Virgin Group has just won a major lawsuit against Florida’s innovative Brightline train service, and it could be astronomically costly…
In this post:
The history of Brightline & Virgin
For some background, Brightline is Florida’s impressive privately owned train service. It launched in 2018, initially operating between Miami, Fort Lauderdale, and Palm Beach. However, the service has recently expanded to Orlando. The Brightline experience is awesome, for the most part, with modern trains, bright and cheery stations, and friendly service.
In 2018, Brightline entered into a partnership with Virgin, with the plan being for Brightline to be fully rebranded as Virgin Trains USA, making it Virgin’s only US train system. The Virgin brand of course has incredible global name recognition.
While Brightline was supposed to be fully rebranded as Virgin Trains by the end of 2019, that didn’t happen. The Miami station did get Virgin branding above the door, but that’s about it. The trains, as well as none of the other stations, were ever rebranded.
Many wondered what was going on. There was finally an announcement in August 2020, when Brightline revealed that the company had terminated its licensing agreement with Virgin. There weren’t any more details about why. Well, we now know a lot more.
Virgin’s successful lawsuit against Brightline
Virgin has been engaged in a $246 million lawsuit against Brightline over this licensing agreement being terminated. What happened is that Brightline decided to terminate its licensing agreement with Virgin shortly after the start of the pandemic, claiming that the Virgin brand “ceased to constitute a brand of international high repute.”
This came as Virgin Atlantic filed for bankruptcy protection in the United States, and Virgin also lost its train franchise in the United Kingdom.
Virgin filed a lawsuit in London, arguing that Brightline’s allegations were “cynical and spurious.” The judge in the case has now ruled in favor of Virgin. He ruled that Brightline had to prove that continuing to use the Virgin brand “would cause material damage to Brightline’s reputation or the value of its business,” and the company failed to do so.
Virgin has been seeking a settlement of £200 million ($246 million) in damages. The judge has not yet ruled on damages, but suffice it to say that this could be costly.
Here’s the statement that Virgin released about this ruling:
“The Virgin brand has been a symbol of global innovation, exceptional customer experience and entrepreneurship for more than 50 years. Today’s court judgement demonstrates the strength of our business and brand following Brightline’s attempts to breach a long-term licensing agreement. We continue to work with the most dynamic partners across the world to bring ideas to life and change business for good.”
It sure seems to me like Brightline simply had a change of heart regarding the Virgin rebranding, and was looking for a way out. The company already delayed the rebranding before the pandemic, and then once the pandemic impacted demand for just about everything, the company seemed to think it had an easy out.
But when you enter a long term licensing agreement, you can’t just backtrack at will. Brightline had to prove that being associated with Virgin would have harmed the company’s business, and that’s simply an absurd claim. No one would say “oh, I don’t want to take Brightline, I don’t trust the Virgin brand.”
One could certainly argue that Brightline licensing the Virgin name was unnecessary to begin with, but nothing materially changed there as a result of the pandemic, other than Brightline owners obviously trying to get out of a financial obligation.
While it’s not yet clear exactly how much Virgin will be awarded, this will be potentially massive. For what it’s worth, Brightline’s revenue in all of 2022 was just $32 million (yes, revenue, not profit), so a potential nearly quarter billion dollar settlement would just be… wow.
Bottom line
Virgin has won a major lawsuit against Brightline. The Florida train company had a licensing agreement with Virgin, but wanted to get out of it, arguing that the Virgin brand was no longer one of “high repute.” Understandably, Virgin filed a $246 million lawsuit against Brightline, and was successful, as a judge ruled that there was no evidence that being associated with the Virgin brand was harming Brightline’s business.
I’m curious to see just how much money Virgin is awarded, because it could potentially be many years of revenue for Brightline. Then again, Brightline seems more like a real estate play than an actual for-profit train service.
What do you make of Virgin’s lawsuit against Brightline?
Brightline is seriously lacking in safety measures and has killed far too many of our residents. I would think Virgin is better off not attaching its name to Brightline.
Mr, Branson had reneged payments required to aquire shares of ownership per the agreement with Brightline.
He was not only delinquent, but also was experiencing bad financial investments in his other companies.
Hate to see Brightline compromised…and possibly loss of revenue undermine the success of this much needed mass transit in Florida.
How is Brightline a Real Estate Play?
