[View without highlighting]
[Printable RTF version]
||Neutral Citation Number:  EWHC 616 (Ch)
||Case Nos: HC10C00474, HC11C00774
IN THE HIGH COURT OF JUSTICE
||Rolls Building, Fetter Lane, London, EC4A 1NL
||21 March 2012
B e f o r e :
THE HON MR JUSTICE ARNOLD
|| FORCE INDIA FORMULA ONE TEAM LIMITED
||- and -
||1 MALAYSIA RACING TEAM SDN BHD
1 MALAYSIA RACING TEAM (UK) LIMITED
FONDMETAL TECHNOLOGIES SRL
James Mellor QC and Lindsay Lane (instructed by Fladgate LLP) for the Claimants
Iain Purvis QC and Tom Alkin (instructed by Withers LLP) for the Corporate Defendants
Benet Brandreth (instructed by William Sturges LLP) for Mr Gascoyne
Hearing dates: 18-20, 23-27, 30-31 January, 1-2, 13-14 February 2012
Further written submissions 17, 28 February 2012
HTML VERSION OF JUDGMENT
Crown Copyright ©
MR JUSTICE ARNOLD :
| Force India
| Mr Gascoyne
| FondTech and Aerolab
| Factual witnesses
| Force India's witnesses
| Lotus' witnesses
| Mr Gascoyne's witnesses
| Aerolab and FondTech's witnesses
| Expert witnesses
| Force India's experts
| The Defendants' experts
|My approach to finding the facts
|The outline facts
| Aerodynamic development in F1
| Designing a windtunnel model
| The relationship between Force India and Aerolab prior to April 2008
| The Force India-Aerolab Development Contract
| Aerolab's work for Force India in 2008-2009
| The ending of the relationship between Force India and
| Aerolab's access to Force India data after 31 July 2009
| Force India's performance in 2009
| Litespeed's F1 application for 2010
| Lotus' F1 application
| The FOTA August 2009 shutdown
| The design of the initial Lotus model
| The Lotus press release and its aftermath
| Aerodynamic development of the Lotus model
| Parts which were not changed
| Transfer of data to Lotus
| Aerodynamic development by Lotus
| The 2010 F1 Championship
| Date of termination
| Breach of clause 6(a)
| Does clause 5(b) continue after termination?
| The enforceable scope of clause 5(b) after termination
|Breach of confidence: the law
| The necessary quality of confidence
| Relative confidentiality
| Trivial information
| Circumstances importing an obligation of confidence
| The scope of the obligation of confidence: trade secrets
| What is a trade secret?
| Who is liable for breach of confidence and in what circumstances?
|The designs in issue
|Force India's claim to confidential information
| The pleaded case
| What was in the public domain?
| Is any of the information trivial?
