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. While we knew what Alaska was trying to do, there’s now an update, as a court has approved Alaska’s request.
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 trying to get decision overturned with lawsuit
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 in recent times, the company has been trying to take 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). And even more specifically, the company has the right to exclude others from using the Virgin brand on US domestic flights, and in other select international markets.
Alaska is arguing 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.
A US District Court has now approved Alaska’s request to initiative discovery into Delta, and secure evidence for the lawsuit. Following the court order, Alaska will serve Delta with a subpoena for deposition testimony and documents and communications that are relevant to this partnership. In a statement, Alaska shared the following:
“Through its loyalty program with Delta Air Lines, Virgin Group has repeatedly infringed upon Alaska’s exclusive right to use the Virgin trademark in the U.S. We are pleased that the Court has granted our request to obtain discovery from Delta for use in our U.K. lawsuit against Virgin for breaching our trademark license agreement. This discovery will provide additional evidence of Virgin’s scheme and will help illustrate how Virgin’s conduct benefited both Virgin and Delta at Alaska’s expense and in violation of the trademark license agreement.”
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 makes money from the Flying Club program (and even more broadly, Virgin Group makes money from its Virgin Red loyalty program), and the ability to redeem on domestic Delta flights is one of the upsides of the program. So it’s hard to argue that Virgin Group isn’t in any way benefiting from Virgin branding within the United States.
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?
This will become even more interesting with Alaska’s entrance into Heathrow is my small prediction.
like British courts might impound an AS aircraft if they refuse to pay?
Oh no... "a judge in London ruled in favor of Virgin Group"... anyways.
Alaska should refuse to pay that unenforceable judgment, especially these days, where our current government does not give a flying Fuddrucker about enforcing international agreements.
Alaska to Virgin: "Make me."
And, I don't mean any of that is 'okay,' because it isn't, but, let's get real, the 'rules-based order' of the last 70 years is evaporating, rapidly, so expect promises to not be kept, and few to do anything about it. 'Might makes right' is back, and me no like-y.
it's laughable that you argue incessantly against the current administration and then do exactly what you accuse them of doing...
The judgment would be enforced by the US court, not the administration. Assuming the UK court had jurisdiction, it would absolutely be enforced against any AS assets within the reach of the US court, like their bank accounts. This sort of proceeding probably happens every day.
see above.
and the comment had to do with 1990's railing against the current President defying laws for his sake while advocating for the very same principle
Laws are not for when we like them and non-laws when we don't like them.
It sounds like AS has a strong argument that Delta and Virgin are marketing domestic flights using Virgin branding. That’s the whole point of the code share, after all. I’m also reasonably confident that Delta displays Virgin branding and flight numbers on domestic flights at the airport.
Delta can legally sell seats in the US market; Virgin Atlantic cannot and does not.
VS legally cannot sell a domestic flight in the US; a stopover is still a segment that is part of an international journey.
How anyone that even understands air transportation at the most basic level can see it any other way is hard to understand.
Again, AS bought Virgin America with the full intent of dismantling the Virgin brand...
Delta can legally sell seats in the US market; Virgin Atlantic cannot and does not.
VS legally cannot sell a domestic flight in the US; a stopover is still a segment that is part of an international journey.
How anyone that even understands air transportation at the most basic level can see it any other way is hard to understand.
Again, AS bought Virgin America with the full intent of dismantling the Virgin brand and found out that the contract they signed requires them to pay for the use of the Virgin brand even though they have not used it.
Alaska's strategic mistakes and ignorance of what they signed is not a crisis for anyone else or obligate anyone else to bail AS out.
btw, this case has gone through British courts - and AS lost.
The issue isn't whether Virgin can "sell seats" on a domestic flight. The issue is whether Delta and Virgin are marketing domestic flights using Virgin branding, thus violating AS's right to exclusive use. As to the litigation in UK courts, it shouldn't be a surprise that they decided in favor of a British company over an American one.
Tim, I’m an aviation lawyer and have a reasonable understanding of the issues. I appreciate that AS has a contractual obligation to pay VS the royalty as determined already by the court, but VS must also provide whatever it has agreed to under the contract. If AS has the exclusive right to use Virgin branding on domestic US flights as they claim in the lawsuit, VS may be in breach of contract for allowing DL...