Please explain?
Their rights-of-ways has tremendous value. They are great for power and telecommunications cables. In fact, Sprint gots its start by laying fiber optic cable throughout the west using one of its parent companies railway rights-of-ways. (The Sprint Corporation traces its origins to two companies, the Brown Telephone Company and Southern Pacific Railroad.)
Brightline you need good lawyer.. cause this case you should win it
I’d be more than happy to testify against Virgin!
Look at Virgin Galactic and all the empty promises made to the people of New Mexico.
Virgin has a poor reputation here in the states but really is synonymous with failure, from the regional airlines, the space company and record / entertainment company. The judge needs perspective as anyone can see once you enter bankruptcy, your image loses luster.
Did you actually read the post? The the dispute was in the UK and had nothing to do with bankruptcy. It has nothing to do with image. It was a pure contract dispute. There is no reason why the judge needs perspective.
How can a US, Florida based company be sued in the UK? There is no jurisdiction over them.
The license agreement probably (almost certainly) included a clause whereby Brightline agreed to UK jurisdiction.
It probably cost tens of billions of dollars to build Brightline. If their revenue last year was only 32 million, there seems to be a problem, that’s much larger than the Virgin’s lawsuit. Has Brightline actually been a scam on Florida residence?
It cost nowhere near “tens” of billions. It cost half that - 5 billion. Revenue of 32 million is still horrible, but exaggerating the facts does not make your Pinot more valid.
I think the comments to this post set a record on this site for the number of really bad hot takes from people who seem to think they are lawyers but clearly are not. Just a tremendous amount of pseudo-lawyer nonsense. Kudos all around.
The Virgin brand reputation is strong. Especially with Delta being part owner and Virgin Voyages.
Delta is not part owner of the Virgin brand. Delta is part owner of Virgin Atlantic, which has a license to use the Virgin name.
After finding out that Virgin filed bankruptcy, I would not want to be associated with them either. And they do need to get better lawyers. All they had to do was ride it out for one year after the start of covid, then they could have backed out with proof of loss revenue and sued virgin and win. Because there were less people riding the train and the busses at the orlando station at that time.
Your comment is incorrect in so may ways, I don’t even know where to begin. This is a simple trademark license dispute.
If Brightline's revenue is this low there's absolutely zero chance they caused Virgin $250M in damages because they were never going to generate those kinds of numbers to pay Virgin. So combined with the fact Brightline quite reasonably didn't want people to think it had gone bankrupt, this ruling makes little sense in the real world unless the damages ends up being token, like $1.
That said, Brightline's revenues will probably triple or quadruple next...
If Brightline's revenue is this low there's absolutely zero chance they caused Virgin $250M in damages because they were never going to generate those kinds of numbers to pay Virgin. So combined with the fact Brightline quite reasonably didn't want people to think it had gone bankrupt, this ruling makes little sense in the real world unless the damages ends up being token, like $1.
That said, Brightline's revenues will probably triple or quadruple next year (not this coming year, the year after) as the Orlando extension is now up and running. But their likely profit over the next decade is still going to be much lower than Virgin's proposed "damages".
I don't blame Virgin for trying mind you, I mean, they have a lot of creditors they have to make good...
They will and next few years they will be all right.
The damages to Virgin are lost royalties. Brightline signed a contract, then tried to back out. Virgin does need to prove “damages” as you put in quotes - it is owed the royalties.
Does *not* need to prove damages.
Morons. British judgments have no effect in the USA. You people waste our time with ignorant takes on nothing. Get a freaking JOB!
Moron. A UK judgement often will be enforceable in the USA. Your job clearly is not as an attorney. When Brightline signed a trademark license in the UK with Virgin it probably agreed that any judgement in a UK court would be enforceable in the US. Any decent attorney for Virgin would have included that clause.
Have always viewed this whole thing as a hedge fund play- at tax payers expense ( and eventual tranching to Arab money) with little or no investment $ from the players.
Also believe the true motive for this venture has less to do with commutors and more to do with freight out of the massive port of Miami.
If it had anything to do with freight out of Miami, they:
- Would have double tracked the entire FEC, not the part from Miami to Cocoa - which is the least busy part (It gets busier the further North you go).
- Wouldn't have built the Cocoa to Orlando stretch and signed leases that made it passenger only.