| Precise dimensions
| Spatial relationship
| Annex 1 Part B
|Aerodynamic parts the full-sized equivalents of which were installed on the Force India car
| Front wing
| Front wing endplate and turning vane
| Front wing transition element
| Front wing mainplane and primary and secondary flaps
| Front wing strakes
| Y400 endplate and mounting pad
| Front wing mainplane pillar pocket infill
| Front wing assembly
| Front and rear barrels, front and rear brake ducts, disc bell
| Driver's helmet
| Rear wing
| Central section
| Rear wing assembly
| Diffuser strake
| Profiled foot
| Outboard area
| Lateral roof profile
| Secondary inlet
|Aerodynamic parts which were not installed in the Force India car
| Sidepod inboard and outboard lower leading edge
| Forward bargeboard
| Rearward chin
| Vortex generator
| Rearview mirror
| Model spine
| Front spine
| Centre spine
| Rear spine
| Spine assembly
| Wheel rim sealing details
| Suspension components
| Limit cams and shaft clamps
| Lower wishbone flexure
| Model jigs
| Diffuser fix plate jig
| Model mounting jig and spacer
|Liability of Aerolab and FondTech for breach of confidence
|Liability of Mr Gascoyne for breach of confidence
|Liability of Lotus for breach of confidence
|The copyright claim
|Quantum: the law
| Invasions of proprietary rights
| Intellectual property claims
| Breach of a contractual obligation of confidentiality
| Breach of an equitable obligation of confidence
| The authorities
| General conclusions
| Specific issues
|Quantum: the present case
| Summary of the parties' positions
| The date of the hypothetical negotiation
| The parties to the negotiation
| The subject matter of the negotiation
| The value of the confidential information
| Aerodynamic system
| Track validation
| Stable baseline
| The poor aerodynamic performance of the Force India car
| The nature and extent of the misuse
| The aerodynamic performance of the intial Lotus model
| The FMCG story
| The position of Force India as licensor
| The position of Aerolab and FondTech as licensee
| Other relevant factors
|Summary of conclusions
- The principal claim in these proceedings is a claim by the Claimant ("Force India") against the Defendants for misuse of confidential information relating to the design of a half-size wind tunnel model of a Formula 1 ("F1") racing car. In addition, there is a claim for infringement of copyright. (Pleaded claims for infringement of Community design right and UK design right were not pursued at trial.) Very unusually, as result of an order made by Master Bowles on 4 May 2011, issues of liability and quantum were tried together. The Fourth Defendant ("Aerolab") has a cross-claim against Force India in respect of an unpaid debt.
- It should be made clear at the outset that the Defendants do not dispute that some of Aerolab's employees engaged in some copying of computer files containing Force India designs. The areas of dispute are four-fold. First, how much copying took place? Secondly, to what extent is the copying actionable? Thirdly, which of the Defendants are liable? Fourthly, what sum should be awarded to Force India by way of recompense?
- Force India operates a Formula 1 racing team. The Force India F1 racing team started life as "Jordan Grand Prix" in 1991. It became "Midland F1 Racing" in 2006, "Spyker F1" in 2007 and "Force India" in 2008. Force India operates its own wind tunnel facility at Brackley near Silverstone.
- The First and Second Defendants are respectively a Malaysian company ("1 Malaysia") and its English subsidiary ("1 Malaysia UK") which operate a Formula 1 racing team. At the relevant time the team was known as either "Lotus Racing" or "Team Lotus", or "Lotus" for short. I shall therefore follow the parties' example in continuing to refer to it by that name, although it is now known as "Caterham F1" following a settlement of the proceedings which had led to the judgment of Peter Smith J in Group Lotus plc v 1 Malaysia Racing Team Sdn Bhd  EWHC 1366 (Ch),  ETMR 62.
- 1 Malaysia was incorporated on 16 October 2009 and 1 Malaysia UK was incorporated on 14 October 2009. Although there was no corporate vehicle prior to then, Lotus effectively came into being in early July 2009. On 14 September 2009 it gained entry into F1. Lotus' Team Principal, and its principal financial backer apart from sponsors, is Tony Fernandes.
- The Third Defendant Michael Gascoyne's first job in F1 was as Chief Aerodynamicist with McLaren F1 in 1989-1990. He then worked on aerodynamics for Tyrrell and Sauber. From 1994 to 1998 he was Deputy Technical Director for Tyrrell. From 1998 to 2001 he was Chief Designer and then Technical Director for what was then Jordan Grand Prix. From 2001 to 2003 he was Technical Director of Benetton/Renault F1. From November 2003 to November 2006 he was Technical Director of Toyota's F1 team. In November 2006 he became Chief Technical Officer ("CTO") of what was then Midland F1 Racing. He remained CTO until November 2008, when Force India terminated his contract. Mr Gascoyne brought a claim for wrongful dismissal which was settled on the first day of trial. As described in more detail below, Mr Gascoyne acted as CTO of Lotus from the outset.
