Virgin Aviation TM Limited & Virgin Enterprises Limited vs Alaska Airlines Inc

This case involved a dispute over a trademark licensing agreement between Virgin Aviation TM Limited & Virgin Enterprises Limited and Alaska Airlines Inc, focusing on the interpretation of royalty payment obligations.

TLDR:

• Virgin and Alaska Airlines disputed the interpretation of a trademark licensing agreement.
• The High Court ruled in favor of Virgin, requiring Alaska to pay a Minimum Royalty.
• Alaska appealed the decision, but the Court of Appeal upheld the High Court's ruling.

The case arose from a trademark licensing agreement dated 19 November 2014, under which Virgin granted Alaska the exclusive use of certain Virgin names and trademarks. The agreement stipulated that Alaska must pay a Minimum Royalty each financial year, even if no gross sales were derived from the use of the trademarks.

On 20 July 2018, Virgin America Inc merged with Alaska Airlines Inc, and Alaska ceased using the Virgin Brand by 30 May 2019. Alaska argued that clause 3.7 of the agreement allowed them to perform licensed activities without paying royalties if they did not use the trademarks. Virgin contended that Alaska was still obligated to pay the Minimum Royalty.

In the High Court, Christopher Hancock KC ruled in favor of Virgin, stating that Alaska must pay the Minimum Royalty regardless of trademark usage. Alaska appealed the decision, arguing that clause 3.7 overrode the obligation to pay the Minimum Royalty.

The Court of Appeal, led by Lord Justice Phillips, upheld the High Court's decision. The court found that the Minimum Royalty was a flat fee payable for the right to use the Virgin Brand, regardless of actual usage. The court emphasized that the agreement's language, factual matrix, and commercial considerations all supported Virgin's interpretation.

Lord Justice Phillips noted that clause 3.7 allowed Alaska to operate without using the Virgin Brand without paying royalties for those operations, but it did not absolve Alaska of the obligation to pay the Minimum Royalty. The court also highlighted that the Minimum Royalty provided Virgin with protection against the risk of a complete de-branding.

In conclusion, the Court of Appeal dismissed Alaska's appeal, affirming that the Minimum Royalty was payable each financial year, even if Alaska did not use the Virgin trademarks. This decision provides important guidance on the interpretation of trademark licensing agreements and the obligations of licensees.

Legal representatives: Daniel Toledano KC and Joshua Crow (instructed by Slaughter and May) for the Claimants/Respondents (Virgin), Tom Weisselberg KC and Edward Ho (instructed by Jones Day) for the Defendant/Appellant (Alaska).

Judicial Panel: Sir Geoffrey Vos, Master of the Rolls, Lord Justice Phillips, and Lady Justice Andrews.

Case Citation Reference: [2024] EWCA Civ 622