify the various ICT policy areas in Nigeria. It is equally important to identify ICT laws to help businesses and corporations leveraging ICT avert their minds to it. The following areas represent some of Nigeria's policy focus on ICT/Digital infrastructure and service:

●       Data Protection

●       Broadcasting

●       Content Regulation

●       Telecommunications

●       Cybersecurity

●       Competition

●       Cloud Computing

●       Artificial Intelligence

DATA PROTECTION

The Nigerian Data Protection Regulation ("NDPR") 2019 is the primary data protection legislation in Nigeria and is administered by the Nigerian Data Protection Bureau (NDPB). The NDPR applies to Data Controllers and Data Administrators  that process the personal data of natural persons residing in Nigeria or who reside outside Nigeria but are citizens of Nigeria. In 2020, the National Assembly presented a draft copy of the Data Protection Bill to the public for review. However, the Federal Government has since abandoned this Bill, and there are significant indications that a fresh draft is in the works. Other data protection regulations are found in sector-specific laws such as the Banks and Other Financial Institutions Act 2020, the Nigerian Communications Act, Cybercrime (Prohibition and Prevention, etc.) Act and so on.

ONLINE BROADCASTING

The primary legislation on broadcasting in Nigeria is the Nigerian Broadcasting Commission Act ("NBC Act"). The National Broadcasting Commission Code 2020 (6th edition) (the “NBC Code”) is a procedural legislation that gives flesh to the Act. The NBC Code requires all individuals who seek to run "web/online broadcasting services" in Nigeria to register with the NBC and to abide by the rules of the NBC Code. The NBC Code also recognizes "international broadcasters" and requires them to follow Nigerian broadcast rules as well as international reciprocity norms. This sixth amendment to the NBC Code precisely includes requirements for local content in the broadcast sector, higher advertising revenue for local broadcast stations and content providers, and comprehensive limits on monopolistic and anti-competitive behavior.

Instructively, the NBC Code does not make specific provisions for Over-the-Top (OTT) Services, which are ways of offering television and film material over the internet on-demand and to fulfill the needs of individual consumers. These OTT services (example, Apple TV, Netflix, Internet Radio etc) are fast disrupting traditional broadcasting and are creating new channels of content creation and consumption.

However, the Nigerian government is attempting to regulate this field through a Bill known as, HB 332: A Bill to amend the National Broadcasting Commission (NBC) Act, as Nigerians constitute a large market for these OTT services and there is data to prove that Nigerians actually consume these services. The National Film and Video Censorship, Classification and Exhibition Regulatory Commission Bill 2019 (the "NFVCCERC Bill") is another Bill purporting to regulate OTT platforms in Nigeria. The Act which this Bill seeks to repeal is the enabling authority for the censoring of film and music over traditional platforms in Nigeria. The Bill will extend its regulatory purview to OTT platforms like Netflix and Apple TV.

It is important to note that the validity of the NBC Code in its entirety was recently contested before a Federal High Court sitting in Lagos in Femi Davies v. NBC, suit no.: FHC/L/CS/1152.2020 (Unreported), and the Court ruled that the NBC Code is "ultra vires, incompetent, null and void and perpetually restrained the NBC from implementing the document". Therefore, until this judgement is overturned, the NBC Code, which is the primary procedural legislation for broadcasting in Nigeria, will be legally ineffective.

CONTENT REGULATION

The journey to content regulation in Nigeria dates back to 2015 when the Frivolous Petitions Bill was introduced in the National Assembly as part of the strategy to regulate Short Messaging Services (SMS) and social media in Nigeria. This Bill was widely protested against by Nigerians and it was eventually withdrawn. In 2019, The Protection from Internet Falsehood and Manipulation Bill 2019 (also known as the Anti-Social Media Bill) which had the same intent was also introduced and the public outrage caused the Bill to be withdrawn.

Shortly thereafter, the Independent National Commission for the Prohibition of Hate Speech (Est., Etc) Bill 2019 which seeks to make "hate speech" illegal was introduced. The bill addresses ethnic discrimination, hate speech, any form of harassment based on one's ethnicity, ethnic or racial contempt, victimization discrimination, and it establishes the Independent National Commission for the Prohibition of Hate Speeches. However, it is not clear whether internet platforms, content intermediaries, or social media platforms are contemplated by the Act.

