Business Dispute

Company A (a Fintech startup) develops a proprietary AI-based, collateral-free SME credit scoring methodology (“Cash Flow Passport”). Company A enters into a signed Non-Disclosure Agreement (NDA) and a Memorandum of Understanding (MOU) containing explicit non-circumvention and IP retention clauses with Financial Institution B (an Islamic Bank).

To satisfy Financial Institution B’s Risk Department regarding “black box” concerns, Company A discloses its proprietary scoring logic, pilot architecture, stratified datasets, and a market needs assessment survey under the protection of the NDA/MOU.

2. Financial Institution B accepts these deliverables, interacts continuously via dedicated working groups, and directs Company A to conduct field research at its branches.

3. After receiving the full validation framework and technical logic, Financial Institution B abruptly terminates engagement, stating it will develop the identical collateral-free credit scoring solution in-house.

Q1) Are intellectual property rights, software logic, and trade secrets considered recognized property (Mal Mutaqawwam) and financial rights (Huquq Maliyyah) in Shariah?

A1) In Islam, there is no such thing as copy right. However, if one had entered an agreement that he will not misuse any information etc., then one should honour one’s word.

Q2) Does Financial Institution B’s act of soliciting proprietary disclosures under an NDA/MOU and subsequently disengaging to build the solution in-house constitute Breach of Trust (Khiyanah), Treachery (Ghadr), and Wrongful Usurpation (Ghasb)?

A2) If the institution pledged not to misuse or misappropriate any information or breach any clause, and it had acted contrary to their agreement, then this will constitute Khiyaanah.

Q3) Is Financial Institution B religiously and financially obligated under Shariah to compensate Company A for the value of its intellectual property, research, and services (Ujrah al-Mithl / Dhaman)?

A3) If Party A had carried out some service, then yes, it is entitled to be remunerated.

Q4) Is a Non-Circumvention clause in a commercial MOU binding (Mulzim) under Islamic commercial law?

A4) Yes.

وَأَوْفُوا بِالْعَهْدِ ۖ إِنَّ الْعَهْدَ كَانَ مَسْئُولًا [ الإسراء: 34]

“And fulfill the covenant. Indeed, the covenant will be questioned.”

يَا أَيُّهَا الَّذِينَ آمَنُواْ أَوْفُواْ بِالْعُقُودِ] سورة المائدة 1]

“O Believers, fulfill your contracts.”الحقوق المجردة لا يجوز الاعتياض عنها (الأشباه والنظائر 1/178)

والحقوق المفردة لا تحتمل التمليكa، ولا يجوز الصلح عليه (بدائع الصنائع 6/190)

NB: OUR RULING IS BASED ON THE INFORMATION PROVIDED IN THE QUERY. HOWEVER, IF THE INFORMATION DIFFERS OR IS NOT COMPLETE THEN, THE RULING WILL DIFFER.

ALLAH TA’ALA ALONE IN HIS INFINITE KNOWLEDGE KNOWS BEST!

ANSWERED BY:

Mufti Abdul Kader Fazlani

Date: 20 Jumaadal-Ulaa 1448 / 27 October 2026

CHECKED AND APPROVED BY:

Mufti Yacoob Vally Saheb