Force India Formula One Team Ltd v 1 Malaysia Racing Team SDN BHD & Ors

A contractor’s express confidentiality obligation may continue indefinitely after termination. Its enforceable scope may nevertheless permit personnel to use their general skill, knowledge and experience, while protecting trade secrets and similarly confidential material.

Using confidential CAD files as a shortcut can constitute misuse even where the resulting design does not reproduce confidential dimensions. Compensation for contractual and equitable breaches is assessed alike. Where conventional financial loss cannot be proved, the claimant may recover the reasonable fee which willing parties would have negotiated at the date of breach for the actual use made. Lawful alternative sources and the cost of obtaining equivalent assistance are relevant to that fee.

Force India claimed that Aerolab, FondTech, two companies operating the Lotus Formula One team, and Lotus’s chief technical officer had misused confidential information contained in CAD files for Force India’s half-size wind-tunnel model. It also pursued a copyright claim against the English Lotus company. Aerolab counterclaimed for unpaid fees under its aerodynamic development contract with Force India.

The principal issues were when that contract terminated, the survival and scope of its confidentiality provisions, the extent of actionable copying, accessory liability, copyright infringement and the proper measure of compensation. Liability and quantum were tried together under an order made before trial.

1. The claims succeeded only in part. Force India’s persistent failure to pay Aerolab was a repudiatory breach. Aerolab accepted it by the overt and unequivocal act of disabling Force India’s server connection. The development contract ended with effect from the end of 31 July 2009. Aerolab’s subsequent work for Lotus therefore did not breach the contractual exclusivity clause.

2. The confidentiality obligation in clause 5(b) survived termination indefinitely. In the circumstances, however, Aerolab’s personnel remained free to use information forming part of their general skill, knowledge and experience. They could not use trade secrets or information of an equivalent degree of confidentiality. Detailed CAD data could satisfy that standard even though a product’s general shape and configuration were publicly observable.

3. The actionable misuse consisted mainly of opportunistic use of Force India CAD files by Aerolab and FondTech draftsmen as shortcuts. The files embodied valuable, non-public work protected by express obligations and treated as highly confidential within Formula One. Force India did not establish systematic copying of its aerodynamic system. Nor did it generally prove that the aerodynamicists had reproduced confidential dimensions rather than using their own experience.

4. Aerolab was contractually liable, and FondTech equitably liable, for their employees’ misuse. Mr Gascoyne had not agreed upon, induced or participated in the specific misuse of Force India files. Merely commissioning the design of a model did not amount to a common design to commit the acts constituting breach. The claims against him and the Lotus companies for breach of confidence therefore failed.

5. The copyright claim against 1 Malaysia UK succeeded only for copies reproducing substantial parts of the CAD files relating to the vortex generator, rear brake duct lower element and rear-view mirror.

6. The same compensatory approach governed contractual damages and equitable compensation. As Force India proved no conventional financial loss, compensation was the reasonable fee which Force India and Aerolab/FondTech would have negotiated when misuse began for the actual information and uses involved. Taking account of the limited shortcut, lawful alternatives and a premium for assisting a potential competitor, the fee was €25,000.

7. Aerolab was owed €846,230 under the development contract. The €25,000 award was to be set off against that debt. Interest, costs and consequential matters were reserved.

This was a first-instance trial of liability and quantum together. That combined trial followed an order made by Master Bowles on 4 May 2011.