Alaska Airlines (AS, Seattle Tacoma International) is squaring off this week against Virgin Aviation TM Ltd. and Virgin Enterprise Ltd in the Commercial Court of the King's Bench Division of the UK High Court, over claims it owes the Virgin companies up to USD160 million under a Virgin America 2014 trademark licensing agreement. Judge Christopher Hancock is now being asked to determine the precise meaning of the agreement.

The Virgin companies claim Alaska Airlines should be paying an annual royalty fee of USD8 million to use the Virgin America brand. Alaska Airlines acquired Virgin America in 2016 for USD2.6 billion but promptly retired the brand name, bringing the airline's assets under the Alaska Airlines brand. Counsel for the Virgin companies says despite this, the royalty agreement (which is indexed to inflation and runs through to 2039) stands.

Daniel Toledano KC and Joshua Crow of One Essex Court are representing Virgin Aviation TM Ltd. and Virgin Enterprise Ltd, while Tom Weisselberg KC of Blackstone Chambers and Edward Ho of Brick Court Chambers represent Alaska Airlines. Weisselberg told the court that Alaska Airlines isn't obliged to pay a fee for a brand name it has not used and says if the agreement is enforced, it will require the airline to pay a fee for the next 17 years for a defunct brand name. However, Toledano previously told the court Alaska Airlines must pay the annual fee even if it does not use the brand name and derives no revenue from it.

"Alaska is not paying for nothing," he said. "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. It has the right to use the brand, it has just chosen not to use it. It also has the right to exclude others from using the brand." Weisselberg argued that the Virgin Group had "over-engineered" words in the agreement. "If Alaska really was subject to a nine-figure obligation spanning decades, one would expect that would be clearly spelled out," he said.

The Virgin Group lawyers argue that Alaska Airlines benefits from the Virgin America brand even if it does not use it. They say the right to prevent other operators from using the brand has considerable value. The UK-based Virgin Group spent a reported USD600 million building up the Virgin America brand between 2002 and 2013. The airline was then publicly listed via a NASDAQ IPO in 2014.

While Alaska Airlines says there is nothing to stop the Virgin companies from relaunching the Virgin America brand, Virgin counter that relaunching or re-franchising would be difficult because they are not a US-domiciled company.

"It is hardly unfair for the current trademark licensing agreement to place a substantial price on Alaska's right to take the Virgin America brand out of the market," argues a submission from the Virgin counsels.