The first major intellectual property battle in East Africa, involving copyright infringement and breach of contract over the development of a mobile money service, has started moving through the Kenyan legal system.

Faulu Kenya filed a lawsuit last week in the Kenyan High Court seeking to halt Safaricom from operating M-shwari, arguing that it is similar to its Kopa Chapaa service, which has been in operation since last year in partnership with India's mobile operator Airtel Kenya.

Faulu Kenya alleges that it had proposed to enter into a partnership with Safaricom to deploy a similar product and that it presented to Safaricom a prepared concept paper detailing how the platform was going to operate.

Faulu Kenya also alleges that it signed a non-disclosure agreement with Safaricom, which it claims that Safaricom disregarded when it developed and launched the M-shwari product.

Safaricom's M-shwari was launched three weeks ago in partnership with Commercial Bank for Africa and has since registered more than 640,000 users. The service is so far said to have netted US$1.7 million in savings and disbursed over $580,000 in loans. M-shwari allows users to save, borrow loans and earn interest using their mobile phones.

But Faulu Kenya claims the M-shwari was copied from its Kopa Chapaa, which allows users to borrow between $7 and $1,200, repayable within 10 days.

Safaricom denies the claims. With M-shwari, account holders can deposit less than $1 in savings and can borrow over $1,000, payable with a one-off interest rate of 7.5 percent. In a statement this week, the company said, "Safaricom seeks to clarify that M-shwari is a banking product of Commercial Bank for Africa and authorized as such by the Central Bank of Kenya."

When the matter came up for hearing before Justice Jonathan Havelock Tuesday, Safaricom said the Kenyan High Court did not have the jurisdiction to hear such a case, claiming issues of intellectual property are supposed to be handled by industrial property tribunal. The high court is now expected to give direction on the matter.