FondTech and Aerolab
- Aerolab and its parent company the Fifth Defendant ("FondTech") are Italian companies. FondTech was founded by Jean-Claude Migeot in 1993. Mr Migeot was Chief Aerodynamicist for Renault F1 from 1981 to 1985. He held the same position for Ferrari from 1985 to 1988 and for Tyrrell from 1988 to 1990. From 1990 to 1993 he was successively Head of Aerodynamics, Technical Head of the Race Team and Head of Research and Development for Ferrari. FondTech's premises are located in Ferrara. Aerolab was established in 2003. Its premises are in Bologna.
- Both FondTech and Aerolab operate a wind tunnel and have a staff of aerodynamicists, CAD (computer-aided design) designers and model part makers. Both specialise in the aerodynamic development of F1 cars. Since 1994 they have between them worked for the Tyrrell, Benetton, Minardi, Renault, Toyota, Force India and Lotus F1 teams. They also develop other types of cars, such as Formula 3. As at the summer of 2009, they were the leading external aerodynamic design consultants in F1.
- Force India's witnesses. The following factual witnesses gave evidence for Force India: Simon Belcher, Force India's Chief Aerodynamicist; Robert Fernley, Force India's Deputy Team Principal; Robert Halliwell, Force India's Production Director; Simon Phillips, Force India's Director of Aerodynamics; and Margaret Sweeney, Force India's Chief Accountant.
- Counsel for the Defendants made no criticism of Mr Belcher, Mr Fernley or Mr Halliwell as witnesses, but submitted that Mr Phillips had put serving his employers' interests ahead of telling the truth. I agree with this. I was particularly concerned by Mr Phillips' evidence about the confidentiality of the Force India front wing profiles: he gave evidence that these were not in the public domain and were an important part of Force India's confidential information, when in fact Force India had sold a 2007 front wing mainplane via FMCG (as to which see below) and the design had not changed between 2007 and 2011. As for Mrs Sweeney, counsel submitted that her evidence revealed a cavalier approach to the preparation of the schedule of costs which Force India relies upon in support of its damages claim. Again I agree with this, for reasons I will explain below.
- Lotus' witnesses. The following factual witnesses gave evidence for Lotus: Lesmana Djayapertapa, Lotus' Head of CFD Research & Development; Simon Dodman, Lotus' Project Leader for Aerodynamics; and Tim Milne, Lotus' Deputy Head of Aerodynamics. Counsel for the Claimants made no criticism of these witnesses.
- Mr Gascoyne's witnesses. Mr Gascoyne gave evidence on his own behalf. In addition, Mr Hall provided a witness statement but was not required to attend for cross-examination. Counsel for Force India submitted that Mr Gascoyne was not a truthful witness. I shall have to consider his evidence on a number of points below, but in general I consider that Mr Gascoyne was a truthful witness.
- Aerolab and FondTech's witnesses. The following factual witnesses gave evidence for Aerolab and FondTech: Mr Migeot; Andrea Bevacqua, a CAD designer employed by FondTech; Alberto Balboni, Aerolab's Chief Designer; Simone Branchini, at the time a CAD designer employed by FondTech; Davide Carafoli, a CAD designer employed by Aerolab; Mirko Columbanu, a CAD designer employed by Aerolab; Luca Crosetta, at the time an aerodynamicist employed by Aerolab; Enrico Domenicali, a CAD designer employed by Aerolab; Gianmarco Legnani, a CAD designer employed by Aerolab; Edoardo Lenoci, an aerodynamicist employed by FondTech; Marco Liboni, Aerolab's IT manager; Alessandro Mirani, at the time an aerodynamicist employed by Aerolab; Hugo Neira, an aerodynamicist employed by Aerolab; Davide Paganelli, at the time an aerodynamicist employed by Aerolab; and Marco Urru, a CAD designer employed by Aerolab. In addition, Marco Cremonini, a CAD designer employed by FondTech, and Cosmin Nita, a CAD designer employed briefly at the relevant time by Aerolab and later by FondTech and then Aerolab again, provided witness statements, but were not required to attend for cross-examination.