The draft Code of Practice for Interactive Computer Service Platforms/Internet Intermediaries (“Code of Practice”) issued by the National Information Technology Development Agency (“NITDA”) in June 2022, is the Federal government's most recent attempt to regulate digital content in Nigeria. The Code of Practice applies to all “Interactive Computer Service Platforms/Internet Intermediaries” and their agents in Nigeria.  Essentially, both  Interactive Computer Service Platforms and Internet Intermediaries capture all forms of digital broadcasting mediums and information disseminating internet platforms, like Twitter, Facebook, TMZ and other online platforms where communication is exchanged. The Code of Practice requires these platforms to  comply with Nigerian laws and to work with NITDA to censor, take down or perform other acts on online content as may be required of them by the Code of Practice and NITDA. It is important to note that the Code of Practice is still a draft and has no force of law until enacted.

TELECOMMUNICATIONS

The NCC is Nigeria's primary telecommunications regulator. The Nigerian Communications Act, 2003 ("NCA") empowers the NCC to enact subsidiary legislation in the form of regulations, guidelines, and so on to regulate telecommunications services. The Act requires anyone who wishes to operate a communications system or facility or provide a communications service to be authorized and licensed by the NCC, unless exempted from such requirements. A separate licence is usually required for each type of telecommunications activity, though a number of activities can be carried out under a single licence. Other relevant telecommunications laws include the Wireless Telegraphy Act ("WTA"), which establishes the framework for regulating the use of wireless telegraphy, the NBC Act, which governs broadcasting services in Nigeria, and the Cybercrimes (Prohibition, Prevention) Act, 2015.

CYBERSECURITY

The Cybercrimes (Prohibition, Prevention, Etc.) Act 2015 is the primary law on cybersecurity in Nigeria. The Cybercrimes Act is a criminal law and there is yet no law creating civil duties and obligations for cybersecurity in Nigeria. Other laws relevant to cybersecurity in Nigeria include: The Terrorism Prevention Act 2011 (as amended), the Guidelines for the Provision of Internet Service (“NCC Internet Service Guidelines”) issued by the NCC, and CBN's Risk-based Cybersecurity Framework and Guidelines regulating banks and other financial institutions.

COMPETITION

The principal legislation on competition in Nigeria is the Federal Competition and Consumer Protection Act (“FCCPA”) administered by the Federal Competition and Consumer Protection Commission (“FCCPC”). The FCCPA was enacted to protect consumers' interests and welfare by expanding the range of products available at competitive prices and prohibiting unethical business practices, as well as to prevent major corporations from abusing their dominant positions. The FCCPA applies to all commercial activities within or having effect in Nigeria, to all government departments and state-owned corporations, and to all commercial activities aimed at profit and satisfying public demand.  Extraterritorially, it applies to any prohibited conduct by a Nigerian citizen or a person ordinarily resident in Nigeria, a corporate body registered in Nigeria or carrying on business within Nigeria, any person supplying or acquiring goods or services into or within Nigeria, and any person in relation to the acquisition of shares or assets outside Nigeria that results in the change of the business, part of the business, or any asset of the business in Nigeria. There are other sector-specific legislation that promotes competition and prevent anti-competitive practices, like the NBC Act, relevant CBN guidelines and so on.

CLOUD COMPUTING

The Nigeria Cloud Computing Policy is the only semblance of legislation in Nigeria on cloud computing. However, because policy is not law, it does not bind citizens. It only applies to all Federal Public Institutions, as well as State and Local Government Public Institutions. The Policy also applies to all corporations in Nigeria that are fully or partially owned by the Federal Government, as data generated by these intuitions is considered "Government Data." Its purpose is to assist the government in gaining access to efficient IT resources for cloud computing, particularly from local providers, allowing the public sector to improve its service delivery quality. As a result, it is effectively a local content promotion law.

