In 2023, Virgin Group won a $160 million lawsuit against Alaska Airlines, over a trademark dispute. Alaska is still trying to get this overturned, and it now involves Delta Air Lines, with a rather interesting angle.
In this post:
Basics of Alaska & Virgin Group $160 million dispute
In 2018, Alaska Airlines and Virgin America merged in a $2.6 billion deal. Even though Richard Branson’s Virgin brand has great name recognition, Alaska chose to maintain its own identity, and stopped using the Virgin America brand. That’s where the dispute originated.
Back in 2014, Virgin Group and Virgin America entered into a licensing agreement, whereby the airline would have to pay a minimum of $8 million in annual royalties to Virgin Group every year through 2039, for using the Virgin brand.
When Alaska stopped using the Virgin brand, the company believed it no longer had to pay those royalties, arguing it was “commercially nonsensical,” especially with a change in ownership. Not only was the name not being used, but Virgin America didn’t exist anymore as a company. As you’d expect, Richard Branson and Virgin Group had a different take, and believed that the royalties still had to be paid even if the name wasn’t being used, and even if the company had been sold.
The lawsuit went on for years, and in 2023, a judge in London ruled in favor of Virgin Group, awarding the company a $160 million settlement. In the decision, the judge wrote 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.” The judge also added that the agreement “must be approached from the perspective of Virgin and Virgin America and not from the perspective of Alaska.”
Alaska now pursuing this dispute from different angle
Obviously Alaska Airlines doesn’t want to keep paying $8 million per year all the way through 2039, if there’s any way to avoid it. So the company is continuing to try to dispute this judgment, and the company is now taking a different approach.
The idea is that in exchange for the royalties, Alaska has the exclusive right to market domestic US flights with the Virgin branding (since obviously Virgin Atlantic and Virgin Australia also exist, in other markets).
Alaska is now trying to argue that Virgin Atlantic is selling domestic US flights on Delta, and that this qualifies as marketing domestic flights with Virgin branding. In reality, Virgin Atlantic is only selling wholly domestic flights on Delta through its booking channels if redeeming Flying Club points. And those flights aren’t actually Virgin branded (award flights aren’t codeshares), but it just happens to be that you can use Virgin points to book Delta flights.
Because of that, Alaska is subpoenaing Delta for documents related to Alaska’s trademark dispute with Virgin Group. The reason that Delta is being subpoenaed is to determine the company’s involvement in the overall marketing and sales strategy.
This all goes way beyond my knowledge of international law. Does Virgin Atlantic using its marketing channels to promote Delta’s domestic flights using the Virgin name infringe on Alaska being forced to pay for the exclusive use of Virgin branding for domestic flights?
While I don’t think anyone believes that letting Flying Club members redeem Virgin Atlantic points on Delta causes any confusion, ultimately Alaska is paying for exclusivity that it doesn’t want, so you also can’t blame the company for doing what it can get out of this.Virgin Atlantic is using the Virgin brand more than Alaska is for selling domestic US flights, so I’m curious to see if anything comes of this.
Bottom line
Alaska Airlines is still paying $8 million in annual royalties for use of Virgin branding, following the company’s acquisition of Virgin America back in 2018. While Alaska thought it was off the hook for these fees once it stopped using Virgin branding, a judge disagreed.
Now the airline is trying to get out of paying these fees by pointing out that its exclusive use of Virgin branding for domestic flights within the United States is being infringed upon, with Virgin Atlantic selling domestic Delta award flights through its booking channels. I’m curious if this ends up being a more successful argument for Alaska…
What do you make of this Alaska & Virgin trademark dispute?
Alaska had a crap legal argument for their first go, but I will admit that their argument against Delta using the Virgin name in any form or collaborating with the Virgin company to benefit from the use of the Virgin name in the United States seems a lot stronger of an argument.
Was Virgin Atlantic doing Delta redemptions when Virgin America existed; they've had a redemption relationship with Delta longer than Delta being a 51% investor
Alaska doubling down on being dumb. They deserve to have to pay the whole amount.
This is pathetic. Instead of suing Virgin group, Alaska should be suing the law firm that helped negotiate the merger. Alaska and their lawyers screwed up during due diligence.
This dispute is good to settle. Alaska pays Virgin $16M.
Well I think Delta had had interest in Virgin America as well, and Alaska and Delta are arch-rivals in Seattle, so I'm not surprised to that there's a bit of bitterness between them.
no, DL had no interest in Virgin America.
It did have a JV with Virgin Australia.
bitterness and rivalry doesn't matter in the courts.
Either VS is promoting Virgin coded flights within the US and it is pretty clear that is not happening. VS is selling DL coded flights on connecting international flights that include a domestic segment - no different what more than a dozen carriers do with AS.