- All of these witnesses signed witness statements in English. Many of their statements contained statements to the effect that the witness had some knowledge of English, that the witness had been interviewed by Italian-speaking lawyers who had drafted the statement in English based on his answers and that the witness considered that his knowledge of English was sufficient to allow him to give the statement in English, but might require the assistance of an interpreter to give evidence in court. A smaller number said that the statement had been translated into Italian for him (as I understand it, orally) before he signed it. In the event, all of these witnesses except Mr Crosetta, Mr Migeot and Mr Neira gave their evidence through interpreters. While I appreciate that many people can read English with greater proficiency than they can speak it, particularly in the context of cross-examination, it does not necessarily follow that it is appropriate for them to make witness statements in English, particularly in a highly technical case involving many points of detail such as this one. It was clear that at least one of the witnesses had not correctly understood part of his statement when he signed it, and I suspect that this problem may have been more widespread. In my judgment the correct course would have been for the witnesses other than Mr Crosetta, Mr Migeot and Mr Neira to make their statements in Italian, and for the statements then to have been translated in English.
- Both Mr Migeot and Mr Neira gave evidence in their third language (Mr Migeot's first language being French and Mr Neira's Spanish and both having Italian as their second language) with very occasional assistance from an (Italian) interpreter. Mr Migeot was the more fluent of the two, and in the case of Mr Neira I have made allowance for his lack of fluency in assessing his evidence.
- Counsel for the Claimants submitted that Mr Migeot and a number of the other witnesses were not truthful. So far as Mr Migeot is concerned, as I shall explain, I do not accept some of his evidence. In general, however, I consider that he was a truthful witness. As for the other witnesses, save in the instances identified below, I accept their evidence.
- Counsel for the Corporate Defendants (that is to say, the Defendants other than Mr Gascoyne) submitted that Mr Mirani's evidence had to be treated with some caution because he had tended to agree with what was put to him in cross-examination unless he was certain it was wrong. I agree with this.
- Force India's experts. The following expert witnesses gave evidence for Force India: Darren Strevens; David Hurst; Garth Anderson; and Chris Clements.
- Mr Strevens has a degree in Mechanical Engineering from the University of Hertfordshire. He has 18 years' experience in the automotive industry in various capacities. He has been trained on and used numerous CAD systems. In particular, he has over seven years' experience of using the Catia system which Aerolab and FondTech used. On the other hand, he is not an aerodynamicist. He has no expertise in Formula 1, racing cars generally, wind tunnel models, the structures needed for those models, F1 regulations or technical restrictions on the design of racing cars.
- Mr Strevens carried out a detailed comparison between CAD files containing the designs of Force India parts on the one hand and CAD files containing the designs of Lotus parts on the other hand. As I shall explain below, his evidence convincingly establishes copying by Aerolab/FondTech of a number of Force India CAD files. To that extent, his evidence was of considerable assistance. Nevertheless, I was concerned by two aspects of his evidence.
- The first was that large parts of his reports were concerned not merely with identifying indicia of copying of CAD files, but also with pointing out similarities in the designs of the parts depicted in those files. For the reasons given above, however, he was not in a position to comment on the significance of those similarities. Ultimately he accepted that he was unable to say, from his own expertise, whether the indicia of CAD file copying he had identified demonstrated copying by aerodynamicists responsible for the designs of the parts as opposed to the taking of a short cut by the CAD draftsman.
- Secondly, he gave evidence in his first report about the front wing mainplane and flap arrangement which was misleading. He presented the profiles as if they overlapped, and said in the report that the only adjustment he had made was to remove the effect of the lower mainplane in the Aerolab model. In fact, he had also changed the angle of the flaps in relation to the mainplane, a change which was of aerodynamic significance. He should have made it clear in his report that he had carried out this manipulation.
