The years-long ‘Please Call Me’ litigation between Vodacom and Nkosana Makate holds many lessons on how inventors or product originators should protect their ideas, to address compensation terms and avoid costly court proceedings.
This is according to legal experts, discussing the pitfalls that inventors must avoid when addressing issues related to ownership of intellectual property (IP) created by employees during their employment.
Makate came up with what is now known as the ‘Please Call Me’ concept in 2000 and proposed it to Vodacom’s development team. Despite being promised remuneration, he has never received a cent from the telecoms operator, he claims.
The former trainee accountant and Vodacom have been embroiled in litigation over the product for almost 18 years, leading to what is now a multibillion-rand legal battle.
Tumelo Mashabela, founder of Tshaya Mashabela Attorneys and an IP practitioner, tells ITWeb the key takeaway from this case is the importance of establishing clear, binding and written agreements from the outset, especially when it concerns the ownership of IP rights and any related compensation.
“To avoid the legal battles Mr Makate faced, he could have taken several steps, early on, including negotiating contract terms through an attorney. He could have also filed a provisional patent application prior to approaching Vodacom, thereby establishing a clear record of ownership. He could have also clarified compensation terms by setting clear terms for how compensation will be structured and how it will be determined between the two parties.”
Mashabela also highlights the importance of formalising ownership with a written agreement, to ensure this is clearly documented.
By taking these protective measures in the early stages of conceptualisation, “Makate could have minimised the risks of a protracted legal dispute, clearly defining ownership, managing expectations, and addressing compensation and commercialisation concerns,” she adds.
While the Vodacom versus Makate 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, she continues.
The Intellectual Property Laws Amendment Act 28 of 2013 stipulates that the right to all IP (covering patents, designs, copyright and trademarks) belongs to the employer if the employee created it in the course and scope of employment.
In his 97-page answering affidavit submitted to the Constitutional Court in March 2024, Makate stated 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.
This agreement sets this court battle apart from typical IP matters, so it is not argued as an IP matter, but rather as a contractual matter.
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.
According to a February 2024 majority judgement by the Supreme Court of Appeal, Makate is entitled to compensation ranging from R29 billion to R63 billion, including accrued interest and legal fees incurred. Vodacom described this amount as “unreasonable”.
According to Mashabela, the Patent Act 57 of 1978 defines an ‘inventor’ as an individual who has made a significant contribution to the creation of a new and useful invention that is patentable. This contribution could be either through conceptualisation or technical development.
Janine Hollesen, director and head of the IP practice area at Werksmans Attorneys, points out this case centres on upholding an agreement.
Hollesen believes several issues should have been taken into consideration. “The parties should decide upfront as to what the terms of the agreement will be prior to the commencement of any development, or if a product is developed by an employee (which is not in the scope of employment), a written agreement must be entered into on unambiguous and clear terms, including the basis remuneration.”
Companies should ensure employees in positions of authority fully understand the possible legal consequences of making such agreements / arrangements with employees, adds Hollesen.
“It should be a policy that no agreements of this nature can be entered into. There should be clear rules within organisations which are understood by managers and employees as to what the processes and protocols will be if anyone does come up with an ‘idea’ and who would be the appropriate person to discuss the matter with.”
Malebakeng Forere, professor of IP and investment law at the University of the Witwatersrand, and author of the South African Intellectual Property Law Journal 2021, points out the case raises interesting IP questions, despite it being argued and decided on as a purely contractual matter.
Based on both the Copyright Act and the Patents Act, in most instances an employee cannot claim ownership of inventions created during their contract of employment, leaving Makate with little room to claim ownership or negotiate, she asserts.
Despite this, Vodacom was found to have been in breach of an agreement to reward a former employee who conceived an idea that led to the development of a product, while still employed by the company, she points out.
“Ownership of the product in question vests in Vodacom in accordance with the Copyright Act. In fact, it is surprising that the courts are giving him so much [compensation]. On the other hand, Vodacom, and indeed other employers, should be wary of making promises to employees because the law does not extend ownership of an intellectual work to employees,” explains Forere.
The dispute, she adds, is now about fair compensation payable to Makate. It is argued that the determination of fair compensation is predicated on the determination of ownership of the ‘Please Call Me’ product.
“Accordingly, it is argued herein that any determination of compensation must be based on how the industry, in general, and Vodacom, in particular, rewarded employees who have conceived workable ideas in the past. Thus, compensation cannot be based on market value.”
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