Makate v Vodacom (Pty) Ltd (CCT52/15)  ZACC 13 (26 April 2016) has garnered enormous media attention in recent months. This case, referred to as the "Please Call Me" case, provided the public with a rare opportunity to grapple with intellectual property, the laws which govern it and the implications for persons wishing to preserve ideas in the future. The media fixated upon the "David v Goliath" aspect, where a man who had an idea for a new product went head-to-head for nearly a decade with South Africa's telecommunication giant and ended up in the highest court in the land, the Constitutional Court. But what can be taken from this case from an intellectual property perspective?
In 2000, Kenneth Makate came up with the idea that a cell phone user who had no airtime would be able to send a "call me" request to another cell phone user (who had airtime). Makate presented the idea to Mr Giessler, the Director of Product Development for Vodacom at the time.
In 2008, Makate launched proceedings against Vodacom in the high court where he alleged that he had an oral agreement with Vodacom (through Mr Giessler) whereby, if the product was successful, Makate would be compensated. Makate was unsuccessful in the high court but was granted leave to appeal. The Constitutional Court handed down judgement in his favour in April 2016. Vodacom was ordered to commence negotiations in good faith with Makate to determine a reasonable compensation.
This article considers the whispers that this case will bring about a change in copyright law. Neither the high court nor the Constitutional Court considered intellectual property rights in their judgement, but because Makate had claimed compensation for Vodacom's use of his idea, it seemed to mislead people into believing that it involved an intellectual property claim. Copyright law does not protect an idea but rather the manifestation thereof. Merely because the idea was a result of Makate's intellectual labour did not automatically mean that he had intellectual property rights to it.
The Constitutional Court's judgement focused on Vodacom's defence of prescription and lack of ostensible authority. Vodacom raised the defence of prescription as Makate only launched proceedings in the high court in 2008, roughly four years after the launch of "Please Call Me". In terms of the Prescription Act (68 of 1969), claims are said to prescribe after three years. However, Jafta J considered s11(d) of the Prescription Act and whether the word "debt" included Vodacom's obligation to enter into reasonable negotiations with Makate. If Jafta J accepted that Vodacom's obligation was included in the meaning of the word "debt", it would have prevented Makate's access to court as his claim would have been deemed to have prescribed. Access to court is one of the fundamental rights set out in the Bill of Rights and therefore Jafta J held that: "The objects of the Bill of Rights are promoted by, where the provision is capable of more than one meaning, adopting a meaning that does not limit a right in the Bill of Rights" (para 89). He therefore dismissed Vodacom's defence based on prescription, finding that the obligation here was not a "debt".
Vodacom's ostensible authority defence was also dismissed. Vodacom argued that Geissler had not had authority to enter into a contract with Makate. However, the Constitutional Court considered the concept of apparent authority, where a principal (Vodacom) creates the impression that its agent (Giessler) has authority to act on its behalf. Jafta J stated that: "When account is taken of Mr Geissler's position as a member of the Board, the enormous power he wielded in respect of new products, the organisational structure within which he exercised his power and the process which had to be followed before a new product could be introduced at Vodacom...it is clear that Mr Geissler had apparent authority to bind Vodacom" (para 66). Essentially, the court then had to consider whether Vodacom had entered into an agreement with Makate.
Therefore, this case did not focus on intellectual property law but rather on aspects of contract law based on the oral agreement. Nonetheless, this misconception generated questions from the public concerning whether intellectual property protection for individuals who come up with novel ideas is inadequate, specifically because the available enforcement mechanisms can be so expensive. The "Please Call Me" case appealed to the public's empathy as it was seen as an innocent man fighting against a big corporation in order to receive at least some benefit for his intellectual labour. When judgement was handed down in Makate's favour, people began to ask whether copyright law would change so that a work created in the course and scope of one's employment would no longer belong to the employer.
In terms of s21(1)(a) of the Copyright Act (98 of 1978), the default rule is that the author of a work, protected by copyright law, is usually also the owner of the work. However, one of the exceptions to this default rule can be found in s21(1)(d) which provides that: "where the work is made in the course of the author's employment by another person under a contract of service or apprenticeship, that other person shall be the owner of any copyright subsisting in the work by virtue of section 3 or 4". In other words, if a work is made in the course and scope of an author's employment, the employer shall be the owner of the work (own emphasis).
In King v South African Weather Services (716/07)  ZASCA 143 (27 November 2008) (King case), the s21(1)(d) exception was considered when King sought to enforce a copyright claim in computer programmes which he had developed. King had developed the source codes for weather computer programmes, which he used to assist him in collecting, processing and analysing weather related data. These programmes were then incorporated into and became an integral part of the South African Weather Service's (the bureau) business. A dispute arose when King refused to give the source codes of these programmes to the bureau. King alleged that he was the owner of the works and this is where consideration of the s21(1)(d) exception became relevant.
King alleged that the programmes were not written in the course and scope of his employment as he had written them in his own time, at home and for the purpose of assisting himself personally in the performance of his duties as an employee of the bureau. The relevant question which needs to be asked is: "But for the employment, would the employee have created the works?" (para 20). In King's case it was clear that there was a causal connection between King's employment and the creation of the computer programmes. Although King may have created the programmes for his own benefit, without his employment at the bureau, there would have been no need for them. They were, therefore, directly related to the business of the respondent namely; to capture, rectify and transmit weather data.
This exception of "in the course of employment" is still applicable today but the consideration of this exception necessitates an understanding of the particular facts and circumstances. The court in the King case held that: "It appears to me to be dangerous to formulate generally applicable rules to determine whether or not a work was authored in the course of the employee's employment. It remains by and large a factual issue that depends not only on the terms of the employment contract but also on the particular circumstances in which the particular work was created" (para 17).
Ultimately, the King case is still authority for work created "in the course of employment" and the "Please Call Me" case has not affected copyright law. The fact that Makate approached his employer with his new idea and subsequently successfully obtained an order for Vodacom to enter into reasonable compensation negotiations with him, misled people to believe that this compensation was based on his intellectual property rights. In turn, rumours arose that the s21(1)(d) exception may be changed. This is incorrect and, had Makate attempted to claim intellectual property rights in his idea against Vodacom, the King case would have been authority.
So what can we learn from this case? It cannot be denied that it leaves us feeling satisfied, with a sense that equity and justice have prevailed. In Jafta J's judgement he stated: "['Please Call Me'] had become so popular and profitable that revenue in huge sums of money was generated, for Vodacom to smile all the way to the bank. Yet it did not compensate the applicant even with a penny for his idea. No smile was brought to his face for his innovation... This leaves a sour taste in the mouth" (para 104).
However, the laws governing the creation of a work or idea while "in the course of employment" remain the same and businesses and innovators and the like must be prudent in ensuring that they are aware of both their rights and responsibilities in this regard. As the law currently stands, in the absence of an agreement to the contrary, an employee would not be entitled to compensation for ideas created in the course and scope of their employment. This case was different purely because the parties agreed to negotiate compensation once the commercial profitability of the product had been established. Businesses should take care to avoid being burdened with similar claims when their employees create ideas in the course of their employment. One recommendation would be that, in order to address the "ostensible authority" issue, businesses should clearly set out in their employment contracts exactly who has authority to represent them. Furthermore, businesses should include provisions in employment contracts stating that compensation agreements for ideas will not be binding unless they are reduced to writing and signed by specified executives.
Dormehl is a candidate attorney with Spoor & Fisher, Cape Town. The article was overseen by Jeremy Speres, a senior associate. This article is merely to report, not to advise.