On 11th June, Alaska Airlines lost an appeal in a significant $160 million trade mark case against the Virgin Group. This follows a ruling from a London court last year, which determined that Virgin was entitled to royalties despite the U.S. airline no longer using the Virgin brand.
Virgin units, Virgin Aviation TM Ltd and Virgin Enterprises Ltd, successfully argued that Alaska Airlines is obligated to pay an annual “minimum royalty” payment of approximately $8 million until 2039. This obligation originates from a 2014 trade mark license agreement between Virgin and Virgin America Inc, which Alaska’s parent company acquired in 2016. The agreement stipulates the annual payment irrespective of whether Alaska uses the Virgin branding.
Last year, a judge at London’s High Court ruled that the minimum royalty was “a flat fee payable for the right to use the Virgin brand, whether or not that right is taken up.” Alaska Airlines contended that it was “commercially nonsensical” to pay $8 million a year for trade marks it had no intention of using and sought to overturn the ruling. However, on Tuesday, the Court of Appeal in London rejected Alaska’s appeal. Judge Stephen Phillips stated in a written ruling that Virgin’s interpretation of the agreement was correct.
A license agreement in the UK is a legal contract wherein the owner of a trade mark (the licensor) grants permission to another party (the licensee) to use the trade mark under specified conditions. Such agreements are crucial for maintaining control over the use of a brand while allowing others to benefit from the established reputation and goodwill of the mark. A well-drafted license agreement typically outlines the scope of the license, including the duration, territory, and the specific goods or services covered. It also includes terms on royalty payments, quality control measures to ensure consistency with the brand’s standards, and provisions for termination in case of breach of contract.
In the context of the Alaska Airlines and Virgin Group dispute, the 2014 trade mark license agreement required Alaska Airlines to make annual minimum royalty payments to Virgin, regardless of whether the Virgin brand was actively used. This illustrates the potential long-term financial obligations that can arise from such agreements. It underscores the importance for businesses to carefully negotiate and understand the terms of any license agreement they enter into, as these terms can impose significant financial commitments and operational constraints, long after the cessation of active use of the licensed trade mark.
This decision highlights the importance of thoroughly understanding and negotiating license agreements, as their financial implications can extend far beyond the initial terms of use.
Should you have questions regarding a license agreements please contact us at info@nbrg.co.uk or call 0800 069 9090.
