Alaska Airlines Not Soaring After Losing Appeal

Alaska Airlines (“Alaska”) recently lost an appeal over a trademark licensing agreement at the Court of Appeal in London, in a decision favoring Virgin Group. Alaska was ordered to pay approximately $8 million per year until 2039 in royalties, even though Alaska no longer uses the Virgin brand.

The appeal gave rise to an issue of contractual interpretation of what was, at its core, a 2014 trademark licensing agreement (the “Agreement”). 

The Agreement was between Virgin Group and Virgin America Inc., the latter of which merged with Alaska, which assumed all rights and obligations under the Agreement. Alaska thereby became party to the Agreement pursuant to which Virgin Group had granted Virgin America Inc. the use of certain Virgin names and trademarks in exchange for yearly royalty payments for 25 years.

By 2019, Alaska had ceased use of all Virgin names and trademarks, and stopped making royalty payments. Alaska was of the view that requiring it to pay millions of dollars per year for trademarks it was not using was commercially nonsensical. 

Virgin Group successfully sued Alaska in London’s High Court. A judge ruled that the royalty was a flat fee payable for the right to use the Virgin brand, regardless of whether that right was exercised or not. 

The Court of Appeal ultimately agreed with the High Court’s interpretation of the Agreement.