The ‘David v Goliath’ saga of Makate v Vodacom, which proceeded all the way up to the Constitutional Court, highlighted the risks organisations face if they fail to properly address the ownership and commercialisation of potentially lucrative ideas created by their employees.
Key take-away’s of Makate v Vodacom for your organisation
- What do your employment contracts say?
- What are your policies around ownership and commercialization of your employee-created intellectual property?
- Take steps to protect your intellectual property.
Summary of the facts of Makate v Vodacom
Makate was employed by Vodacom as a trainee accountant. During that time, he came up with “Please call me”, an idea born out of his long-distance relationship with his girlfriend, now wife. They had experienced communication difficulties, mainly because his girlfriend could not afford to buy airtime to make telephone calls to him. As a result, Makate had to initiate all calls. He therefore came up with the idea whereby a cellphone user, who had no airtime, could send a request to another cellphone user, who had airtime, asking that person to call him.
Makate wrote the idea down and, on the advice of his manager and mentor at Vodacom, took the idea to Vodacom’s Director and Head of Product Development, Mr Geissler. They agreed orally that Vodacom would experiment with the idea and, if it proved commercially viable, Makate would be paid a share of the proceeds subject to the exact terms being negotiated at a later stage. Vodacom rolled out the idea in March 2001 which proved to be a runaway success, generating billions of rands for Vodacom. Makate however did not receive a penny and after unsuccessful attempts to have Vodacom honour his oral agreement, he instituted legal proceedings, which eventually culminated before the Constitutional Court. The main thrust of the Makate v Vodacom case revolved around the enforcement of Makate’s oral agreement with Vodacom and the payment of compensation to him for using his idea in the overwhelmingly successful “Please call me” messaging system. Having found that Makate had indeed shown that there was an ‘agreement to agree’ with Vodacom, the Constitutional Court ordered Vodacom to start negotiations with Makate to determine the compensation due to him.
Who owned “Please call me”?
The issue around ownership of the rights in “Please call me” was not specifically dealt with the Makate v Vodacom Constitutional Court decision; the Court accepting that Makate was the owner of the idea. Vodacom had originally asserted that, under Makate’s employment contract with Vodacom, the idea belonged to Vodacom and that Makate was not entitled to compensation, they later abandoned the claim – it was in any event fundamentally flawed.
The South African legal position – in a nutshell
South African intellectual property laws permits the transfer of ownership of intellectual property created by an employee to an employer where it has been made “in the course and scope of” the employee’s employment. Generally, this position is made expressly clear in employees’ employment contracts.
In Makate v Vodacom, however, the “Please call me” idea was unrelated to Makate’s role as a trainee accountant.
The idea was developed in Malate’s spare time and outside the scope of his employment with Vodacom. Vodacom’s Managing Director even enthusiastically praised Makate in an internal newsletter stating ‘… the idea of the product came from one of our staff members whose job is not in any way related to product development’.
Vodacom could never, therefore, have had any legitimate claim to ownership of “Please call me”, at most they could have obtained a right to use the idea in their products, which is what they orally agreed with Makate to do. You can read the full judgment.