Brand licensing is the process of managing and creating contracts between the owner of a brand and the company who want to use it. The use of a Brand Licence has a number of benefits for both parties involved.

The Brand Licence between the founder of easyJet, Sir Stelios, and the easyJet airline represents just one of the high profile examples.

The 'easy' brand

EasyJet, the airline, started in 1995. As it became a brand Sir Stelios started to work on brand expansion and set up a holding company - easyGroup - in 1998 which owns the 'easy' brand and licenses it to all 'easy' branded businesses including easyJet plc. Its mission - ''to manage and extend Europe's leading value brand to more products and services, whilst creating real wealth for all stakeholders.''

In 2000, immediately before easyJet was floated on the stock exchange, easyGroup entered into a formal Brand Licence with the Company. A nominal royalty for the use of the 'easy' brand by easyJet was agreed. Stelios is now suing easyJet over services that can be offered under the 'easy' trademark on the basis that this is in breach of their Brand Licence agreement and the 'easyJet' name.

EasyGroup IP Licensing Ltd v easyJet Airline Company Ltd

The case concerns the interpretation of the Brand Licence. In particular the interpretation of specific provisions that were built into the Brand Licence with the intention of restricting the extent of use of the brand. One of these is the 75:25 rule on which the dispute hinges. The Brand Licence requires easyJet to focus on its core area of activity and only to extend its business to the extent that it is ancillary to its core activity by not more than 25% of its business. If it goes beyond this threshold then easyJet will lose the right to use the easyJet trademark and other relevant IP.

Critical to the outcome of the case is the court's judgement on the difference between ''core'' and ''ancillary'' airline services. Schedule 4 of the Brand Licence defines core activity as ''passenger transport in fixed wing aircraft' and easyGroup is arguing that sales of services such as food, travel insurance, car hire combined with baggage and priority boarding check-in fees should count as non-core as they are not integral to the 'core' activity. If the court accepts this argument then easyJet would be in breach of the Brand Licence agreement. EasyJet generated £238 million from checked in bags alone last year and on this basis is exceeding the 25% earnings ceiling for non-core activities.

However in their defence easyJet seek to adopt a wider interpretation of core activity - ''the business of an airline providing passenger transport in fixed wing aircraft.'' They argue that the above services are part of the main business and as such the items only have value when sold in connection with the plane ticket.

Since 2000 revenue streams have expanded to baggage, speedy boarding, charges for infants and an increase in food served onboard flights. Whilst easyJet's proposition that, on their own, activities like baggage check-in have no value is true to a certain extent in relation to priority boarding, baggage and check-in fees, which have no value outwith the context of air travel, that is not to say these are not core activities. On easyGroup's interpretation, priority boarding and baggage check-in are optional extras as consumers may opt to take hand luggage only. The verdict should be delivered later this month and will have a significant impact on the parties. It serves as an important reminder that Brand Licences are often a product of their time and future-proofing definitions can be challenging.

22 July 2010

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