Tuesday, 31 May 2011

Which is the true successor to Lotus?

The delightful Mr Justice Peter Smith - one of the very few High Court judges with whom I have had more than a passing encounter, chatting to him over a glass of wine at a reception a few years ago and successfully avoiding any mention of Da Vinci, Jackie Fisher, or other topics that might have proved contentious - has now decided grand prix motor racing's biggest dispute: Group Lotus Plc and another v 1Malaysia Racing Team SDN BHD and others [2011] EWHC 1366 (Ch). It was always going to be a bit of a disaster, having two teams using the name, but at least it was one of what is still referred to as the new teams against one of the second-tier teams, the group following in the tyre tracks of Red Bull, McLaren and Ferrari. There's a precedent, of sorts, in the form of Red Bull and Toro Rosso, another pair of teams that only occupy the same piece of track when the one is lapping the other, but Lotus and Lotus - even if, strictly speaking, it's Lotus Renault GP and Team Lotus. The issue is compounded by Team Lotus using Renault engines, and it's customary to include the engine-maker in the full name of the car - or at least it used to be, not necessarily as far back as Brabham-Repco, Eagle-Westlake, Cooper-Maserati and the like. Even Lotus-BRM, using the fantastically mad, incredibly complicated and phenomenally unreliable H16 engine.

In the mid-eighties Lotus used Renault engines, so there is some historical precedent for that connection - although none of the named parties seems to have much to do with the holders of the name back then. Team Lotus and Lotus Engineering were split as long ago as 1954, so there have been two entities using the Lotus name for a good while, and the relationship between them has been complicated to say the least - many of the 388 paragraphs of the judgment are devoted to tracing the history, with the assistance (heavily discounted by the judge, though I think without casting aspersions on their integrity) of several motor racing journalists and writers including my old friend Karl Ludvigsen. So probably best not to spend much time on the history here - read the judgment or one of the many histories of Lotus (or Colin Chapman: Inside the Innovator by Karl Ludvigsen (Haynes, 2010)).

The case has a lot more to do with the facts than with the law, but it does serve as an object lesson in how to create problems. The judge held, in summary:

  • Team Lotus Ventures Limited (TLVL, the second defendant) owns the goodwill associated with the Team Lotus name and roundel
  • Group Lotus's claim to the name should be dismissed
  • TLVL's trade marks be revoked for non-use since at least 2003, when TLVL was not involved in Formula 1 racing
  • TLVL was entitled to register new trade marks for its name and the roundel device (so in due course it will have a statutory defence to an infringement claim again)
  • TLVL's use of its name did not infringe Group Lotus's trade marks in the name Lotus 
  • 1Malaysia (the first defendant) was not to be restrained from using the name Team Lotus by reason of a licence agreement between it and Group Lotus in 2009
  • 1Malaysia had been in breach of the licence agreement in failing to obtain approval for the manufacture and sale of 'Lotus Racing' merchandise in 2010, this licence having been validly terminated by Group Lotus in September 2010
Having started out sympathetic to to Team Lotus, whose efforts on the track so far have been pretty impressive, I am persuaded in particular by the evidence about the breach of the licence agreement that I should stick with Renault, whose factory I had the pleasure of visiting a couple of years ago. The judgment relates how the first defendant's director of marketing, Mr Choy, was denied sight of the licence agreement - a strange way to deal with your own director of marketing:
302.When he finally saw the Agreement in June 2010 he sent an email ...stating:-

"We have breached every clause in this Agreement there is to be breached".
303. In that he is correct.
    That brings to mind some classic lines from the Da Vinci Code case, and certainly doesn't suggest an approach to business that one might admire.

    The judge also expressed regret that the parties should have chosen to fight their differences out in the courts not on the racetrack. I dare say the defendants would be only too pleased to get within reach of the claimants - perhaps they will sometime. As it was, on Sunday, they managed 13th and 14th places, while the claimants got 8th place with their other car finishing in the barriers (through no fault of theirs, or the driver's, who ended up in hospital though evidently not injured). Both teams are adding significantly to the entertainment value of the racing this year: a pity litigation has to cast a shadow over that. Still, another interesting addition to the Formula One IP Casebook.

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