- Would have been ignoring every rail analyst who says it's unnecessary as the...
If it had anything to do with freight out of Miami, they:
- Would have double tracked the entire FEC, not the part from Miami to Cocoa - which is the least busy part (It gets busier the further North you go).
- Wouldn't have built the Cocoa to Orlando stretch and signed leases that made it passenger only.
- Would have been ignoring every rail analyst who says it's unnecessary as the existing stretch has more than enough capacity combined with modern freight rail practices, which the FEC excels at
- Wouldn't have built a separate company to do this
- Would have needed only $200M, rather than $2B+
Even if they'd really disguised a capacity as a passenger rail project and wanted that to pay for double tracking, they could have simply proposed bringing back passenger rail along the FEC, double tracked the entire stretch, run trains for a year or two, and then shut it down. It would have taken less time, achieved the (unneeded) capacity increase, and required much less money and scrutiny.
It's a silly conspiracy theory, originating in the Treasure Coast's airline funded NIMBY campaign, and never made any sense. If you were to disguise a capacity increase as a passenger service, you wouldn't do it that way, and you'd do it in a way that actually leaves you with more capacity at the end of it, which Brightline doesn't.
Only reason Brightline got on my radar was because of the Virgin agreement. And when it went nowhere my interest in Brightline also decreased significantly. I think those announcements got them into a lot of doors and raised a large amount of awareness that they benefited from.
Given how Virgin Group companies work, declaring a brand valueless based on the performance of another licensee is pretty poor.
It’s akin to saying you won’t go to a Disney park again because people sell knock-off Mickey Mouse merch.
So virgin is reduced to licensing it's name like trump used to do? It used to stand for something.. but licencing it's name seems shady.
Virgin was licensing its name well before Trump ever got into the licensing play. Nothing shady about licensing - it’s the quality of the brand that matters.
This is incredibly frustrating. The first new train investment in America in a hundred years and it’s beautiful, well serviced, with growing ridership only to be hobbled by a vengeful Virgin brand led by the worlds poorest billionaire Branson.
I completely disagree that nothing changed on that front during the pandemic *especially* with specific regards to the American market (where Brightline is, and, thus, the relevant market.)
Virginia Australia completely shut down their long-haul operations during the pandemic and sold off all of their long-haul jets, meanwhile Virgin Atlantic also filed bankruptcy as you've noted. With Virgin America also gone, Virgin's brand in the U.S. took a major hit to its value, with Virgin...
I completely disagree that nothing changed on that front during the pandemic *especially* with specific regards to the American market (where Brightline is, and, thus, the relevant market.)
Virginia Australia completely shut down their long-haul operations during the pandemic and sold off all of their long-haul jets, meanwhile Virgin Atlantic also filed bankruptcy as you've noted. With Virgin America also gone, Virgin's brand in the U.S. took a major hit to its value, with Virgin Atlantic being the only thing left and that in bankruptcy at the time.
Showing that this would damage Brightline's company value should have been easy. It sounds to me as if either Brightline's lawyers did a terrible job of representing them or there was some bias in the UK courts involved (or both.) It seems particularly interesting that UK courts even had jurisdiction, considering that Brightline isn't in the U.K.
the licensing agreement is in the UK. Same as with Alaska.
The standard is not whether someone THINKS that the Virgin Brand has been damaged but whether Brightline suffered damage. They can't prove that because it didn't happen.
1. The “relevant” market is irrelevant market. It is a contract, and Brightline decided not to pay what was owed.
2. Of course the jurisdiction was the U.K. - the licensor (Virgin) probably made that a “take it or leave” issue.
3. What Virgin Australia did is completely irrelevant.
4. Damage to Brightline is irrelevant. It agreed to a contract. Virgin’s lawyers (in drafting) were either just better, or Brightline agreed to terms that came back to haunt it.
we agree.
I suspect that Brightline simply wanted to cut costs and thought the original licensing agreement was no longer necessary.
As has been noted, that ship sailed (or train left the station) the minute the ink hit the paper
Ah yes, the US, where you are never wrong and so your first step whenever a decision goes against you is to accuse whoever made it of being biased…
That’s gonna cost …lol
Good luck enforcing the judgement in the US.
Quite easy. A U.S. court will often enforce a judgement from another country, particularly a common law country.
Virgin's best days are behind it.