ARTIFICIAL INTELLIGENCE

There is currently no law on artificial intelligence in Nigeria. However, NITDA is developing a National Artificial Intelligence Policy for Nigeria. This policy, when introduced, will hopefully set the stage for laws or regulations on artificial intelligence in Nigeria.

CONCLUSION

The preceding areas represent some sectors of Nigeria's ICT ecosystem. Other areas not covered include electronic payment, local content development etc. The purpose of this article is to demonstrate that these areas are governed by laws and to show policy makers which areas require regulation. We hope that emanating laws and the enforcement of existing laws do not stifle innovation and development.

A SNEAK PEEP INTO THE PATENT VALIDITY ASSESSMENT SYSTEM

INTRODUCTION

Generally speaking, registration presupposes some sort of conclusion or priority in terms of legal rights. For patent or design however, this might be a little utopic, because Intellectual Property (IP) heavily prioritizes acknowledging original creators and inventors, as will be seen. To satisfy the requirements for the issuance of Patent over an object, function or process and be issued a Patent is not enough apparently; what makes a Patent truly valid in the essence of IP transcends beyond an application for Patent and certainly beyond a mere certificate of registration.

REGISTRATION OF PATENT

The phrase “Registration of Patent” connotes that a Patentee has registered an object, function or process (subject-matter of patent) with the Patent Office and has been issued a Certificate of Registration over it. In reality however, the PH is not registering the Patent itself; the Patent is issued to him upon meeting the requirements for its issuance such as novelty, non-obviousness, utility, etc.

Upon registration, the Patentee becomes the registered title holder over the subject-matter. In any litigation surrounding the validity or infringement, the registration certificate becomes a prima facie evidence of validity, not a conclusive one. This is because validity of Patent is not tied down to the registration process; it focuses on the qualification (creation and inventive step) in the subject-matter. The reason is as already mentioned – IP seeks to protect people’s creativity and ideation.

PATENT VALIDITY ANALYSIS

Patent validity analysis encompasses a lot; from the application for Patent to the scrutiny of the application, its approval, etc. Essentially, it is to ensure that the subject-matter of Patent meets the requirements for the issuance of the Patent.

Patent validity analysis occurs in two phases, the;

a.       Prosecution Phase and;

b.      Enforcement Phase

The Prosecution Phase; this is the more detailed stage of patent analysis. The analysis in this phase is conducted by the Patent Office which would scrutinize the application for Patent made, to ensure its compliance to the requirements and standards for the issuance of Patent. If the application does not follow the procedural guidelines, it would be rejected. If the subject-matter fails one or more requirements, it certainly should be rejected.

The Enforcement Phase; this phase of validity analysis only arises when there is an infringement. Whenever there is an infringement of alleged infringement of Patent, the validity of the Patent is directly a fact in issue or relevant fact or any other fact envisaged by Part II of the Evidence Act 2011 and therefore constitutes an issue for determination, unless the defendant does not join issues with the claimant on the infringement.

The validity analysis of assessment here is done by the Court through the litigation process; parties lead evidence while the court gives its pronouncements based on such evidence before it. The Court in this phase would examine the requirements for the issuance of Patent vis-à-vis the Patentee’s application to assess the validity of the Patent (the subject-matter of the dispute). The basis for this is because the defendant can plead that the Patent was wrongly issued, he may claim to be the inventor of the subject-matter as his defense. If the defendant is successful, the Court would rule that the Patent was wrongly issued and thereby grant an order of revocation or withdrawal of the Patent.

NOTE:  An invalidity determination is final, but a ‘no invalidity’ determination is not. This means that even if a claimant successfully defends his Patent in an action, the validity can still be attacked on the same issues in a different action by a different party. This seems contrary to the rationale behind the legal principles of “estoppel” and “autrefois acquit” but then, IP is civil in nature. In any case, IP is sui generis as well. In light of this, Patentees may be caught up consistently in litigation defending their Patent during the 20 years they should be enjoying exclusive rights over it.

PRESUMPTION OF VALIDITY

There is a “presumption of validity” in the Enforcement Phase of a Patent. The law presumes that the Patent Office performs its due diligence before issuing Patent. This presumption however is rebuttable; if the defendant can lead evidence to convince the court to the contrary or that a requirement was not satisfied, the Patent would be pronounced void by the Court.

