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Law360, London (March 4, 2021, 1:50 PM GMT) -- Virgin Enterprises is suing a U.S. train operator in London for more than $250 million in damages, accusing Brightline of using the COVID-19 pandemic to get out of trademark licensing deal early.
The company, part of Richard Branson's Virgin Group, has said in its High Court claim that Brightline is trying to end a trademark agreement. (iStock)
According to Virgin's lawsuit, filed on Feb. 10 and now made public, Brightline Holdings LLC began looking for an "opportunistic pretext to extricate itself" from a licensing tie-in after having second thoughts about the deal.
The arrangement allowed Brightline to rebrand its rail service as Virgin Trains USA in return for royalties. The license was meant to last 20 years, with an option to extend it further, Virgin said.
But, in the summer of 2020, in the midst of the coronavirus outbreak, Brightline claimed that the "Virgin brand had ceased to constitute a brand of international high repute, largely because of matters related to the pandemic," the suit says. "This suggestion was, and is, completely false."
Brightline is attempting to avoid its contractual obligations, the lawsuit says. Virgin claims it is entitled to damages that would put it in the same position it would have been in if Brightline had not breached the trademark license agreement.
Brightline told Virgin in April that continuing to use its trademarks would materially damage its brand and reputation, and the U.S. company served a "notice to cure," the suit says.
Lawyers for Virgin says that Brightline would not have continued to use images of its trains on social media if the company had believed the Virgin name was hitting its business. Brightline was posting tweets which prominently displayed pictures showing the Virgin brand around the time that it was trying to exit the contract, the suit says.
According to its claim, Virgin told Brightline that its attempts to cut ties in this way would amount to a "material breach and repudiation" of their agreement. Virgin then served its own notice of termination in August, the suit says.
"The Virgin brand has, at all material times, remained a brand of international high repute," the claim says. "The defendant was not entitled to terminate the trademark license agreement."
Under the terms of the licensing deal, the earliest at which Brightline could lawfully have exited the contract was 2023 — although the company would have had to pay an exit fee. Virgin is suing to recoup the royalties it should have paid until this date plus the early termination fee.
This amounts to $251.3 million, according to the suit.
Brightline is based in Delaware and owns and operates an express passenger rail system across parts of the U.S. Its ultimate parent company, Fortress Investment Group LLC, is an American investment management company.
Branson's Virgin Atlantic was given court approval in September for a restructuring plan that the airline said would help pull it out of a liquidity crisis sparked by travel disruption caused by the pandemic. The restructuring was part of a broader £1.2 billion ($1.6 billion) recapitalization.
Brightline and Virgin did not immediately respond to a request for comment on Thursday.
Virgin is represented by Daniel Toledano QC and Nicholas Sloboda of One Essex Court, instructed by Herbert Smith Freehills LLP.
Counsel information for Brightline Holdings was not immediately available.
The case is Virgin Enterprises Ltd. v. Brightline Holdings LLC, case number CL-2021-000065, in the High Court of Justice of England and Wales.
--Additional reporting by Paige Long. Editing by Ed Harris.
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