The biggest lesson companies can learn from the Vodacom versus Makate ‘Please Call Me’ litigation is that if an employee invents a product, proper contractual agreements must be put in place, detailing guidelines around the use of the product and remuneration.
In cases where the invented product cannot be protected by means of intellectual property (IP) rights, a clear and concise contractual agreement could help companies avoid costly court proceedings and exorbitant compensation payouts.
This is according to legal experts, discussing the crucial issues SA’s biggest telecoms operator could have avoided, leading to what is now known as a multibillion-rand legal battle, which started in 2008.
Nkosana Makate, a former trainee accountant at Vodacom, and the telco have been embroiled in litigation over the 'Please Call Me' product for almost 17 years.
Makate previously claimed Vodacom owes him a settlement of R10.2 billion, which excludes accrued interest and the legal fees incurred.
Tumelo Mashabela, founder of Tshaya Mashabela Attorneys and an IP practitioner, tells ITWeb that while the case was not decided on IP grounds, it did have a strong influence on how IP is viewed in SA and highlights the potential of disputes in this area.
The case has most likely led to more companies rigidifying and consolidating their contracting language around IP, she adds.
“This case has helped advance the significance of well-drafted employment contracts. These types of contracts should highlight and address ownership of IP created by employees within the duration of their employment.
“If Vodacom had simply acknowledged the value of Makate’s ‘Please Call Me’ idea in the beginning, both parties could have negotiated and established a profit-sharing agreement and possibly acquired the rights to the IP.”
According to Mashabela, this case stresses the conversations that need to happen relating to how companies handle employee suggestions and potential remuneration for commercially viable ideas.
The Publicly Financed Research and Development Act No 51 of 2008 and the Intellectual Property Law of SA emphasise the importance of mediation and negotiation, before approaching a court with the matter.
These negotiations could have been facilitated by a neutral third-party to assist in reaching a mutually-beneficial compromise, she notes.
“It would have been helpful if Vodacom had set up proper submission channels and processes of ideas created by employees. In this way, Makate could have presented his idea using clear submission channels, which Vodacom deemed to have necessary authority to hear such ideas.”
Makate reportedly came up with the idea for the product in 2000 and proposed it to Vodacom’s development team. Despite being promised remuneration, he has never received a cent from the telecoms giant, he claims.
In 2016, the Constitutional Court found in favour of Makate as the inventor of ‘Please Call Me’, and ordered Vodacom to enter into negotiations with him, in efforts to determine a reasonable settlement figure. Vodacom then made an offer of R47 million, which he rejected, claiming he is owed billions.
Eight years and numerous court proceedings later, no consensus has been reached.
In the latest development, the Supreme Court of Appeal (SCA) in February ruled that Vodacom should determine new compensation for Makate, within 30 days of the order.
According to the ruling, Vodacom must pay Makate between 5% and 7.5% of the total voice revenue generated by the service, derived from prepaid or contract offerings from March 2001 to March 2021 (18 years), including interest.
Vodacom has since lodged an application with the Constitutional Court for leave to appeal the SCA ruling – which Makate later urged the ConCourt to dismiss.
In his 97-page answering affidavit submitted to the ConCourt in March, Makate explains the High Court previously accepted and concluded, based upon supplied evidence, that Philip Geissler and Alan Knott-Craig − both directors at Vodacom at the time − had made an agreement to use Makate’s invention, and that he would be remunerated accordingly.
However, the affidavit does not mention any contractual agreement, nor does it state any terms and conditions of such an agreement.
Vodacom has warned of dire financial implications should it be forced to pay Makate billions in compensation, noting this would have a devastating impact on Vodacom Group and millions of South Africans.
Honouring an agreement
Malebakeng Forere, professor of IP and investment law at the University of the Witwatersrand, and author of theSouth African Intellectual Property Law Journal,points out the case raises interesting IP questions, despite being argued and decided on as a purely contractual matter.
“I think companies are now aware of the necessity to protect their IP. Vodacom had promised him [Makate] some reward; they should have honoured it. I think R1 million or even half could have been sufficient, if done sooner.”
According to Forere, this case has distorted IP laws as well as labour laws. For example, the issue of ownership of the ‘Please Call Me’ product was not determined in accordance with the Patents Act.
“Had this been done, it would have transpired that an employee, which Makate was, cannot claim ownership of inventions created during the subsistence of his contract of employment, irrespective of the role in which one was employed for.
“Secondly, it is disturbing that an employee can enter into a contract of this nature with the employer − how would we guard against conflict of interests when employees can now conclude business deals with employers?”
Referencing her law journal, Forere explains Vodacom was found to have been in breach of an agreement to reward the former employee who conceived an idea that led to the development of the commercial ‘Please Call Me’ product.
“In the main, the dispute is now about fair compensation payable to Mr Makate. This paper finds that ownership of the product in question vests in Vodacom in accordance with the Copyright Act and Patents Act, even though the product was never patented, which, in turn, makes compensation to Mr Makate even less determinable,” she comments in the journal.
Janine Hollesen, director and head of IP at Werksmans Attorneys, highlights in a legal brief on the matter, the importance of establishing company policies detailing who is responsible for IP and providing guidance on employee incentives/remuneration.
“The essential understanding to grasp in examining this case is that due to the fact that there is no protection in respect of ideas, it is always important to ensure that if an individual does conceive of a concept (which cannot be protected by means of IP rights), that the proper agreements be in place which regulate the arrangement, the use of the concept and possible remuneration, in order to avoid costly court proceedings,” explains Hollesen.
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