Structuring Licensing and Collaboration Agreements for Kenyan Biotech and Pharma Companies

A licensing or collaboration agreement between a Kenyan biotech company and a foreign partner is not just a contract negotiation. In Kenya, an unregistered patent or trademark licence can be void, royalty payments abroad can stall at the bank without the right paperwork, and withholding tax rates can shift by fifteen percentage points depending on which jurisdiction the counterparty sits in. Getting the commercial terms right is only part of the job.

The Contract Law Baseline

Kenyan commercial contracts, including licensing and collaboration agreements, are governed generally by the Law of Contract Act, Cap 23, alongside ordinary common law principles of offer, acceptance, and consideration. For dispute resolution, most cross-border licensing deals rely on arbitration clauses, and Kenyan law is genuinely supportive of that choice. The Arbitration Act, 1995, as amended in 2009, provides in section 36 that an international arbitration award is recognised and enforced in accordance with the New York Convention, which Kenya acceded to on 10 February 1989, subject to a reciprocity reservation that limits automatic enforcement to awards from other Convention states. Section 37 sets out the limited grounds on which a Kenyan court can refuse recognition. In practice, this means a foreign licensor’s preference for arbitration under a foreign governing law is generally enforceable in Kenya, which matters when structuring the dispute resolution clause of a collaboration agreement.

Registration Is Not Optional Paperwork

This is the point most first-time Kenyan licensors and licensees underestimate. Section 68 of the Industrial Property Act, 2001 requires all patent, utility model, and industrial design licence contracts, including any modifications, to be submitted to the Kenya Industrial Property Institute for registration in the Patent Register. Section 68(6) is unambiguous about the consequence of skipping this: a licence contract is void if registration is refused, and by clear implication, an unregistered licence sits on shaky legal ground. Section 70(2) does offer some relief, deeming registration to have occurred if KIPI fails to respond within ninety days. Trademark licensing runs on a parallel but distinct track under section 31 of the Trade Marks Act, Cap 506, which requires licensor and licensee to jointly apply as “registered users,” supported by a statutory declaration, with the Registrar registering the licensee only if satisfied that the arrangement is not contrary to the public interest. A collaboration agreement that bundles patent and trademark rights needs both registration processes handled correctly, not just one.

Competition Law Rarely Blocks a Pure Licence, But Watch the Edges

The Competition Act, 2010 does not impose a pre-clearance requirement on ordinary licensing agreements. Section 21 prohibits restrictive agreements such as exclusive dealing, tying arrangements, and discriminatory conditions on a conduct basis, meaning the risk is a post-hoc challenge rather than a mandatory upfront filing. Section 24 separately prohibits abuse of a dominant position. The practical risk sits at the edges: a licensing deal structured with unusually tight exclusivity, output restrictions, or tying provisions could attract scrutiny under section 21, and a collaboration structured as a joint venture rather than a pure licence may cross into merger notification territory under section 42, where thresholds are set by Gazette notice rather than fixed in the Act itself. Most straightforward technology licences will not trigger either concern, but the structure matters more than the label the parties give it.

Moving Royalties Out of Kenya

Kenya liberalised its exchange control regime with the repeal of the Exchange Control Act, effective 27 December 1995, so there is no direct Central Bank pre-approval requirement for outbound royalty payments as such. In practice, however, commercial banks handling the remittance will typically require a copy of the licence agreement, evidence of KIPI registration, a demand note from the licensor, and proof that withholding tax has been paid, before releasing funds abroad. That last point is the recordal requirement resurfacing in a different guise: a licensor that never registered its licence with KIPI may find its royalties genuinely difficult to repatriate through the banking system, not just legally vulnerable. On withholding tax itself, the Income Tax Act imposes 20 percent on royalties paid to non-residents, reduced by treaty for some jurisdictions, 10 percent for India and 15 percent for the UK under their respective double tax treaties with Kenya. No Kenya-US double tax treaty currently exists, so US licensors should generally expect the full 20 percent rate to apply, which is worth building into the economics of the deal from the outset.