Virgin company in High Court fight with US train operator

Lawyers representing Virgin Enterprises told a judge at a High Court hearing in London that Brightline Holdings’ allegation was “cynical and spurious”.

The deal meant that Brightline would rebrand its rail services in the United States as “Virgin Trains USA”, Judge Mark Pelling heard.

Virgin Enterprises says Brightline is in breach of a trademark licence agreement and wants around £200 million damages, the judge was told.

Brightline says Virgin Enterprises’ claim should be dismissed.

Judge Pelling has begun overseeing a trial, at the Rolls Building in central London, which is due to last three weeks.

He heard that Virgin Enterprises was part of the Virgin Group, founded by businessman Sir Richard Branson, and managed intellectual property relating to the “Virgin brand”.

“This dispute arises out of a trademark licence agreement dated November 15 2018 between (Virgin Enterprises) and (Brightline) pursuant to which Virgin Enterprises agreed to license the Virgin brand to Brightline such that Brightline would rebrand its rail services in the USA as ‘Virgin Trains USA’,” Daniel Toledano KC, Emma Himsworth KC, and Maximilian Schlote told the judge in a written case outline.

“The term of the (agreement) was for an initial 20 years, which was extendable.”

They said a clause in the agreement allowed Brightline to terminate the agreement, after giving written notice, if the Virgin brand had ceased to be a “brand of international high repute” – and told the judge that an “exit fee” had been agreed.

“Very soon after concluding the (agreement), it appears that Brightline had second thoughts about the deal it had struck and began looking for a way to extricate itself from it as soon as possible and without paying the contractually agreed exit fee,” they added.

“At the height of the first wave of the Covid-19 global pandemic, Brightline sought to terminate the (agreement), on the basis of a cynical and spurious allegation that the Virgin brand had ceased to be a brand of international high repute.”

Lawyers representing Brightline told the judge that the claim should be dismissed.

“This is a claim brought by (Virgin Enterprises) against Brightline for very substantial sums – in excess of 250 million US dollars – said to be due as damages for breach of a trademark licence agreement between the parties dated November 15 2018,” they said.

“Brightline terminated the (agreement) on July 29 2020.

“(Virgin Enterprises) claims that this was a renunciatory breach of the (agreement).”

The lawyers said the “liability” issue the judge had to decide was, “simply stated”, was Brightline “entitled to terminate” the agreement.

They added: “The claim should be dismissed.”

Lawyers representing Brightline outlined concerns about Virgin’s train and airline businesses.

They said by the end of 2019, Brightline was becoming “concerned about the reputation of the Virgin brand”.

“In April 2019, Virgin Trains was disqualified from bidding for a renewal of the West Coast mainline train franchise; it operated no trains in the UK after 7 December 2019,” they said.

“Not long after the announcement that Virgin Trains had been disqualified, investors started to express concerns about Brightline’s links with Virgin.”

They said a Virgin Trains UK video, released in November 2019 and called “The Final Whistle”, was not “universally acclaimed”.

One newspaper described the footage as a “Bizarre farewell to Virgin Trains video featuring Richard Branson and Mr Blobby”.

Lawyers said: “Brightline regarded the video as an embarrassment…”

They added: “The Covid-19 pandemic had a major impact on both Brightline and Virgin.

“In March 2020, Virgin Atlantic attracted widespread criticism with its request to staff to take unpaid leave, followed by its request for a substantial financial support package from the UK Government (or “bailout”).

“There was an ensuing wave of negative publicity.

“This was noted internally by Virgin, which recognised the need to do something.”

They told the judge that the response on social media was summarised in a “social listening report”, prepared for Virgin, which said: “People are angry and frustrated that a billionaire would take taxpayer money to bail out his airline when he has ample money to fund it himself”.

Lawyers representing Virgin Enterprises said Brightline had operated a train line in Florida, between Miami and West Palm Beach.

They said Brightline had explained that it entered into the agreement to “increase brand awareness and to take advantage of cross-selling opportunities”.

“Virgin was hit by a spike in negative press in the UK in the spring of 2020, in particular in relation to Virgin Atlantic’s request for government support,” they said.

“However, the picture was different in other Virgin markets.”

They added: “There was no notable negative press about any Virgin-related stories in the USA.”

Lawyers said, nonetheless, the “challenges” the wider group of Virgin companies and the Virgin brand “was facing at that time in the UK” caused “internal concern and were taken very seriously and were addressed”.

“The press surrounding Virgin Atlantic and, relatedly, Sir Richard, also did not cause the Virgin Masterbrand to cease to be of international high repute,” they said.

“Virgin Atlantic’s request for government support should be seen in the context of the pandemic and in light of the fact US and other airlines received huge government support.”

Nigel Tozzi KC, who led Brightline’s legal team, told the judge on Monday that Sir Richard’s reputation had taken a “hammering”.

He said Sir Richard had used the word “trashed”.