Makate v Vodacom: Intellectual property in mist of a contractual dispute

June 1st, 2019
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The case between Makate and Vodacom (Makate v Vodacom Ltd 2016 (4) SA 121 (CC)) is mostly categorised as a contractual dispute. The case stems from an oral agreement, for use of the idea behind Vodacom’s product now famously known as ‘Please Call Me’. The agreement was concluded between Mr Makate and then Director of Product Development and Management at Vodacom, Mr Geissler. The Constitutional Court (CC) upheld the agreement as a valid and enforceable contract. The court reasoned that Mr Geissler had ostensible authority to conclude a valid contract with Mr Makate. Accordingly, the court ordered that, Vodacom, the principal of Mr Geissler, negotiate compensation with Mr Makate and if the parties could not agree on the amount, the Chief Executive Officer of Vodacom had to determine a reasonable amount within a reasonable time.

In the history of the Makate case, intellectual property rights, particularly patent rights have received only passing treatment. For example, despite Vodacom having acknowledged Mr Makate as the brains behind the idea, the company later accused him of having stolen the idea from an MTN patent (patent number ZA2002/04150) protecting a similar product, which was launched a month earlier than the analogous Vodacom product. Similarly, Mr Kahn, who was a co-inventor in the MTN patent also supported this view. However, Mr Kahn stated that a wrong patent was the subject of the testimony at the trial court and that the correct patent number is ZA2002/05184. In the trial court, Mr Makate employed the services of an expert witness, Mr Zatkovich, to deal with the defence’s accusation that his idea lacked originality. With reference to the MTN granted patent number ZA2002/04150, the court accepted Mr Zatkovich’s testimony that the objectives of Mr Makate’s idea were met by the ‘Please Call Me’ product but differed from the MTN patent. This evidence was never challenged or dismissed as irrelevant to the matter at hand. Seemingly, there is a need to give clarity on the issue raised by Vodacom and Mr Kahn. In an attempt to provide clarity on the issue of patent rights arising from the Makate case, the authors of this article give an overview of the South African patent prosecution system, outlining what constitutes infringement (‘stealing’) and when infringement proceedings may be instituted with reference to the cited MTN patents and the ‘Please Call Me’ idea.

In terms of the South African Patents Act 57 of 1978 (the Act), a patent application may be filed as a provisional or complete application. A provisional application must fairly and conceptually describe an invention and secures a date of filing (priority date). An applicant can subsequently file a complete application, which must be accompanied by at least one claim, a full specification sufficiently describing an invention and a priority date claim if one is available. Alternatively, an applicant has an option of filing one complete international application under the Patent Cooperation Treaty (PCT) to seek simultaneous protection for an invention in any of the PCT contracting states. Eighteen months from the earliest priority date, the International Bureau (IB) publishes the specification of a PCT application, together with a search report and a written opinion on the patentability of a claimed invention. An applicant has 30 or 31 months from the earliest priority date to approach their contracting states of choice to seek grant of an application. It is important to stress that at this stage one is still dealing with a patent application and not with a patent.

The patent, which was the subject of the testimony in the trial court, had been filed as a provisional application (application number ZA99/7346) on 26 November 1999, citing Mr Kahn as one of the inventors. Subsequently, PCT application was filed on 23 November 2000, claiming the priority date of the South African provisional application. The contents and details of the application by all accounts remained confidential and only became public knowledge on publication by the IB on 31 May 2001 (publication number WO 01/39 468 A1). Later, a complete patent application was filed in South Africa on 24 May 2002 and a patent was granted on 30 July 2003 with patent number ZA2002/04150. The patent later lapsed in 2003, due to the non-payment of renewal fees.

With reference to the patent claimed to be of correct relevance by Mr Kahn, the application (application number ZA2001/0609) for the patent was filed on 22 January 2001. Subsequently, a PCT application was filed at the IB on 22 January 2002, which was made open to public inspection on 25 July 2002 (publication number WO 02/058 417 A1) and granted in South Africa with publication number ZA2002/05184 on 26 March 2003.

This patent also lapsed in 2007 due to non-payment of renewal fees. Only on 30 July 2003 and 26 March 2003 did patent rights accrue for the respective MTN patents in South Africa. This view is derived from s 44(3) of the Act, which provides that a patent shall have effect from the date of publication, which is also the grant date.

On grant, the effect of a patent is to exclude third parties from ‘making, using, exercising, disposing or offering to dispose of, or importing the invention’ in South Africa for the duration of the patent (s 45(1) of the Act). Any of the aforementioned acts constitute infringement, unless such acts are committed on a non-commercial scale for the purpose contemplated in s 69A of the Act.

However, there is a nine-month moratorium from the date of grant within which no infringement proceedings may be instituted. Therefore, in principle, infringement proceedings could only have been instituted from 30 April 2004 and 26 December 2003 for the ZA2002/04150 and ZA2002/05184 patents respectively. However, at the relevant date the ZA2002/04150 patent had lapsed.

At this point, it is important to remember that it was never disputed that Mr Makate pitched the ‘Please Call Me’ idea to Vodacom in November 2000. In fact, Vodacom even relied on this fact to raise a defence that Mr Makate’s claim had prescribed in terms of s 11(d) of the Prescription Act 68 of 1969 (see Makate v Vodacom (Pty) Ltd (GJ) (unreported case no 08/20980, 1-7-2014) (Coppin J)).

Based on the foregoing analysis, it is difficult to understand how an infringement action could have been brought to court. It thus becomes apparent that Mr Makate could not have infringed the MTN patents as there were no patent rights to infringe.  In addition, Mr Makate could not have derived the ‘Please Call Me’ idea from the subject matter of MTN’s patent applications because these applications became public information after Mr Makate had pitched the idea to Vodacom.

Disclaimer: This article only reflects personal opinions of the authors. It is not intended to be legal advice and is not attributable to the employer of the authors. The authors consciously decided not to comment on whether the MTN patents met patentability criteria and the possible reasons behind the lapsing thereof. Answers to this question require a detailed technical explanation but are nonetheless simple to arrive at using the information cited in this article.

Anathi Njokweni PhD Biotechnology (UWC), Masisange Mketsu MSc Biochemistry (UWC), and Thandanani Cwele PhD Chemistry (UKZN) are patent searchers at the Companies and Intellectual Property Commission in Pretoria.

This article was first published in De Rebus in 2019 (June) DR 4.