IP in practice: Legal and commercial IP developments in Kenya and South Africa

In many of our past articles, we have focused on traditional aspects of intellectual property (“IP”), such as the creation, acquisition, and enforcement of rights. However, commercial considerations, including how IP is exploited, licensed, and protected in business dealings, are equally critical. This article addresses some recent legal and commercial IP developments in two of Africa’s largest markets: Kenya and South Africa.

Kenya: Goodwill recognised as property

A significant development in Kenya arose from the Supreme Court’s decision in Radbone Clark Kenya Limited v. Jami Bakery Limited & 3 others [Petition No. 10 of 2021], where the Court recognised goodwill as a property right protected under Article 40 of the Constitution of Kenya, 2010. This judgment introduces several important legal standards:

Goodwill is property: The Court ruled that goodwill qualifies as property and is protected from arbitrary deprivation under Article 40 of the Constitution.
Identifiability and value: For goodwill to be recognised as a protectable property right, it must be identifiable either independently or together with other assets and must have a measurable value that can be attributed to it.
Sub-distributor limitations: A sub-distributor cannot automatically claim goodwill belonging to a parent or principal unless this is expressly provided for in the contractual arrangements.

This recognition has important implications for commercial transactions:

Goodwill can now be assigned, valued, and transferred as part of a business sale.
It emphasises the need for clear, written agreements, especially in franchise or distributorship models

South Africa: Restraint of trade and confidentiality

In South Africa, the Labour Court recently reaffirmed the importance and enforceability of restraint of trade and confidentiality provisions in employment and sale-of-business contexts in the case of Hudaco Trading (Pty) Ltd v Sniperverse (Pty) Ltd and Others [2024] ZALCJHB 112.

The background

Two senior employees of Hudaco Trading resigned and joined a competitor, Sniperverse (Pty) Ltd. Hudaco alleged that these employees accessed confidential information (e.g., pricing, supplier and client data, and marketing strategy), which Sniperverse used to solicit Hudaco’s clients. Hudaco sought urgent relief based on breach of restraint and confidentiality obligations.

Legal issues considered

The Labour Court was asked to determine:

whether the Court had jurisdiction to enforce restraints flowing from employment and sale of business agreements;
whether Hudaco had a legitimate protectable interest;
whether there was a reasonable apprehension of harm; and
whether Sniperverse’s conduct justified the grant of final interdictory relief.

Court’s findings (Judge Daniels)

The restraint of trade and confidentiality clauses were valid and enforceable.
The evasive conduct of Sniperverse in its affidavits bolstered the credibility of Hudaco’s case.
Hudaco had demonstrated a clear right, reasonable apprehension of harm, and a legitimate proprietary interest worth protecting.
Sniperverse failed to offer a credible rebuttal to the allegations of misappropriation of confidential information.

As a result, the Court issued a final interdict, preventing Sniperverse from soliciting Hudaco’s clients and from using or disclosing its confidential information.

Importance of the case

This decision underscores:

The enforceability of restraint of trade clauses, especially where the breach involves confidential or proprietary information.
The need for clear contractual terms when transferring a business or engaging senior staff.
The delicate balance between protecting commercial interests and an individual’s right to pursue a livelihood.

As Judge Daniels noted:

“Our courts are more likely to take a favourable view of the restraint agreement where the parties engaged on an equal footing… there is a general acceptance that in an employment context, parties rarely contract as equals.”

“There arises a tension between the right of the individual to be economically active and the need to respect agreements entered into.”

This case is also significant because it reaffirms prior jurisprudence, such as:

Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA), which established that public policy does not preclude enforcement of restraints unless they are unreasonable; and
Magna Alloys & Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A), which laid the foundational principle that restraint of trade agreements are enforceable unless shown to be unreasonable and contrary to public interest.

How Hudaco protected its information

Hudaco’s approach provides a useful case study in how companies should protect their confidential information:

Written agreements: Hudaco relied on well-drafted sale of business and employment agreements containing explicit restraint and confidentiality clauses.
Access controls: They had clear structures in place to manage who could access sensitive data.
Proactive enforcement: Hudaco moved swiftly to launch court proceedings on an urgent basis when it suspected a breach.
Evidential support: They were able to present a coherent version of events, supported by documentation, while Sniperverse’s affidavits were described as evasive and contradictory.

In intellectual property and commercial deals, especially joint ventures, distributorships, franchise arrangements, or senior-employment contexts, it’s critical for businesses to:

Draft robust confidentiality and restraint agreements that are reasonable in scope and time.
Maintain clear documented policies and board oversight around handling trade secrets and client data.
Monitor and enforce compliance consistently; in Hudaco’s case, enforcement was taken swiftly once a breach was detected.
Ensure that disclosure obligations and limitations are matched with corresponding non-compete or restraint provisions.

Conclusion

From the recognition of goodwill as a constitutional property right in Kenya to the enforcement of restraint and confidentiality provisions in South Africa, it’s clear that African courts are increasingly sensitive to the commercial realities of intellectual property. These decisions offer businesses critical takeaways: ensure that IP is documented, that agreements are clearly drafted, and that enforceability is tested not just at registration, but in practice.

*Reviewed by Janine Thomas, Executive in the Intellectual Property Practice

Gomolemo Tau
Associate | Intellectual Property
gtau@ENSafrica.com