The implication of such a judgment is that such a Patentee’s right over that subject-matter in question ceases to exist. He can however re-apply to the Patent Office for a fresh Patent after meeting the requirements it did not satisfy, according to the Court’s judgment (if possible). Within that period within which there is no Patent over that subject-matter however, other persons may apply for Patent over it or something very similar, subject to the requirements of Patent.

BURDEN OF PROOF

One jurisprudential question in the validity assessment in the Enforcement Phase is this, “On whom (should) the burden of proving originality lie”? Even though Sections 131-136 of the Evidence Act 2011 are crystal clear on burden of proof, the rationale for our answer should take into consideration the reality that the subject-matter of Patent has been registered.

Registration needs to be accorded some sort of value, otherwise, it is useless. This makes sense and seems to flow from the rationale behind the principle of “Better Title” in property claims. It is that both the Claimant and Defendant have some sort of evidence of title in the land.

In the case of an infringement of a registered patent, what title does the defendant have to even compete for a “Better Title”? Why should the defendant even be allowed a defense that raises questions on the validity of a Patent?

“He who asserts must prove”. The patent holder who asserts the infringement of his right over an innovative subject-matter is required by law to prove the infringement, but (NOT) the innovation in the subject-matter for which he has a Patent. If the defendant admits the infringement but denies the novelty of the subject-matter, should he still be liable? If he denies the infringement because of the absence of novelty as his defense, is he making a mere academic argument? The fact still remains that the claimant’s title was valid at the time of infringement.

Are we allowing moral rights question legal rights or simply giving legal rights room to validate themselves? It may seem too academic to imagine, but the economic implications of our answers cannot be academic. People invest in enterprises, and a Registration Certificate is certainly a document an investor can rely on for investment. To know that the Certificate doesn’t guarantee anything on the subject-matter on it certainly raises eyebrows.

RECOMMENDATIONS

The Patent Registry must be thoroughly equipped for the rapid and numerous innovations going on in Nigeria in terms of training, resources and other things it would need to be standardized. It has to broaden its search beyond its records to actually deploying personnel to check the novelty of subject-matters brought before it for registration.

Also, our laws and IP Policies must be frequently updated to respond to modern trends and development in the IP Industry.

Sensitization in rural and urban communities on IP should be done and encouraged; social media platforms could even be used to educate and enlighten people on the need for registering their products, particularly about the moral, economic and legal value of Intellectual Property.

Stricter penal measures should be meted out on those who deliberately infringe on people’s IP rights. Also, stricter penal measures should be issued on those who are discovered to have stolen people’s ideas and products by beating people to the registration of their own creation.

Finally, there should be an IP tribunal to enable quicker dispensation of IP cases owing to the delicate nature of IP and the negative effects delayed dispensation of cases may have on its economic value to IP owners of Copyright, Trademark, Patent and Design as the case may be.

CONCLUSION

Intellectual Property rights are sui generis and should be treated as such. While efforts are being made to tackle the challenges bedeviling the Patent Office and its administrations, the priority remains to give original creators adequate protection, value and reverence for their works and this should remain so. Undue relevance and priority should not be placed on Certificates of Registration such that the challenges, rules and malpractices in administrative institutions do not prevail over the essence and moral right in the Intellectual Property sector.

The content of this article is intended to provide a general understanding to the subject matter. For specific consultancy relating to your circumstance, feel free to reach out to us today at hello@thefirmaadvisory.com.

Are Nigerian Data Controllers Mandated by the Law to Maintain State-of-the-art Network Systems Guarding Against Data Breach?

One important aim of data protection laws is to prescribe minimum standards for the protection of information obtained from a person (data subject) by another (data controller). A data controller is anyone who requires and collects data to process certain sets of actions and who determines how the data is processed. Examples of data controllers include: MTN, Access Bank, Flutterwave and Jumia. Anyone whose data is collected for processing  is a data subject; for example, all subscribers to MTN network are data subjects.