"Alaska is paying for exclusivity that it doesn’t want, so you also can’t blame the company for doing what it can get out of this" - You absolutely can blame them for it. Surely they've done the due diligence before buying the VX and were aware of the licensing deal?
The whole notion of "oh well, we chose not to use it, so the contract is void" is beyond ridiculous. If I sign a two...
"Alaska is paying for exclusivity that it doesn’t want, so you also can’t blame the company for doing what it can get out of this" - You absolutely can blame them for it. Surely they've done the due diligence before buying the VX and were aware of the licensing deal?
The whole notion of "oh well, we chose not to use it, so the contract is void" is beyond ridiculous. If I sign a two year contract with my cell provider, I'll have to fulfil my obligation to pay even if I decide I no longer need that number after three months.
Yeah. This is a botched merger detail.
(As someone still salty about the merger, I'm cheering Branson on with this.)
Strange that the venue would be London, when the two operating companies were both in the US. It's typical for EU/UK to bend their laws to target and fleece American companies. AS needs to get this dispute in front of a US court if they want a fair shake. In the meantime, tell that old cryptkeeper to pound sand.
according to other sites, this part of the case is being heard in a Georgia court, not exactly a stronghold for Alaska Airlines, a Seattle based airline.
Nothing strange about it - the parties agreed on English law as governing law / UK courts as venue at the time the contract was negotiated and entered into. That simply what the agreement between stipulates - and I suspect this point was heavily negotiated.
No, neither the EU, nor the UK "bend their laws" based on which country are the parties from. We have actual rule of law, unlike our friends behind the Atlantic who like to act as if only Americans have any rights at all.
@Mantis
a) The original agreement was between parent Virgin and what was effectively a subsidiary, so relevant parties much more familiar with English law. And specifying English Courts precisely to avoid the political (and some elected!) judges in the USA.
b) For once Google AI is quite accurate:
Yes, it's common for contracts between American companies to specify English law as the governing law, even if the companies are not based in...
@Mantis
a) The original agreement was between parent Virgin and what was effectively a subsidiary, so relevant parties much more familiar with English law. And specifying English Courts precisely to avoid the political (and some elected!) judges in the USA.
b) For once Google AI is quite accurate:
Yes, it's common for contracts between American companies to specify English law as the governing law, even if the companies are not based in the UK. This choice is often made due to the perceived predictability, neutrality, and efficiency of English law in international commercial transactions.
By fair presumably you mean completely corrupt. Prolly why they had it in london.
@Tim Dunn,
Get over yourself, you add no value to anything you post. If you had wonderful and thoughtful ideas we’d see you in the boardroom at an airline. Instead you post on blogs thinking you’re the smartest person in the room, and you’re really not
Now go cry that AS will remain the #1 carrier in Seattle with today’s announcement.
@james Smith
Go back to the toilet. Tim Dunn is sometimes a little over the top but a world with Tim Dunn is better than him dead.
@James Smith, as opposed to your brilliantly insightful analyses?
Tim Dunn is a staple of this blog, and at least he understands the aviation industry, Delta-bias aside.
You’re contribute nothing here but hate. Go find a sandbox to amuse yourself.
Sounds like somebody did not complete their due diligence thoroughly enough when transacting the merger...
you mean that AS, which lost the lawsuit against the Virgin Group, wants to drag DL into the lawsuit by alleging that VS sells domestic space on DL which DOES have the right to fly within the US. VS doesn't promote the Virgin brand for travel within the US because no Virgin Group airlines fly within the US. Delta does have that right.
It is incredible that an airline that code whores with so...
you mean that AS, which lost the lawsuit against the Virgin Group, wants to drag DL into the lawsuit by alleging that VS sells domestic space on DL which DOES have the right to fly within the US. VS doesn't promote the Virgin brand for travel within the US because no Virgin Group airlines fly within the US. Delta does have that right.
It is incredible that an airline that code whores with so many foreign airlines can't understand how codesharing works and wants to argue about $8 million per year given that will spend far more than the entire Virgin Group settlement integrating HA's money-losing operations.
Alaska got into a pi78ong match w/ B6 for Virgin America, then lost billions trying to compete largely with UA at SFO, only to dismantle most of the Virgin America network because they didn't understand that a premium transcon market really exists - and AS thought their own airplanes were good enough.
the real story is that AS is reportedly ditching parts of their branding but still cling to the Alaska brand and will be surprised why no one in Europe understands why an airline would fly from Europe to SEA on an airline named Alaska.
code whores is sort of an unintentionally brilliant slip of the keyboard. well dunn, old friend
It's a miracle but I actually agree with you here.
Absolutely correct. Ignore the haters who contribute little.
The most premium lawsuit!