Please Call Me man doesn’t deserve lifelong payments for one idea

Vodacom is arguing before the Constitutional Court that Nkosana Kenneth Makate’s claim that he is entitled to a percentage of all Please Call Me revenue is misguided.

“He is entitled to an amount which reasonably compensates him for his idea. He is not entitled to an annuity for life,” Vodacom stated.

Vodacom filed papers in the Constitutional Court this week appealing the Supreme Court ruling that ordered it to pay Makate between 5% and 7% of the revenue generated by Please Call Me.

Crucially, the Supreme Court of Appeal (SCA) ordered that Vodacom should use Makate’s models to calculate his compensation rather than its own.

These models include the assumption that Makate should have earned a commission for 18 years and that Vodacom should pay mora interest on the amounts.

In its court papers, Vodacom said the SCA ruling effectively increased Makate’s compensation from the R47 million he was offered in 2019, to between R29 billion and R63 billion.

That is roughly 13% to 28% of Vodacom’s entire market capitalisation.

It should be noted that the Supreme Court judgement was split 3–2, with the minority agreeing that compensation should be calculated over 18 years, but using Vodacom’s models.

Vodacom filed papers after the Constitutional Court issued a directive in August allowing the mobile operator to proceed with its appeal.

It directed Vodacom to make its case for why its appeal should be heard on constitutional grounds and file its arguments for why the Supreme Court’s ruling should be overturned at the same time.

This latest salvo in the sixteen-year legal battle between Makate and Vodacom comes after the Constitutional Court had already heard the case in 2016.

Eight years ago, the Constitutional Court overturned a Supreme Court ruling in favour of Vodacom and instead found that Makate was owed compensation.

This was not based on the merits of Makate’s idea but on the finding that there was a verbal agreement between him and his superiors at Vodacom for some kind of compensation.

Makate, a trainee accountants at the time, pitched his idea of a method to “buzz” someone else’s phone without airtime to a superior on 21 November 2000.

His idea was ultimately developed into Please Call Me, which launched on the Vodacom network in 2001.

Makate was not involved in the development or launch of the product. There is also compelling evidence suggesting that MTN was actually the original inventor of “Call Me”.

However, the Constitutional Court ruling essentially found that this was moot because of the likelihood that there was a verbal agreement about compensation for the idea based on the success of “Call Me”, regardless of the above factors.

Makate left Vodacom and sent letters of demand in 2007. He also found funders to back his case and launched legal action against Vodacom in 2008.

After failing in the High Court and SCA, the Constitutional Court ruled in his favour and ordered Vodacom and Makate to negotiate reasonable compensation in good faith.

It also built in a clause for when talks inevitably broke down, making Vodacom CEO Shameel Joosub the deadlock-breaker.

This was in line with one of the emails between Makate and Vodacom product development head Philip Geissler.

Geissler had promised to speak to then-CEO Alan Knott-Craig on Makate’s behalf regarding compensation provided Please Call Me was successful.

However, Geissler had also cautioned Makate that coming up with ideas to help Vodacom reach its goals was part of normal business.

Subsequent court documents have revealed that Makate’s team demanded R20 billion compensation during the negotiations, and Vodacom countered with R10 million.

Current Vodacom Group CEO Shameel Joosub was ultimately called on to break the deadlock and returned with an offer of R47 million in January 2019.

Makate rejected the offer, labelling it “shocking” and “an insult”.

However, in its most recent court papers, Vodacom argued that Joosub’s offer was more than generous.

Vodacom said that despite the SCA finding otherwise, calculating Makate’s compensation using a hypothetical five-year contract was generous, as its standard service provider agreement at the time was 12 months.

“Mr Makate’s only contribution was an idea. He was entitled to reasonable compensation for his idea. But, upon expiry of his contract after five years, he would not have had any further contribution to make,” Vodacom stated.

“Mr Makate did not provide any ongoing infrastructure, goods or services as other normal service providers did. Vodacom would have had no incentive to renew his contract.”

Vodacom also said that Joosub used generous estimate for the base penetration rate of Please Call Me, and adjusted for the time value of money despite Makate not being entitled to mora interest.

It also noted that the final Please Call Me product differed significantly from Makate’s original idea, which was to “buzz” a phone with a missed call even if you had no airtime.

This proved impractical to implement, and Vodacom ultimately built a USSD-based interface with which subscribers could generate a free “Please Call Me” SMS message delivered to a specified phone number.

Another consideration, Vodacom said, was that by the time Please Call Me launched, Makate’s idea was no longer novel.

“His idea, to provide a PCM service, had become public knowledge, first when MTN launched its PCM service on 23 January 2001 and thereafter when Vodacom launched its service on 1 February 2001,” said Vodacom.

“The idea of such a service became public property. It was now an idea available free of charge to every cell phone network worldwide. It no longer had any novelty value. It no longer had any commercial value.”

Vodacom said this should be taken into account when considering what constituted reasonable compensation for the idea.

“In determining the amount of the reasonable compensation payable to Mr Makate, the notional CEO would have had to strike a balance between these countervailing considerations,” said Vodacom.

Constitutional grounds

Vodacom advanced several reasons why the Constitutional Court should hear its appeal, hinging on the right to a fair hearing under the Constitution.

It said that the Supreme Court majority judgement was wrong and unlawful, exceeding its jurisdiction and issuing an unduly vague order.

For example, Vodacom said that ordering that compensation be recalculated over a range of between 5% and 7.5% of Please Call Me revenue was flawed for multiple reasons.

“The CEO awarded Makate 5% of PCM revenue. Makate accepted this percentage and Vodacom did not dispute it. It was thus common cause before the SCA,” said Vodacom.

Vodacom remarked that the SCA’s substitution relief was little more than a copy-and-paste exercise of Makate’s prayers, which added the 7.5%.

In addition, the SCA majority ordered that Vodacom must add mora interest to its compensation calculation.

However, Vodacom argued that Makate had not cross-appealed, and therefore, the High Court’s dismissal of his prayer for interest was not before the SCA.

Vodacom submitted “with the greatest of respect” that the SCA majority had demonstrated a complete lack of awareness of the core issues before the court.