In a recent landmark decision, the Supreme Court of Appeal (SCA) resolved a longstanding dispute between Kenneth Makate and Vodacom regarding compensation for the invention of the Please Call Me (PCM) product.
The SCA dismissed an appeal from the Gauteng Division of the High Court, Pretoria, setting aside the previous order and substituting it with a new determination of compensation owed to Makate.
The dispute originated from a Constitutional Court order in April 2016, which mandated negotiations between Makate and Vodacom to determine reasonable compensation for the PCM invention.
In the event of a deadlock, the CEO of Vodacom was directed to determine a fair amount of compensation. However, negotiations failed, leading Makate to challenge the CEO’s determination in the high court.
At the heart of the matter was the interpretation of the Constitutional Court order and the CEO’s mandate to determine compensation.
The SCA examined jurisprudence from South Africa and abroad, emphasising the standard of review applicable to valuation determinations.
While the CEO’s determination was not subject to the provisions of the Promotion of Administrative Justice Act, the court could rectify valuations marred by unfairness or inequity.
The SCA concurred with the high court’s finding that the CEO’s valuation was unreasonable.
However, it noted that the high court failed to assess whether the final compensation amount was manifestly inequitable.
The court determined that the valuation was flawed and inequitable, considering the duration of the agreement between Makate and Vodacom.
In its decision, the SCA clarified that compensation for the PCM invention was intended to last for the duration of the contract between Makate and Vodacom, which the respondent argued should be 18 years.
The court concluded that the high court should have examined the equity and reasonableness of the ultimate decision.
The SCA set aside the high court’s order and substituted it with a new determination: Makate is entitled to be paid 5% to 7.5% of the total revenue of the PCM product, along with the time value of money calculated at 5% for each successive year. This decision marks a significant development in the legal landscape surrounding intellectual property rights and fair compensation.
In a separate dissent, the minority advocated for remitting the matter to the CEO for redetermination in accordance with the Constitutional Court’s order. Despite agreeing with the unreasonableness of the CEO’s determination, the minority believed that the CEO should reconsider the compensation, considering the time value of money over an 18-year period.
The SCA’s ruling underscores the complexities involved in determining fair compensation for intellectual property and highlights the importance of equitable outcomes in such disputes. As the legal saga surrounding the PCM invention continues, the decision sets a precedent for future cases involving innovation, compensation, and contractual disputes in South Africa’s legal landscape.