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It seems like all is not well in the kingdom of the King of Good Times. Vijay Mallya, who is already facing a host of financial difficulties, with his airlines accumulating losses and statutory authorities putting pressure on the management to pay up the liabilities,has received yet another jolt. His F-1 team Force India lost an IP case against Aerolab SRL, a former designer of Force India cars.
Force India had entered into an aerodynamic development contract with Aerolab SRL in 2008. The contract was however terminated by Aerolab, following a payment default by Force India in 2009. Aerolab, then started working withTeam Lotus (now Caterham F1). Force India accused Team Lotus, Aerolab and Lotus Chief Technical Officer Michael Gascoyne (ex Force India Technical Director) of illegally copying Force India Formula One Team’s design from secure files held at Aerolab. Force India claimed that the Lotus T127 had featured a large number of parts copied from Force India’s design.
Therefore, Force India’s claim for breach of confidence and infringement of Copyright did succeed and they were awarded compensation. Fair enough?
Well, here’s the catch:
All the F-1 teams are bound by the “Concorde Agreement” requiring each team to design almost its entire car apart from the engine, gearbox and tyres. It provides for each team to own the intellectual property rights to its car, and it prohibits the misuse by any team of another team’s confidential information.
Force India alleged that when it parted ways with Aerolab, the latter held substantial amount of confidential information and a number of CAD files that contained access to the designs of Force India’s parts.
Aerolab then joined hands with Caterham F1 and allegedly misused Force India’s design to build a wind tunnel model for them.
Following the publication of Team Lotus wind tunnel model pictures in October 2009, Force India Formula One Team lodged a complaint with the Criminal Court in Italy and subsequently commenced civil proceedings before the Chancery Division of England and Wales High Court, citing concerns in respect of illegal copying of Force India Formula One Team design intellectual property.
Force India contended that the confidentiality obligations in clause 5 of the Development Contract, and in particular clause 5(b), continued after termination, to which Aerolab objected.
It is well-known to all those involved in F1, including everyone connected with the case, that misuse of confidential information attracts severe penalties from the FIA.
The case was heard at length at the High Court during January 2012 with Mr Justice Arnold finding Team Lotus (now known as Caterham F1) and Aerolab liable for copyright infringement and using confidential information respectively and that some parts created using Force India’s confidential information were used on the Team Lotus race cars in the early part of the 2010 season.
Honourable Mr. Justice Arnold ruled that Aerolab had misused certain confidential information as a means of taking a “short-cut” to produce a wind-tunnel model that could begin to be used for testing as soon as possible. However, the court also opined that Force India had come “nowhere near” establishing systematic copying of files and that the misuse mainly consisted of opportunistic copying of CAD files by CAD draftsmen in order to take a short cut.
The court did not find the Chief Technical Officer of Team Lotus, Mr. Gascoyne jointly liable for inducing Aerolab to act in breach of Development Contract.There was no direct evidence of any kind to support the claim that Mr Gascoyne made an agreement that Force India’s CAD files would be used as the starting point for the design of the Lotus model.
The court awarded Force India €25,000 compensation for the accidental usage of a small amount of 2009 data. Since, Aerolab had sued Force India for non-payment of dues for which Force India was ordered to pay a sum of €846,230 to Aerolab, the sum of €25,000 would be set off against this amount.
Another noteworthy aspect of this case is the court’s opinion on “trade secret”. The case referred to was Cross J in Printers & Finishers Ltd v Holloway, (1965) 1 WLR 1, (1965) RPC 239 where it had to be considered whether an ex-employee should be restrained by injunction from making use of his recollection of the contents of certain written printing instructions which had been made available to him when he was working in his former employers’ flock printing factory. In was held:
-“In this connection one must bear in mind that not all information which is given to a servant in confidence and which it would be a breach of his duty for him to disclose to another person during his employment is a trade secret which he can be prevented from using for his own advantage after the employment is over, even though he has entered into no express covenant with regard to the matter in hand. For example, the printing instructions were handed to Holloway to be used by him during his employment exclusively for the plaintiffs’ benefit. It would have been a breach of duty on his part to divulge any of the contents to a stranger while he was employed, but many of these instructions are not really “trade secrets” at all. Holloway was not, indeed, entitled to take a copy of the instructions away with him; but in so far as the instructions cannot be called “trade secrets” and he carried them in his head, he is entitled to use them for his own benefit or the benefit of any future employer.”
Force India has decided to appeal against the decision of High Court calling the settlement “totally unrepresentative”, considering the current value of a F1 car somewhere around £15 million.
The UK High Court judgement, in respect of the illegal copying, will now be referred for the consideration of Formula One’s governing body, the FIA, whilst the Italian criminal case against Mike Gascoyne, and others remain pending.
About the Author: Mr. Anirudh Sarin, Trade Mark Intern at Khurana & Khurana and can be reached at: Anirudh@khuranaandkhurana.com