- Dr Hurst gained a BSc in Aeronautics and Astronautics from the University of Southampton in 1974 and a PhD on the Aerodynamics of Bluff Bodies from the same institution in 1978. From 1978 to 1996 he was a lecturer at Southampton and also its wind tunnel manager. From 1996 to 2000 he was senior lecturer and wind tunnel manager. From 2000-2002 he was wind tunnel manager for Jaguar Racing. From 2002 to 2006 he was a specialist wind tunnel engineer for BAE Systems. From 2006-2011 he was Senior Aerodynamicist for the Aircraft Research Association.
- As counsel for the Defendants pointed out, Dr Hurst was a strange choice of witness on the key aerodynamic aspects of this case. He is not an aerodynamic designer of cars. His only involvement in car aerodynamic design seems to have been in assisting aerodynamicists working for some of the teams which used the wind tunnels at Southampton University prior to 2000. So far as F1 (or any motor racing) was concerned, his last involvement was at Jaguar. The most he could say was that "I have kept a very close interest in Formula 1. It was really my hobby". Thus although Dr Hurst was a fair witness who tried to assist the Court, I did not find his evidence of much value.
- Mr Anderson has had a long career in motorsport in a variety of positions. From 1973 to 1983 he held positions as mechanic and chief mechanic in three F1 teams. From 1980 to 1985 his company Anson Racing Ltd designed and manufactured cars for various formulas. From 1985 to 1986 he was Chief Race Engineer for an Indy Car team. From 1987 to 1988 he ran a team which competed in Formula 3000. In 1989 he was Chief Designer for a Formula 3000 team. From 1990 to 1998 he was Technical Director for Jordan Grand Prix. From 1999 to 2000 he was Technical Director for Stewart Grand Prix which became Jaguar Racing. In 2001 he was Technical Director for an Indy Car team. From 2003 to 2003 he was Race and Test Director for Jordan F1. Since 2004 he has been a technical commentator for various television programmes, magazines and websites.
- Force India relied on Mr Anderson's evidence in support of their case on quantum. I was unimpressed by his evidence, but this was mainly due to the assumptions upon which his report was based, which may well have formed part of his instructions.
- Mr Clements is a partner at Grant Thornton UK and a Fellow of Institute of Chartered Accountants. His only role was to conduct a forensic review of the schedule of costs produced by Mrs Sweeney.
- The Defendants' experts. The following expert witnesses gave evidence for the Defendants: Paul White; Frank Dernie; and Mark Bezant.
- Mr White obtained a degree in Mechanical Engineering from Oxford Polytechnic (now Oxford Brookes University) in 1985 and a masters in Thermal Power from Cranfield Institute of Technology. He is a Chartered Engineer. He held design engineering positions of increasing seniority with Jordan Grand Prix (1991-1996), McLaren International (1996-1997), Arrows Grand Prix (1997-2000), Jordan Grand Prix again (2000-2002) and Toyota Motorsport (2002-2006). Since 2006 he has run his own company which provides design and project management services to customers in F1 and other fields.
- Like Mr Strevens, Mr White was an expert in the use of Catia. Unlike Mr Strevens, he had extensive experience of aerodynamic design in F1. He was therefore better placed to assist me with regard to the significance of the similarities which Mr Strevens had identified. Counsel for Force India submitted that Mr White had taken too narrow a view of what amounted to copying. I think that there is some force in this, but on the other hand I think that Mr White was right to attempt to distinguish between the copying of CAD files and the copying of aerodynamic designs.
- Mr Dernie gained a BSc in Mechanical Engineering from Imperial College in 1971. From 1968 to 1976 he worked for the David Brown group. During this period he carried out computer analysis of racing cars. From 1976 to 1978 he was Chief Engineer for Hesketh Racing. From 1978 to 1988 he was Head of R&D for Williams Grand Prix. From 1989 to 1990 he was Technical Director for Team Lotus (not the Lotus team involved in these proceedings). From 1990 to 1992 he was Technical Director for Ligier. From 1992 to 1996 he was Chief Engineer for Benetton F1. From 1996 to 1997 he was Technical Director for TWR F1. From 1998 to 2010 he was a consultant. Among his clients during this period were Williams Grand Prix and Toyota Motorsport.
