Software Licence Agreement (Kenya)

Software in Kenya is protected primarily by the Copyright Act Cap. 130, which treats software as a literary work eligible for copyright protection from the moment of creation without registration. Section 26 of the Copyright Act vests copyright in the author or, where the software is developed during employment, in the employer. The Copyright Act prohibits copying, adapting, distributing, or making software available to the public without the copyright owner's authorisation under Section 35 — it is this exclusive right that a Software Licence Agreement grants on defined terms. The Industrial Property Act No. 3 of 2001, administered by the Kenya Industrial Property Institute (KIPI), may also apply where the software embodies a patentable invention — though patent protection for software is narrower than copyright in Kenya. The Computer Misuse and Cybercrimes Act No. 5 of 2018 criminalises unauthorised access to computer systems (Section 16), electronic fraud (Section 22), and cybersquatting (Section 34), providing criminal sanctions that supplement civil remedies under copyright law. Enforcement of copyright in software is before the High Court of Kenya or the Copyright Tribunal established under Section 28 of the Copyright Act, which can grant injunctions, award damages, and order delivery up of infringing copies.

A perpetual software licence in Kenya grants the licensee the right to use the software indefinitely, typically in exchange for a one-time upfront payment. The licensee owns the right to use that specific version of the software permanently but does not automatically receive future versions, updates, or support beyond any agreed maintenance period. A subscription licence — increasingly common in SaaS and cloud software arrangements — grants the licensee the right to use the software for a defined period (monthly, annually, or multi-year) in exchange for recurring fees. The right to use the software terminates automatically when the subscription expires or is cancelled. From a Kenyan tax perspective, the Kenya Revenue Authority (KRA) treats perpetual licence fees as capital expenditure deductible under the Investment Deduction provisions of the Income Tax Act Cap. 470, while subscription fees are treated as revenue expenditure deductible in the year of payment. Both types are subject to withholding tax under Cap. 470 when paid to a non-resident licensor — at 20% for royalties. The Law of Contract Act Cap. 23 governs both types, but the termination provisions and post-termination data handling obligations under the Data Protection Act No. 24 of 2019 are more complex for subscription arrangements where the licensor hosts the licensee's data.

The Data Protection Act No. 24 of 2019, administered by the Office of the Data Protection Commissioner (ODPC), significantly affects Software Licence Agreements where the software processes personal data belonging to the licensee's employees, customers, or other data subjects. In a typical SaaS arrangement, the software vendor (licensor) acts as a Data Processor and the business customer (licensee) acts as a Data Controller under Section 43 of the Act. The Data Controller must execute a written Data Processing Agreement (DPA) with the Data Processor before any processing commences — and this DPA must specify: the subject matter, duration, nature, and purpose of processing; the types of personal data and categories of data subjects; the technical and organisational security measures; restrictions on sub-processing without written consent; and the procedure for handling data subject rights requests and data breaches. The ODPC requires both data controllers and processors to register under the Data Protection (Registration of Data Controllers and Data Processors) Regulations 2021. Non-compliance exposes both the licensor and licensee to fines of up to KES 5,000,000 or 1% of annual gross turnover (whichever is higher) under the Act. On termination of the software licence, the licensor must return or securely delete all personal data belonging to the licensee and provide written confirmation of deletion to the ODPC-registered data controller.

Payments made by a Kenyan business to a non-resident software licensor for software licence fees or royalties are subject to withholding tax under the Income Tax Act Cap. 470 at the rate of 20% for non-residents, administered by the Kenya Revenue Authority (KRA). The Kenyan licensee acts as the withholding tax agent and must deduct the tax from the gross payment, remit it to KRA by the 20th day of the month following payment via the iTax platform, and issue a withholding tax certificate to the non-resident licensor. Where Kenya has a Double Taxation Agreement (DTA) with the country of residence of the foreign licensor — for example with the United Kingdom, France, Germany, India, or Zambia — the DTA may reduce or eliminate the withholding tax rate on royalties. The licensor must provide a certificate of tax residence to the KRA to claim DTA benefits. Value Added Tax (VAT) at 16% under the Value Added Tax Act No. 35 of 2013 applies to digital services supplied to Kenyan users by non-resident providers — the Finance Act 2020 introduced the obligation for non-resident digital service providers to register for VAT with the KRA if their supplies to Kenyan customers exceed the VAT registration threshold. The Software Licence Agreement should expressly allocate responsibility for VAT and withholding tax between the licensor and licensee.

