Group Lotus Plc & Anor v 1Malaysia Racing Team SDN BHD & Ors

Goodwill may be divided between businesses operated by separate companies where the facts show distinct activities, markets and commercial identities. An association between a road-car manufacturer and a racing team does not necessarily vest the racing goodwill in the manufacturer.

Where parties have documented and consistently recognised that division, later use of related names will not amount to passing off or trade mark infringement merely because the names evoke a common history. A substantial likelihood of confusion must concern the relevant businesses, goods or services. Goodwill may survive a lengthy period of non-use, although registered marks remain vulnerable to revocation for non-use.

The claim concerned competing Formula 1 teams using names incorporating Lotus. Group Lotus claimed exclusive goodwill and trade mark rights in Lotus, the Lotus Roundel and Team Lotus. The defendants relied on a historic separation between Group Lotus’s road-car business and the Team Lotus racing business, together with a chain of assignments.

The claim also concerned a 2009 licence under which Group Lotus authorised 1Malaysia Racing Team to race as Lotus Racing. Group Lotus alleged breaches concerning merchandise and termination. The defendants counterclaimed in relation to Team Lotus, the JPS livery, a domain name and alleged threats.

The principal issues were ownership and survival of goodwill, likelihood of confusion, non-use of registered marks, the validity of the licence termination and the enforceability of a post-termination restrictive covenant.

1. Goodwill and ownership. The evidence established separate goodwill: Group Lotus owned goodwill in the manufacture and sale of sports cars, while Team Lotus and its successors owned goodwill associated with Formula 1 racing. The 1985 Agreement acknowledged and formalised that division. Its provisions preserved Team Lotus’s right to use Team Lotus and the Roundel, and did not transfer that right back to Group Lotus on termination.
2. Chain of title. The racing goodwill and associated rights passed from Team Lotus International Ltd through Infiniti, Investfirm and Paintglossy, now Team Lotus Ventures Ltd. The defendants could rely on those pre-existing rights even though they were not entitled to enforce the 1985 Agreement as contractual parties.
3. Confusion and infringement. The relevant businesses and markets were materially different. Team Lotus raced Formula 1 cars and did not manufacture or sell sports cars. Even assuming Group Lotus had exclusive rights in Lotus, there was no realistic likelihood that a substantial number of relevant consumers, sponsors or knowledgeable fans would confuse the businesses. The claims for passing off and infringement under sections 10(2) and 10(3) of the Trade Marks Act 1994 failed.
4. Non-use. The defendants’ registered Team Lotus marks had not been used in the relevant Formula 1 services during 2003–2008 and no proper reason for non-use was established. The registrations were revoked. That did not destroy the separate goodwill, which remained substantial and protectable by passing off.
5. Licence. 1Malaysia Racing Team materially and persistently breached the merchandise approval, territorial and quality-control provisions. Group Lotus was entitled to terminate. The defendants’ alleged breaches by Group Lotus were not established. Group Lotus was entitled to damages for the merchandise breaches.
6. Restrictive covenant. The covenant purporting to prohibit use of any mark including Lotus was too wide in scope, unlimited in time and space, and extended beyond Group Lotus’s legitimate interests. It was void as an unreasonable restraint of trade. No injunction was granted. The defendants’ counterclaim otherwise failed.

First-instance judgment. No earlier appellate decision is stated in the judgment.