In a surprising turn of events, Paystack's highly anticipated launch of its consumer product, Zap, has been met with a legal dispute from Zap Africa, a crypto startup, over trademark infringement. The controversy has sparked a heated debate on Nigeria's trademark laws and their application in the tech sector.

The dispute began just minutes after Paystack's launch, when Zap Africa tweeted, "There is only one Zap in Nigeria and Africa." The company later accused Paystack of trademark infringement, claiming that the use of the name "Zap" causes confusion among users and dilutes its trademark. According to Tobi Asu-Johnson, Zap Africa's CEO, the dispute has already affected business, chasing away investors and causing uncertainty among employees.

Zap Africa issued a cease and desist letter to Paystack, demanding that the company immediately stop using the name Zap, withdraw all product and marketing materials, destroy any Zap-branded assets, issue a public apology, and cover Zap Africa's marketing expenses. The letter was based on Zap Africa's trademark filings across Classes 35, 36, and 42, which cover advertising, business management, retail, financial and monetary services, and technology services.

However, Paystack registered its trademark, Zap by Paystack, in December 2023 in Classes 36 and 42. The similarity between both companies' names lies at the heart of the legal dispute, one that could potentially set a precedent and reshape how Nigeria's trademark laws are interpreted and enforced in the tech sector. According to Ebube Nnachi, an intellectual property lawyer, the application was accepted on the grounds of honest concurrent use, a statutory justification also recognized under the law.

In response to Zap Africa's tweets and letter, Paystack issued a cease and desist notice to Zap Africa, demanding that the company provide evidence of its trademark in Classes 9 and 36, cease all public communications about Zap Africa, and stop paying third parties to publish content about Paystack. The notice set a 48-hour deadline.

The dispute raises several legal considerations under the Nigerian trademark system. A trademark must be distinctive to differentiate one business's goods or services from another. This is central to the dispute, as Paystack and Zap Africa both use the name "Zap", which could lead to consumer confusion. According to Amosa Shukurat, an intellectual property consultant, distinctiveness is key, and a term can acquire distinctiveness through consistent and prominent use, which could make it eligible for trademark protection over time.

Paystack has argued that it registered a distinct brand—“Zap by Paystack”—rather than the standalone word “Zap”, and that this reduces the risk of confusion. It also pointed out that “Zap” has been used by different entities over time, making exclusive rights to the word difficult to claim. In fact, more than 40 companies listed on the Corporate Affairs Commission (CAC) website include “Zap” in their business names, and the term has also been trademarked by another proprietor as far back as 2008.

The timing of filings also matters in determining priority. Paystack filed its trademark in late December 2023, while Zap Africa filed a couple of months before Paystack. Nigerian trademark law typically grants rights to the first party to file, but prior use can sometimes override this rule. According to William Umoh, a lawyer, the Registrar may reject a later application if the marks are similar, in the same class, and could confuse.

The outcome of this trademark dispute will depend on factors like the distinctiveness of the marks, their class registrations, and the potential for market confusion. Given that both parties have failed to meet each other's demands, it seems likely that the courts will have to decide whether any party has a legitimate claim to Zap. The outcome could provide judicial guidance not just on the scope of the Registrar's discretion but also on the application and reliance on the defence of honest concurrent use in Nigeria.

The implications of this dispute go beyond the tech sector, as it could set a precedent for how trademark laws are interpreted and enforced in Nigeria. As the legal battle unfolds, it remains to be seen how the courts will rule on this complex and contentious issue.