SOUTH AFRICA – Diageo South Africa (Diageo SA) has won back its intellectual property being held by an advertising agency Twotone over default of payment after a South African court ruled in favor of it.

According to court papers, Diageo SA in September 2022 concluded a “creative services agreement” with Twotone, under which the Johannesburg advertising agency was to perform “certain advertising and related services”.

However, the relationship quickly started to deteriorate, and some accounting issues arose between the parties in November of that year.

Diageo SA decided to terminate the agreement in February, exercising its discretionary power under the deal to end it on two months’ written notice.

Twotone explained that Diageo, in terms of the agreement, was obliged to pay the outstanding invoices within 21 business days of termination of the agreement — that is, before March 20, 2023.

The advertising agency relied on clause 24.1.1 of the agreement which states: “Each affected party to this agreement shall pay all outstanding and undisputed amounts due to the other affected party or parties within 21 (twenty-one) business days (or when valid invoices would ordinarily be issued and payable if later) in respect of third-party fees, or other work started or completed at the date of termination.”

Twotone also elaborated that it has a debtor and creditor lien (a right to keep possession of property belonging to another person until a debt owed by that person is discharged) over Diageo SA’s assets until it has paid its undisputed unpaid invoices.

According to the agency, there was no timeline stipulated for it to arrange the surrender of the assets, and it is only bound for the surrender if Diageo fulfills the payment of the outstanding invoices.

Diageo SA, however, argued that it has contractual, property, and constitutional rights under section 25 of the constitution, including intellectual property rights, adding that Twotone is entitled to the surrender of the assets according to the termination of the agreement.

In ruling the heated argument between the two companies, Judge Fiona Dippenaar ordered Twotone to hand over Diageo’s intellectual property in its possession.

“Given the particularised facts provided by the applicant of ongoing harm which it may suffer and the fact that the respondent refuses to release the assets, despite the repeated undertakings provided by the applicant, in my view illustrates a sufficient risk of harm to meet this requirement,” Dippenaar ruled.

“I am not persuaded by the respondent’s arguments that the applicant has addressed this issue in vague terms and is the author of its misfortune as it did not pay the invoices by March 20, 2023, nor by the argument that the link between the respondent’s retention of the assets pending payment and the injuries that may likely to be suffered has not been addressed.”

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