- Mr Dernie was a very impressive witness. He was extremely knowledgeable, transparently fair and very clear in his explanations.
- Mr Bezant is a Fellow of the Institute of Chartered Accountants and chair of that body's Valuation Special Interest Group. He is a senior managing director in the Economic and Financial Consultancy practice of FTI Consulting Inc. He has 25 years' experience of advising on all aspects of valuing businesses, intellectual property and intangible assets. His experience covers a variety of different industries, but as he made clear he had no experience of F1 prior to this case. His experience also includes a variety of valuation contexts. He is an experienced expert witness, having worked on over 50 cases involving IP and licensing disputes. He has also worked on more than 20 other projects involving the determination of licensing fees.
- Counsel for Force India submitted that Mr Bezant's lack of knowledge of F1 meant that he was unable to assist the court. I do not accept this submission. Mr Bezant's general expertise meant that he was well placed to assist me with regard to the hypothetical licensing negotiation.
My approach to finding the facts
- I have, as counsel for Force India urged, adopted the same approach to fact finding in this case as I set out in Vestergaard Frandsen A/S v Bestnet Europe Ltd  EWHC 657 (Ch) at -. In particular, as he also urged, I shall consider the overall chronology of the development of the initial Lotus wind tunnel model before turning to the individual parts in issue. Some of the documents from which I quote were originally written in Italian, in which case I shall quote from the agreed translation without further acknowledgement. Other documents were written in English by non-native speakers.
The outline facts
- F1 is the premier motor racing event in the world. The full title of F1 is the FIA Formula One World Championship. It is run by the Fιdιration Internationale de l'Automobile ("FIA"). The FIA sets regulations which those competing in F1 must follow ("the Regulations"). The relationship between the FIA and the F1 teams is governed by a confidential agreement known as the Concorde Agreement. The Formula One Teams Association ("FOTA") and Formula One Administration Ltd ("FOA") act collectively on behalf of the teams.
- The Concorde Agreement requires each team to design almost all of its 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. It is common ground that at all material times it was well-known to all those involved in F1, including everyone connected with this case, that misuse of confidential information attracts severe penalties from the FIA.
- A typical F1 season starts in around March and finishes in November each year. The drivers compete for the Drivers' Championship and the teams compete for the Constructors' Championship. Points are awarded to drivers and teams in each race based on the finishing position of the drivers. Thus if two drivers on the same team finish first and second they will secure 25 points and 18 points respectively, and the team will get 43 points. Points are only awarded for drivers who finish in the top 10. Prize money is awarded to teams based on their final positions in the Constructors' Championship.
- F1 teams are substantial undertakings. They may employ tens to hundreds of people. A typical budget even for a small team is about 80 million in the first year and 60-80 million thereafter.
Aerodynamic development in F1
- Each season the F1 teams have a new design of car. The Regulations frequently change, more in some years than others, which force changes to the cars. Changes are also made for other reasons. Each team hand builds its cars for that season. A project to start a new car will typically start 10-11 months before the beginning of the next season. A key aspect is the aerodynamic design of the car.
- Aerodynamic design involves designing the exterior surfaces of the car so as to maximise its aerodynamic efficiency. Efficiency is the ratio between downforce and drag. Downforce is generated by the same phenomenon that creates lift over an aircraft wing, but in reverse. Downforce improves the grip of tyres on the track, particularly when cornering. Drag slows the car down, particularly on straights. While generating high downforce is important, it is not the be-all and end-all, since it is important to minimise drag and there is a trade off between the two. Furthermore, the importance of downforce varies from circuit to circuit. Some circuits require high downforce while others require low drag (and hence lower downforce).
