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Virgin is suing the US train operator for $250 million for dropping its name

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Law360, London (March 4, 2021, 13:50 GMT) — Virgin Enterprises is suing a US train operator in London for more than $250 million in damages, accusing Brightline of using the COVID-19 pandemic to withdraw of trademark license process early.

The company, part of Richard Branson’s Virgin Group, said in its High Court complaint that Brightline was trying to end a branding deal. (Stock)

Virgin Enterprises Ltd., part of billionaire investor Richard Branson’s Virgin Group, said in its High Court complaint that Brightline was trying to terminate a 2018 trademark licensing deal on the basis of “a cynical allegation and misleading” claiming that the Virgin trademark had been damaged.

According to Virgin’s lawsuit, filed Feb. 10 and now made public, Brightline Holdings LLC began looking for an “opportunistic pretext to extricate itself” from a licensing tie after mulling the deal.

The arrangement allowed Brightline to rebrand its rail service to Virgin Trains USA in exchange for royalties. The license was to run for 20 years, with an option to extend it further, Virgin said.

But, in the summer of 2020, amid the coronavirus outbreak, Brightline claimed that the “Virgin brand had ceased to be a brand of great international renown, largely due to pandemic-related issues”, says the trial. “That suggestion was, and is, completely wrong.”

Brightline is trying to evade 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 had Brightline not breached the trademark license agreement.

Brightline told Virgin in April that continuing to use its marks would significantly harm its brand and reputation, and the US company served a “healing notice”, the lawsuit says.

Virgin lawyers say Brightline would not have continued to use images of its trains on social media if the company believed the Virgin name hit its business. Brightline was posting tweets that prominently displayed images showing the Virgin brand around the time it was trying to terminate the contract, the lawsuit says.

According to their claim, Virgin told Brightline that their attempts to sever ties in this way would amount to a “material breach and repudiation” of their agreement. Virgin then served its own termination notice in August, according to the suit.

“The Virgin brand has remained, at all material times, a brand of great international renown,” the claim reads. “Defendant had no right to terminate the Trademark License Agreement.”

Under the terms of the license agreement, the earliest that Brightline could have legally terminated the contract was 2023 – although the company would have had to pay an exit fee. Virgin is suing to recover the royalties it should have paid up to that date, plus early termination fees.

That equates to $251.3 million, according to the lawsuit.

Brightline is based in Delaware and owns and operates an express passenger rail system in parts of the United States. Its ultimate parent company, Fortress Investment Group LLC, is an American investment management company.

Branson’s Virgin Atlantic received court approval in September for a restructuring plan that the airline said would help it emerge from a liquidity crunch triggered by travel disruptions caused by the pandemic. The restructuring was part of a wider £1.2bn ($1.6bn) recapitalisation.

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, retained by Herbert Smith Freehills LLP.

Information about Brightline Holdings’ attorneys was not immediately available.

The case is Virgin Enterprises Ltd. vs. Brightline Holdings LLC, Case Number CL-2021-000065, in the High Court of England and Wales.

–Additional reporting by Paige Long. Editing by Ed Harris.

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