Your brand is an asset. You’ve licensed that asset to another company. They agree to pay you royalties for using your trade mark. However, that company has changed hands and no longer wants to use it. Where do you stand?
The Court of Appeal in London recently considered the small print in a $160 million ‘jumbo’ dispute.
Background
In 2018, Virgin America merged with Alaska Airlines. It ceased to exist, and Alaska assumed all its rights and obligations. This included a trademark licence agreement with Virgin Aviation for its brand use. Under the terms of that licence, a minimum payment of $8 million was to be made annually until 2039.
By mid-2019, Alaska had ceased using the Virgin brand and stopped making licence payments. Alaska relied on a slip clause within the agreement, arguing that it didn’t have to pay royalties if it didn’t use the trade mark. Virgin maintained that the phrase “without the payment of royalties” did not absolve Alaska of the obligation to pay the “Minimum Royalty”.
The trial judge found for Virgin. Alaska appealed.
Judgment
The Court of Appeal held:
“Words giving primacy to one provision must of course be given effect where appropriate, but only to the extent that there would be an inconsistency or conflict between that provision and another.”
There was no ‘inconsistency or conflict’ between the clauses. Accordingly, any ‘trumping provision’, as Alaska contended, was not engaged. Alaska remains bound to pay the Minimum Royalty regardless of whether additional royalties become payable.
The decision of the High Court was upheld.
Comment
This case is an expensive example of the importance of paying attention to the small print. It is essential to distinguish between a decision not to use the trade mark and the premium to be paid for that right. Clear and concise language can help both parties to understand their rights and obligations, saving time and money.
For more information about this article or any other aspect of commercial law, contact your Napthens Solicitors in Preston, Liverpool, Blackburn, and across the North West today.
