South Africa's court sides with the inventor of "Please Call Me" at Vodacom's expense.
In 2001 at the age of 39, Vodacom employee Nkosana Makate invented the popular “Please Call Me" functionality (PCM) allowing African consumers to communicate even when they lacked the means to pay for a phone call. But he failed to secure the intellectual property rights to his invention.
“Inventors as creators of intellectual property are not always savvy and sophisticated individuals. They are therefore often vulnerable to exploitation by big business which is able to see and smell the potential of a game changing invention from 10,000 miles away,” notes William Maema, an intellectual property and technology attorney with global law firm DLA Piper.
This lacuna played into the hands of Vodacom Group PLC, the local subsidiary of the second largest mobile network operator in the world, namely Vodafone Group Plc.
As Africa's second largest mobile operator, Vodacom initially denied its ex-employee was the inventor of the service, and then claimed he was not entitled to any financial compensation.
So Makate took Vodacom to court and litigation dragged on for years. In 2016, the case ended up in South Africa’s highest court, the Constitutional Court, which ordered the two sides to negotiate an agreed compensation.
Vodacom—which has a footprint in 32 African countries—offered to pay Makate what it described as an "overly generous" $3.1 million, but the inventor demanded over $1.2 billion in compensation, arguing that the figure constituted 5% of revenue from the service over two decades.
Makate's 21-year quest for just compensation is nearly over with the South African High Court's February 7 decision ordering the telco to pay him 5% of the total voice revenue generated by the product over the past 20 years.
“To me, it is clear Vodacom is defying the Constitutional Court order to act and negotiate in good faith,” said presiding Justice Wendy Hughes.
Additionally, Judge Hughes' ruling gave Vodacom CEO Shameel Joosub one month to make a new determination of appropriate compensation for voice call revenue generated from PCM.
“That total voice revenue includes PCM revenue derived from prepaid, contract (both in bundle and out bundle) and interconnect fees as set out in the second respondent’s annual financial statements,” the ruling stated.
The court added that Makate was entitled to 27% of the number of PCMs sent daily as being revenue generated by return calls and that he should be awarded “the time value of money calculated at 5% for each successive year.”
The court left it to Vodacom CEO's to determine the annual effective rate—which would blend the effective contract rate and effective prepaid rate—to help determine Makate's compensation.
Ngozi Aderibigbe, a Partner and Head of the Intellectual Property Practice of Nigerian-based law firm Jackson, Etti and Edu, insists that new technology companies in Africa must tick off two essential items on their checklists when introducing a new invention to the market or adapting one for their operations.
“Both for employees and inventors on contract, there must be an adequate compensation plan and a proper assignment of the IP rights in the patent. Nonetheless, one thing is certain—more inventors hoping for the big paycheck will be filing lawsuits to enforce their rights, leading to an inevitable rise in patent disputes against technology companies,“ she says.
“Businesses thrive on intellectual property to make huge profits. They have the wherewithal to exploit an invention which, to the creator, means nothing or very little at the time. Because IP is an intangible asset, it is also very easy to steal or undervalue,” adds Ngozi.
DLA Piper attorney William Maema summed up the broader significance of the decision saying, “The biggest outcome of the South African case is the impact it will have on the bargaining power of Inventors of intellectual property and the sensitization of inventors to insist on getting a fair share of the product of their intellectual effort.”