Yes. A Software Licence Agreement in Kenya can validly restrict the licensee from decompiling, reverse-engineering, disassembling, or creating derivative works from the licensed software. Section 35 of the Copyright Act Cap. 130 grants the copyright owner (licensor) the exclusive right to control adaptations and derivative works, and any such activity without authorisation constitutes copyright infringement. The licence agreement may expressly prohibit these activities, and breach of such a prohibition entitles the licensor to terminate the licence and seek injunctive relief and damages before the High Court of Kenya. The Computer Misuse and Cybercrimes Act No. 5 of 2018 provides additional criminal sanctions — unauthorised access to a computer system (including decompiling software to access its internal logic) may constitute an offence under Section 16 of the Act, punishable by a fine or imprisonment. However, the Copyright Act permits a limited exception for decompilation where it is strictly necessary to achieve interoperability with independently created software — this is a narrow exception and the licensee would need to demonstrate genuine interoperability necessity. The Software Licence Agreement should expressly state that no reverse-engineering, decompilation, disassembly, or derivative work is permitted without the licensor's prior written consent, and that breach of this restriction is a material breach entitling the licensor to immediate termination.

On termination of a Software Licence Agreement in Kenya, both the licensor and licensee have important obligations that must be addressed in the agreement. The licensee's obligations on termination typically include: immediately ceasing all use of the software; uninstalling and deleting all copies of the software from its systems, devices, and servers; returning or destroying all documentation, source code, and confidential information belonging to the licensor; and providing written confirmation of compliance with these post-termination obligations. The licensor's obligations on termination in a SaaS or cloud software arrangement are particularly significant under the Data Protection Act No. 24 of 2019 — within a defined period (typically 30 days), the licensor as Data Processor must return all personal data belonging to the licensee in a usable, portable format, and securely delete all copies retained by the licensor, providing the ODPC-registered data controller with written confirmation of deletion. Failure to return or delete data in breach of the Data Protection Act may attract ODPC fines and enforcement action. The Law of Contract Act Cap. 23 governs the parties' rights regarding any outstanding fees or refunds due on termination. The agreement should specify whether any licence fees paid in advance are refundable on early termination, and the consequences of termination for support and maintenance services.

A Software Licence Agreement and a software development agreement are fundamentally different contracts serving different purposes under Kenyan law. A Software Licence Agreement governs the right to use existing, pre-built software — the licensor retains ownership of the software intellectual property and grants the licensee a limited right of use on defined terms. The licensee receives no ownership rights in the software, only the usage rights specified in the licence. A software development agreement, by contrast, governs the creation of new, bespoke software — it addresses the scope of the development work, milestones, payment, testing and acceptance procedures, and, critically, intellectual property ownership of the newly created software. Under the Copyright Act Cap. 130, unless the development agreement expressly assigns copyright to the commissioning client, copyright in the developed software vests in the developer. Many commercial disputes before the High Court of Kenya and the Nairobi Centre for International Arbitration (NCIA) arise from confusion between these two contract types — particularly where a client commissions customisation of licensed software and assumes it owns the resulting code. The Industrial Property Act No. 3 of 2001 and the Copyright Act Cap. 130 together determine the default ownership position, and express agreement in writing is essential to achieve a different allocation.

Software licence disputes in Kenya can be resolved through several mechanisms, each with different advantages for technology companies and software users. The High Court of Kenya — specifically the Commercial and Tax Division of the High Court — has jurisdiction to hear breach of contract claims under the Law of Contract Act Cap. 23, copyright infringement claims under the Copyright Act Cap. 130, and interlocutory injunction applications to restrain continued use of software in breach of a licence. The Copyright Tribunal, established under Section 28 of the Copyright Act Cap. 130, has jurisdiction to determine disputes about copyright licences, including compulsory licence applications and licence fee disputes. Arbitration under the Nairobi Centre for International Arbitration (NCIA) Rules 2015 or the Chartered Institute of Arbitrators Kenya Branch (CIArb Kenya) is the preferred route for technology companies seeking confidentiality, technical expertise, and enforceability of awards under the New York Convention (to which Kenya is a party). The Arbitration Act No. 4 of 1995 governs domestic arbitration proceedings in Kenya. Mediation administered by the Nairobi Centre for International Arbitration or the Mediation Training Institute (MTI) Kenya offers a faster, lower-cost route for resolving licensing fee disputes. The Software Licence Agreement should specify the chosen mechanism, governing law (Kenyan law), and seat of arbitration to avoid jurisdictional disputes.