Virgin needs cash and will do anything to get it.
Plain and simple !!
Is there anything that goes well in Florida?
Generally, Bankruptcy will void most contracts and be determined by the Bankruptcy court. IDK is the bankruptcy was filed in US or UK and that might matter greatly as to the outcome.
bankruptcy allows the bankrupt company to reject contracts but it does not allow a vendor or other party to reject contracts of a bankrupt company.
If it was the case that Brightline could have rejected the Virgin deal on the basis of bankruptcy, Brightline's lawyers sure didn't bother to make it.
And for you and others that clearly seem to miss the point, Virgin Atlantic restructured under UK restructuring laws; the Virgin Group did not.
bankruptcy allows the bankrupt company to reject contracts but it does not allow a vendor or other party to reject contracts of a bankrupt company.
If it was the case that Brightline could have rejected the Virgin deal on the basis of bankruptcy, Brightline's lawyers sure didn't bother to make it.
And for you and others that clearly seem to miss the point, Virgin Atlantic restructured under UK restructuring laws; the Virgin Group did not.
The Brightline contract is with the Virgin Group, not Virgin Atlantic
Bright line is a scam , no one in Florida asked for it no one rides it it's empty most of the time and if I remember write virgin wanted to take it public and when they had to show there books as part of the process it all fell apart , I don't prof Oiess to understand how it makes enuff money to operate but I do know it really doesn't have riders it's Florida great folly.
Lol you sound like a salty Indian River County resident.
Too bad for ya'll the rail has been successful beyond expectations and also has nothing to do with the state gov't/funding.
Btw, they could have zero passengers and still would make money. It's all about the real estate at the stations. They're making billions on apartments, condos, offices, etc.
Good God; please take a grammar class.
Brightline doesn't need to find lawyers, they need to find new train engineers, and ways to prevent people from being run over every week!
All kidding and deaths aside, I'm surprised OMAAT does not discuss the alternatives such as Tri-Rail between Miami and West Palm Beach, or Amtrak that runs from Miami to Tampa via Orlando. The Amtrak train may not be as fast but it's much much cheaper
A car ride is approximately 3...
Brightline doesn't need to find lawyers, they need to find new train engineers, and ways to prevent people from being run over every week!
All kidding and deaths aside, I'm surprised OMAAT does not discuss the alternatives such as Tri-Rail between Miami and West Palm Beach, or Amtrak that runs from Miami to Tampa via Orlando. The Amtrak train may not be as fast but it's much much cheaper
A car ride is approximately 3 and 1/2 hours between Orlando and Miami, much less expensive as well. Of course convenience is a factor for taking the train, but then you still need a rental car when you get down to fort Lauderdale Miami to get around or vice versa up in Orlando.
Rental car can be had for a week for less than the price of one person on Brightline for one trip.
Is brightline nice and is it fast? Sure. Is there value to it compared to the alternatives? I don't think so. And then again I'm not their target audience.
Brightline Trains are sold out on daily basis with over 200K monthly passengers. where do you see empty trains?
Ben nailed it. This has huge negative implications for Brightline and positive implications for the Virgin Group.
There is no basis that has been revealed so far for Brightline to terminate the branding agreement w/ Virgin - and the cost to Brightline could be very large.
The Virgin Group does know a thing or two about commercial train service and could end up operating what is currently known as Brightline.
Stagecoach was the actual operating partner of the Virgin - Stagecoach JV that was Virgin Trains. Virgin lent capital and branding and marketing expertise. Virgin did not have any operational responsibility.
correct. Virgin was the source of capital and had marketing input.
Whether Virgin "operates" Brightline is not what I was getting at but that they could well have a role in the future of Brightline if a judgment that far exceeds what Brightline can pay.
Didn't Virgin have a similar case against Alaska, when they retired the brand before the end of the licensing agreement? I wonder what ever happened to that...?
Alaska lost.
Hope brightline files bankruptcy and the get bought out by Amtrak for pennies on the dollar. Amtrak is the only train service I trust due to the long track record of operations.
"Amtrak is the only train service I trust due to the long track record of operations." To paraphrase an early commenter --- Tell me you know nothing about Amtrak without telling me you know nothing about Amtrak:-).
