Please Call Me idea-man hits back at Vodacom

Nkosana Kenneth Makate has filed responding papers in the Constitutional Court to challenge Vodacom’s appeal against his victory in the Supreme Court earlier this year.

In his papers, Makate argues that Vodacom’s claims do not hold water and that it should not be allowed to appeal to the apex court as its case lacks the constitutional grounds to do so.

Makate’s response comes after the Constitutional Court issued a directive in August allowing Vodacom to proceed with its appeal against the Supreme Court ruling.

The matter is once again before the Constitutional Court because Vodacom and Makate couldn’t agree on what constituted reasonable compensation for his “buzzing option” idea that was developed into Please Call Me.

In 2016, after eight years in South Africa’s court system, South Africa’s apex court ruled in favour of Makate and ordered the parties to negotiate reasonable compensation in good faith.

The Constitutional Court’s ruling effectively disregarded questions of whether Makate’s idea was novel, practical, and whether MTN had patented it first. Instead, it focused on the contractual aspects.

It found that, on the balance of probabilities, there was a verbal agreement between Vodacom and Makate to compensate him for his idea.

Among the evidence the court relied on was an email exchange between Makate and Vodacom product development head Philip Geissler about “rewards” for his idea.

Geissler told Makate that coming up with ideas to help Vodacom reach its goals was part of normal business.

Within that context, he promised to speak to then-CEO Alan Knott-Craig on Makate’s behalf regarding compensation — provided Please Call Me was successful.

Foreseeing that talks would inevitably break down, and in line with the above, the Constitutional Court designated Vodacom CEO Shameel Joosub as the deadlock-breaker.

Joosub returned with an offer of R47 million, which Makate rejected as “shocking” and “an insult”.

He challenged Joosub’s methodology for determining the amount in the High Court, which ruled that the Vodacom CEO had to recalculate the compensation.

The High Court also set several directives Joosub had to follow in calculating the compensation.

These included that Makate was entitled to 5% of the total voice revenue generated from Please Call Me over 20 years — from March 2001 to March 2021.

It also stated that Makate should be awarded the time value of money calculated at 5% for each successive year.

Vodacom took the matter to the Supreme Court of Appeal (SCA), which amended the High Court’s ruling and opted for a more direct approach.

It stated that Vodacom must pay Makate between 5% and 7.5% of the total voice revenue its Please Call Me product generated over 18 years, plus interest.

Crucially, the court ordered that Vodacom should use Makate’s models to calculate how much revenue Please Call Me generated. The ruling did not stipulate which of the three models Vodacom should use.

This led to Vodacom seeking leave to appeal in the Constitutional Court.

In its court papers, Vodacom said the Supreme Court had infringed on its right to a fair hearing by, amongst others, delivering a ruling that was too vague to be enforceable.

Vodacom said that according to the figures Makate presented before the Supreme Court, the order effectively directed it to pay compensation of between R29 billion and R63 billion.

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

Regarding the merits of the case, Vodacom cited the Constitutional Court’s 2016 ruling, which stated that Joosub had to determine reasonable compensation.

In defence of the reasonableness of Joosub’s determination, Vodacom explained that its CEO considered four different models to calculate Makate’s compensation.

Joosub then averaged the figures of the two models that favoured Makate most.

Vodacom argued that even considering a revenue-sharing agreement was generous because the final Please Call Me product differed significantly from Makate’s original idea.

Makate had proposed a system to “buzz” a phone with a missed call regardless of whether you had 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.

Makate responds

Makate said there was a central flaw in Vodacom’s argument that the Constitutional Court should hear the case on fair hearing grounds.

“Fair hearing rights are procedural in nature and concern the conduct and procedure of the hearing,” his court papers stated.

He also rebutted Vodacom’s contention that the SCA ruling was vague, stating that the mobile operator’s claim was based on a blinkered reading of the judgment.

“Properly interpreted, in the light of the judgment and pleadings, the order is clear.”

In essence, Makate argued that Joosub had agreed that 5% revenue share was suitable compensation and Vodacom did not dispute it.

Therefore, by the time of the Supreme Court hearing, the parties had effectively agreed that 5% revenue share was suitable compensation.

Makate also said he had already told the Constitutional Court in an earlier responding affidavit that he had abandoned the portion of the SCA order granting him up to 7.5% revenue share.

He had also abandoned a portion of the interest clause.

Makate said this renders Vodacom’s claim of vagueness moot.

According to Makate, he had already made clear to the court that he was seeking R9.4 billion as compensation — not R29 billion to R63 billion as Vodacom suggested.

Regarding the issue of the idea’s value, Makate said that Vodacom’s argument that the idea lost its commercial value when MTN launched its Call Me service was incorrect.

He cited the fact that Vodacom continues to offer Please Call Me and that even in 2016 — 15 years after it first launched — Vodacom’s network sent 23.6 million PCMs per day.