Vodacom launches Constitutional Court challenge against Makate over Please Call Me

Vodacom has announced that it filed papers in the Constitutional Court to challenge the recent Supreme Court order in favour of Please Call Me idea-man Kenneth Nkosana Makate.

South Africa’s Supreme Court of Appeal (SCA) recently ordered that Vodacom pay Makate 5%–7.5% revenue share over 18 years, with interest.

It also ordered that Vodacom use models that Makate’s legal team developed to calculate the revenue Please Call Me generated.

This translates to a minimum compensation of R29 billion, a MyBroadband analysis of the relevant court documents showed.

“As a responsible corporate citizen, Vodacom is respectful of the judicial system and abides by the laws of South Africa,” the mobile operator said in a statement on Wednesday.

“Having considered the SCA judgment and order, it is Vodacom’s view that there are key aspects of this matter which do not accord with the spirit of the law and that the judgment and order are fundamentally flawed.”

Vodacom said it was apparent from the dissenting judgment of the Supreme Court that the majority judgment overlooked or ignored many of the issues between the parties.

It said the majority judgement also overlooked or ignored evidence and submissions relating to those issues.

Vodacom said its application for leave to appeal in the Constitutional Court includes the following arguments:

• The SCA’s order impinges on the Rule of Law in terms of section 1 of the Constitution of the Republic of South Africa. It deprives Vodacom of its right to a fair trial under section 34 of the Constitution.
• The SCA misdirects itself by considering and deciding on issues which had not been placed before it for adjudication by either Vodacom or Makate.
• The SCA selectively chose to regard only Makate’s evidence, as in the case of models for computing compensation, while ignoring swathes of evidence presented by Vodacom contesting Makate’s version.
• The SCA orders are unintelligible, incomprehensible, and vague, rendering them incapable of implementation and enforcement.

“The impact of the SCA Judgment, should it be upheld, would be vast and wide-ranging on both Vodacom South Africa and Vodacom Group, as well as the attractiveness of South Africa as an investment destination,” it stated.

“It would negatively impact our employees, shareholders and Vodacom’s contribution to public finances. It would also have an impact on our network investment, coverage, and social programmes.”

The dispute between Makate and Vodacom dates back to 2007, when he sent letters of demand to the company stating he was promised compensation for his idea.

Makate launched legal action against Vodacom in 2008.

Common cause facts are that Makate pitched his idea of a method to “buzz” someone else’s phone without airtime on 21 November 2000 while he was a trainee accountant.

Vodacom product development manager Philip Geissler has promised Makate that he would be compensated for the idea.

He said Makate had asked for 15% of the revenue Please Call Me generated, but Geissler hadn’t committed to a specific amount.

Geissler was to negotiate with Makate, and if they couldn’t agree on an amount, Vodacom’s CEO at the time would determine how much he should be paid.

Vodacom acknowledged Makate in an internal newsletter announcing that his idea was ultimately developed into a product initially named “Call Me”, which launched in March 2001.

MTN had patented and launched a similar product — also marketed as “Call Me” — in January of that year.

However, South Africa’s courts ultimately found that the issue was not whether Makate had the intellectual property rights to Please Call Me, but that Geissler had promised compensation for the idea.

The case made its way through the High Court and Supreme Court of Appeal, which both ruled in favour of Vodacom.

It landed in front of the Constitutional Court in 2016, which ruled that Makate was owed compensation.

Vodacom contended that Geissler had no authority to commit the company to such an agreement.

However, the Constitutional Court did not buy Vodacom’s argument. It ruled that Geissler had the ostensible authority to conclude such a contract.

South Africa’s apex court ordered Vodacom and Makate to negotiate compensation in good faith.

Foreseeing a breakdown in talks, it designated Vodacom’s CEO as the deadlock breaker, per the original oral agreement between Makate and Geissler.

According to court documents, Makate demanded R20 billion, and Vodacom countered with R10 million.

At the same time, there was a flurry of legal action in which Makate’s legal team demanded documents and data from Vodacom about the revenue Please Call Me generated.

Vodacom said it didn’t have the Please Call Me revenue data Makate’s team was demanding.

This caused negotiations to drag on.

Makate’s team ultimately abandoned their court application to compel Vodacom to provide the data, saying they no longer needed it to calculate how much he was owed.

A dispute between Makate and his funders also took an ugly turn, potentially causing delays.

When talks ultimately deadlocked, it triggered a clause in the Constitutional Court’s ruling that gave Vodacom’s current CEO the responsibility of determining suitable compensation.

Vodacom Group CEO Shameel Joosub returned with an offer in January 2019 of R47 million for Makate’s “Buzz” idea.

Makate rejected the money and launched legal action in the High Court, arguing that Joosub had made a mistake in his calculations.

The High Court found in Makate’s favour. Vodacom appealed, and the Supreme Court also found in Makate’s favour.

However, it was a close ruling, with a panel of five judges split 3–2.

The critical difference between the two judgements was that the majority said Vodacom should use Makate’s revenue share models to calculate the compensation he was owed.

The minority judgement said Joosub’s models were fine but that he calculated the compensation over the wrong timeframe.

All five judges agreed on one issue: Joosub erred by only calculating Makate’s compensation over five years.

Both the majority and minority judgements said he should’ve calculated the compensation over at least 18 years.

Had one more judge concurred with the minority ruling, Joosub would’ve had to recalculate the compensation using his models.

This would’ve increased Joosub’s offer to over R150 million — an amount Vodacom would likely have been willing to pay to put the Please Call Me saga to bed.