Tim, I’m an aviation lawyer and have a reasonable understanding of the issues. I appreciate that AS has a contractual obligation to pay VS the royalty as determined already by the court, but VS must also provide whatever it has agreed to under the contract. If AS has the exclusive right to use Virgin branding on domestic US flights as they claim in the lawsuit, VS may be in breach of contract for allowing DL to use that branding for codeshare purposes. VS doesn’t have to operate the flight for its branding to be used. They didn’t operate the Virgin America flights.
no, John, AS is fishing for yet another reason to not pay the royalty that British courts said it must pay.
Again, VS does not sell domestic seats in the US. The VS code does not appear in any case for a solely domestic itinerary. DL does and is not restricted in its ability to sell seats in the US any more than AS is.
This is yet another layer of AS trying to find a way out of paying for a contract that it knew it had no intention of using.
@Tim Dunn
“Act Your Wage,” “No Need To Be Extra”
“You do not get paid to argue. Just stop. There’s absolutely no need to be extra. This is not within your job scope. Act your wage. You’re a nobody, not a Delta Spokesperson.”
Explain it to me like I’m 5 - whether the flight is part of an international itinerary arguably wouldn’t matter, as a great deal of DL domestic flights are marketed as VS codeshares and at many airports display a rolling wheel of codeshare airline logos. That, to me, is clearly “marketing” a domestic US flight using the Virgin branding. How the flight is sold doesn’t appear to enter into the language of the contract, this...
Explain it to me like I’m 5 - whether the flight is part of an international itinerary arguably wouldn’t matter, as a great deal of DL domestic flights are marketed as VS codeshares and at many airports display a rolling wheel of codeshare airline logos. That, to me, is clearly “marketing” a domestic US flight using the Virgin branding. How the flight is sold doesn’t appear to enter into the language of the contract, this is strictly a marketing/branding question, isn’t it?
VS does not have the right to sell domestic flights in the US and does not.
Of course AS is trying to blame someone else and get them to foot the bill for AS' strategic mistakes; they knew exactly what they were doing when they bought Virgin America when they intended to abolish use of the Virgin brand.
So, when Virgin sells a flight that includes a code-share connection on Delta . . . and the Delta flight is listed as VS1234 . . . Virgin is not selling a domestic flight? I don't have a dog in this fight but it would seem to me . . .
How about the VA coded flights operated by Delta? even if they are connections to international itineraries, they are marketed as Virgin flights in the US. Especially if thy are not connections within short layover of 24 hours, but truly stopovers.
There is no VA coded flights operated by Delta. VA codeshare flights are operated by United Airlines stateside as it is United which has an agreement with Virgin Australia whose code by the was is VA.
All Virgin Atlantic codeshare flights on Delta are VS which is Virgin Atlantic's code. Meanwhile Virgin America's code was VX.
What I find interesting is Alaska is coming after Delta meanwhile United Airlines is free to use Virgin...
There is no VA coded flights operated by Delta. VA codeshare flights are operated by United Airlines stateside as it is United which has an agreement with Virgin Australia whose code by the was is VA.
All Virgin Atlantic codeshare flights on Delta are VS which is Virgin Atlantic's code. Meanwhile Virgin America's code was VX.
What I find interesting is Alaska is coming after Delta meanwhile United Airlines is free to use Virgin brand domestically here in the United States. Why go after one airline but allow another airline to continue using the Virgin Brand on domestic flights with their partner Virgin Australia? If you're going to go after Delta you have to go after United Airlines as well because both airlines are using the Virgin Brand (differing codes) on select domestic flight
Reason seems obvious to me: AS hates DL. AS doesn’t want to pay. Dragging DL smack into the middle of this serves your purposes while sticking to your enemy in the form of distraction and legal costs. You kill UA in and then you’ve pissed off another competitor who really isn’t coming for you right now.
If Alaska bought Virgin America, only to get rid of everything about them (routes, planes, brand) then why did they buy them?
It was a defensive move to keep another competitor (JetBlue) from buying them and creating a stronger foothold on the west coast.