LONDON – The Virgin Group is suing Alaska Airlines for $160m due to a dispute ongoing over the use of the company’s trademarks during the Virgin America merger.
Alaska Airlines merged with Virgin America back in 2016 at a list price of $2.6bn, with Alaska supposedly due to make royalty payments of $8m annually until 2039.
The Arguments…
With Alaska not using the Virgin branding anymore, they are arguing that they don’t need to make these payments to Virgin anymore.
Virgin is stating that despite this, Alaska is still obliged to make the annual payments each year.
Commenting on the issue was Virgin’s lawyer Daniel Toledano who said the following:
“The minimum royalty is due as a debt, as consideration for the grant of the right to use the Virgin brand, irrespective of whether, and if so how much, the Virgin brand is actually used by Alaska”.
Tom Weisselberg, who is representing Alaska, called Virgin’s interpretation “an obviously surprising one”.
Weisselberg also argues that Alaska is safe from further payments to Virgin because of safeguards made to the airline in 2007 to operate “completely free of the Virgin brand”.
What Does This All Mean?
With Virgin, they want the money that is supposedly owed to them, irrespective of how Alaska Airlines is running its own business post-merger.
As for Alaska, they also have a strong argument in the case that they have the safeguards in place to prevent them from having to make those payments, especially with the Virgin America brand no longer in existence.
However, if such an agreement was made, then Alaska would have to make those payments to Virgin up until 2039, so the space in between is quite the minefield.
It is, of course, understandable why this case has gone to the courts, as an independent adjudicator needs to come up with a specific ruling based on precedence.
Who Will Win?
At this stage, it is unclear who is going to come out on top in this saga, and this case will definitely be one to watch out for as it continues to progress in intensity.
Whatever the outcome will probably have a later effect on the way mergers are conducted in the future and could alter the way such arrangements are made, especially when it comes to trademarks and branding.
Either way, all we can do is sit back and wait to see what happens in this particular case. And it will definitely be an exciting one if it involves changing the landscape of mergers in the U.S.
Overall…
Both sides do have strong arguments, and this is exactly why it is going to the courts. It’s unclear who will come out on top with this and will make the judge’s job a little harder in that regard.
As we continue to follow this coverage, more information will no doubt come out about the contractual agreements made between the two sides when the Virgin America merger happened.
Once we receive that information, then the judge will probably be able to make a sensible ruling based on that.
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