The increased reliance on the internet and other  technologies for commerce and daily personal activities has brought with it varieties of cybersecurity risks. At the root of the hunt is data. According to the Economist, "the world's most valuable resource is no longer oil, but data''[1] and this makes protection of data a critical subject. Also, it is getting easier to hack information systems to harvest data as hacking technologies are improving rapidly. There are multiple examples of recent cyber attacks targeted at the information systems of countries and businesses, the data breach at Tuckers LLP[2] being one prime example. There is, therefore, an urgent need to ensure an across-the-board state of art security of network systems to guard against possible breach.

However, is there a legal obligation on data controllers to maintain such secure network systems to guard against both foreseeable and unforeseeable data breach or to mitigate possible loss in the event of a breach? And if such an obligation exists, what is the standard of security required?

The simple answer to the first question is Yes. Article 2.6 of the Nigeria Data Protection Regulation creates this obligation. It requires data controllers to, among other things, implement measures to protect systems from hackers; set up firewalls; store data securely with access to specific authorized individuals; employ data encryption technologies and develop organizational policy for handling Personal Data. Other laws like the Nigerian Communications Commission Act, Cybercrime Act and CBN Regulations and Guidelines equally create this obligation to varying degrees.

This legal obligation is achieved when data controllers doggedly ensure there are adequate organizational policies to anticipate and guard against possible data breach, and in the event of a data breach, the onus is on a data controller to show that there was no negligence in the handling of collected personal data.

Clearly, prevalent industry standards for network security go beyond encryption and setting up firewalls. Does the NDPR or any law in Nigeria set a higher standard for network security?

The answer to the above question is also Yes. As a general application for data controllers collecting and processing data for government use, Article 2.6 Guideline for the Implementation of the NDPR (within Public Institutions in Nigeria) provides for the implementation of "ISO 27001:2013 or any similar standard". Article 2.3 CBN's Guidelines on Operations of Electronic Payment Channels in Nigeria stipulates some standards compliant with international best practices (like the PA DSS; PCI PED; Triple DES and EMV). Other stipulations may be found in CBN's Risk-based Cybersecurity Framework and Guidelines and requisite NCC Guidelines. For Nigerian data controllers collecting and processing data of European Union data subjects, Article 32 General Data Protection Regulation, mandates the implementation of "technical and organisational measures'' to data security, considering "the state of the art, the costs of implementation and [...] the risk of varying likelihood and severity for the rights and freedoms of natural persons." (Emphasis mine).

A breach of Article 32 of GDPR cost Tuckers LLP £98,000 in fine. Tuckers LLP failed to implement certain security measures like implementing multi-factor authentication (MFA) for remote access; applying a critical vulnerability patch for a period of 4 months after being notified of a possible breach that might result therefrom and addressing issues highlighted in a failed Cyber Essentials assessment causing a cyber attack on their information systems, resulting in the encryption and permanent loss of 972,191 civil and criminal case files stored on an archive server.

Other examples of global industry standards of network security practices that Nigerian data controllers can implement include: ISO27000 series, the National Institutes of Standards and Technology ("NIST"), the National Cyber Security Centre ("NCSC"), the Solicitors Regulatory Authority ("SRA"), Lexcel and 'NCSC Cyber Essentials'.

On a final note, it is not only imperative that all data controllers in Nigeria implement data security measures to anticipate and guard against cyber attacks, it is also an obligation imposed by law, breach of which may amount to being sanctioned by the appropriate body. The law also prescribes standards for these security measures taking into account the sophistication in hacking technologies and the prevalence of it. Nigerian businesses and data controllers must therefore, ensure they implement the prescribed high network security standards, or risk an organizational failure and the wrath of the law

References

1. The Economist, (Article) The world’s most valuable resource is no longer oil, but data. Available at https://www.economist.com/leaders/2017/05/06/the-worlds-most-valuable-resource-is-no-longer-oil-but-data accessed on March 28 2022

2. Data Guidance (Article) UK: ICO fines Tuckers Solicitors LLP £98,000 for data breach. Available at https://www.dataguidance.com/news/uk-ico-fines-tuckers-solicitors-llp-%C2%A398000-data-breach accessed on March 28 2022