Vodacom says its CEO Shameel Joosub’s determination of compensation to Nkosana Makate for his “Please Call Me (PCM)” idea was reasonable and his process was imminently fair and Makate was bound by it.
The telecommunications giant made this assertion in its replying submissions before the Constitutional Court, where it is appealing a Supreme Court of Appeal (SCA) judgment earlier this year.
Vodacom went to the Constitutional Court in February in a bid to quash a ruling by the SCA that it should make a new compensation offer to Makate for his PCM idea. The SCA set aside a R47m offer that Joosub made to Makate five years ago and which he rejected.
Instead it ordered Vodacom to pay Makate between 5% and 7.5% of the total voice revenue generated by the PCM service over an 18-year period from March 2001, plus interest.
In its submissions Vodacom said the vagueness of the SCA’s orders could not be cured by Makate’s purported abandonment of select words in the order.
Makate had said because he had “abandoned” certain words in the SCA majority’s order, there was no prejudice to Vodacom from the SCA’s errors.
“Mr Makate does not abandon the SCA’s orders in their entirety nor any particular one of its orders. What he attempts to do instead is to rewrite the SCA majority’s order by 'abandoning' select words within an order in the hope that it reads more sensibly,” Vodacom’s lawyers said in their submissions filed on November 1.
They said this did not assist Makate.
“There simply is no identifiable order that Mr Makate could abandon. It cannot be said whether the SCA majority in fact intended to award 5% of ‘Please Call Me’ revenue, 6%, 7.5%, or any other percentage in that range.
“Mr Makate cannot rescue the inchoate order by striking out its inconvenient portions.”
Vodacom said the conceptual foundations of Makate’s revenue share compensation model were disputed by Vodacom as “seriously flawed”.
It said the shortcomings in his model “resulted in his claim being grossly exaggerated and inaccurate and beyond the realm of what could be considered reasonable”.
Vodacom filed expert evidence which, it said, undermined the foundation of Makate’s compensation model. The expert evidence said the model “lacks a proper economic basis”, being premised on direct monetary participation in an innovation in the absence of having afforded Vodacom monopoly right in the exploitation of the property.
Vodacom said it also filed two additional expert reports by George Houpis of Frontier Economics.
“Mr Houpis said, among others, that, in economic terms, Vodacom would never have reached a revenue share agreement with Mr Makate for a number of reasons, including that Mr Makate bore no cost for implementing or operating the service nor carried any risk for its failure, that PCM has never generated any directly attributable revenue (revenue share agreements generally only occur when prospective revenues are uncertain but can be measured once realised) and Vodacom did not enjoy any exclusivity in respect to Mr Makate’s idea as it might have with a patent,” the lawyers said.
The lawyers said Vodacom had consistently said that there was no determinable direct revenue generated by PCM because the service was not charged for and there was simply no way to determine in the mind of a caller the relationship between a PCM sent to them and a corresponding or induced call.
The lawyers said Vodacom filed two expert reports to assess the reasonableness of the CEO’s determination.
“Those reports dispute Mr Makate’s criticism of the CEO’s determination and affirm that the CEO’s methodology was reasonable and, if anything, generous to Mr Makate.”
Vodacom also disputed a number of statements made by Makate in his replying papers.
Makate had said “it is common cause that Vodacom has earned billions of rand” from his invention.
Vodacom’s advocates disputed this statement and said this was not common cause.
It said it had always been Vodacom’s case that there was no direct revenue attributable to PCM, which was a non-billable service and no accurate methodology to determine indirect revenue.
The lawyers also disputed Makate’s claim that Vodacom “keeps 100% of the revenue for any calls responding to PCMs after the first hour”. Makate also stated the R47m awarded by Joosub was a fraction of the billions of rand that Vodacom had raked in from his invention since March 2001.
Vodacom’s advocates said these exaggerated claims were based on a wholesale acceptance of Makate’s flawed compensation model, which he used to generate his figures.
“That model is disputed in its entirety as are these inflated comparative figures. There is no such thing as direct PCM revenue.”