@Mark never said they were on-time operations :')
More seriously, both Brightline and Amtrak has purchased locomotives and passengers cars from the same manufacturer (Siemens). However Amtrak has had serious issues keeping the locomotives in service and just getting the passenger cars certified for service. Brightline doesn't seem to have any such issues.
For the record, Amtrak is funded by the United States of America’s taxpayers. Bright line is private.
Imagine trusting an underfunded department of our government over a private business that has way more to lose....
Btw, Brightline is a subsidiary of Florida East Coast Industries. Aka Henry Flagler, aka the company that brought rail to South Florida and has owned it ever since. I think they know what they're doing...
Imagine trusting a private business as a consumer... Also, Amtrak is not a department of the government. It's a for-profit corporation in which the federal government is the majority stockholder.
That all being said, I agree that Mark's original position is absurd. Wishing for the collapse of a new competitor just because all you've known (and therefore all you trust) is the longtime monopolist? Terrible idea.
Would the damages somewhat be based on the actual impact this had on Virgin? There are penal damages which are meant to deter and there are damages which are meant to compensate for lost revenue. A $32 million a year business, albeit one that is growing, would be made bankrupt and would never be able to pay the damages, but I'm sure Virgin is arguing that their reputation was impaired by Brightline rejecting the Virgin...
Would the damages somewhat be based on the actual impact this had on Virgin? There are penal damages which are meant to deter and there are damages which are meant to compensate for lost revenue. A $32 million a year business, albeit one that is growing, would be made bankrupt and would never be able to pay the damages, but I'm sure Virgin is arguing that their reputation was impaired by Brightline rejecting the Virgin brand and years of future income were lost. And with it being a UK court I don't how civil suits differ there and the court is less likely to care about any impact on Brightline, so who knows what will be decided.
Not a UK lawyer and I haven't seen the relevant contract, but my guess is that Virgin would be awarded their lost profits under the terms of the contract (i.e. what Virgin would've netted if Brightline hadn't breached the agreement).
If the Alaska / Virgin TM lawsuit is anything to go by, the license was probably for 20 or 30 years (which is a loooong trademark license). Virgin is probably seeking 20 or 30 years of royalty payments. Doubtful the Virgin is arguing that its reputation was harmed - it simply wants the royalty payments that Brightline was contractually obligated to pay.
I'm sorry to disagree strongly, but there is no worse hit to brand value than bankruptcy. It was not a change of heart as you describe it. It was a very, very significant change in circumstance. Agree with TravelinWilly, Brightline needs to find better lawyers.
"There is no worse hit to brand value than bankruptcy." Tell me you know nothing about business without telling me you know nothing about business.
Yeah? What's blockbuster's brand worth these days?
First, bankruptcy of which party? Brightline going bankrupt would not affect the value of the Virgin brand.
Second. it certainly was a change of heart. Perhaps caused by the pandemic, but Brightline decided it wanted out of the license. It terminated (or tried to) the license, and Virgin sued. Now IF Brightline had actually gone bankrupt, and filed for bankruptcy, there is a very good chance it could have gotten out of the license....
First, bankruptcy of which party? Brightline going bankrupt would not affect the value of the Virgin brand.
Second. it certainly was a change of heart. Perhaps caused by the pandemic, but Brightline decided it wanted out of the license. It terminated (or tried to) the license, and Virgin sued. Now IF Brightline had actually gone bankrupt, and filed for bankruptcy, there is a very good chance it could have gotten out of the license. It thought it could use the pandemic as an excuse. I do agree that Brightline needed better IP counsel - for better counsel would have said either "pay up" or file for bankruptcy (if that was an option).
I think you are missing the point. It's not the bankruptcy of Brightline that was at issue. It was Virgin that looked as if it might go bankrupt at the beginning of the pandemic when the UK govt was making it clear there would be no bail out like was done in the U.S. airline sector.
So it was completely reasonable for Brightline to want out of that contract to use Virgin's brand since the...
I think you are missing the point. It's not the bankruptcy of Brightline that was at issue. It was Virgin that looked as if it might go bankrupt at the beginning of the pandemic when the UK govt was making it clear there would be no bail out like was done in the U.S. airline sector.
So it was completely reasonable for Brightline to want out of that contract to use Virgin's brand since the value of that brand had declined significantly since that agreement was struck and Virgin “ceased to constitute a brand of international high repute.”
Sounds like Brightline needs to find new, competent lawyers.