- The way in which air flows over the surface of an object like a racing car is very complex. The aerodynamic properties of a complex surface are difficult to predict accurately. By summer 2009 the use of computational fluid dynamics (CFD) to model airflow had become widespread, but in the case of F1 racing car design it was not a satisfactory substitute for a wind tunnel testing programme.
- Wind tunnel testing involves placing a car, or more usually a scale model of a car, in a wind tunnel equipped with a rolling road and measuring the downforce and drag. The model does not include the engine, gearbox and other mechanical parts. Instead the aerodynamic parts are attached to a rigid internal spine. The spine is attached to a main balance which measures the global forces acting on the model. During a testing session different versions of a particular part are fitted to the spine, and then the resulting performance recorded. In this way the effect of small changes to each aerodynamic part of the car on the overall aerodynamic efficiency of the car can be measured.
- It is important to appreciate that no aspect of the car's surface operates independently. On the contrary, the aerodynamic performance of each part will influence, and/or be influenced by, the performance of other parts. Generally, the front wing will have the most influence over other parts and the rear wing will have the least influence, since the air flow over the car is front to rear. All parts will contribute to the overall efficiency, however, and small changes to any part can have a significant impact.
- As a wind tunnel programme progresses, the surface of the model steadily evolves. The evolving surface geometry is known as the "baseline". A model part design which is retained following a testing session is said to have been "promoted to the baseline". A well-planned wind tunnel programme will normally involve sessions devoted to improving the parts at the front of the car, then sessions on the parts in the middle of the car and finally sessions on the parts at the rear of the car, before starting over again. But there may be a need to work on a particular part or sets of parts out of sequence.
- In an established F1 team the starting point for the design of each season's car will normally be the design with which it finished the previous season, to which modifications will be made as required to accommodate changes in the Regulations or other factors. Even in that situation, however, the aerodynamic design of the car will be subject to continuous refinement during the course of the season. It is normal for each team's cars to be considerably more aerodynamically efficient at the end of the season than at the beginning of the season.
- Because aerodynamic design is so important in F1, all teams keep a close eye on what other teams are doing. Not only do they study the cars on the track, but also it is common for teams to take photographs of each other's cars and/or to commission photographers to do so. Furthermore, photographs are widely available on the internet. Both for this reason, and because of a high turnover of engineers and technicians between competing teams, it is common to see aerodynamic designs adopted by successful teams being imitated by other teams.
- Aerodynamic design is a very important factor in an F1 car's performance, but it is not the only factor. As Mr Dernie explained, there are a number of other important factors. These include getting the tyres into optimum condition during the race, the skill of the driver and the team's race tactics. Sheer luck can also play role, as where another team's car develops a mechanical fault or other drivers crash.
Designing a wind tunnel model
- Designing a wind tunnel model involves the skills of two types of people: aerodynamicists and CAD draftsmen. Aerodynamicists are engineers with a specialised knowledge of the aerodynamics of racing cars, and in particular F1 cars. CAD draftsmen are skilled in producing drawings using CAD software. The CAD drafting process involves two main stages: first, the creation of a "master surface" for each component; and secondly, the creation of production drawings for scale model parts. Part of the point of this procedure is that the master surface drawings can subsequently be used to create production drawings for full sized parts.
- The latest generation of CAD software, to which Catia belongs, is "parametric". Parametric CAD software uses a series of commands to produce a piece of three-dimensional geometry. Once an initial design has been created by specifying a series of commands, the draftsman can then manipulate these commands to modify the design as he wishes.
- A CAD draftsman will generally be given a specification of the design required by an aerodynamicist. He then has two options. He can create a new CAD file and create the required geometry by specifying a new set of commands one by one (this set of commands is known as a "part history" or "construction history"). Or he can open an existing file that contains similar geometry, and change the associated commands to create the geometry that he wants. A CAD draftsman may start from a pre-existing CAD file not because he wants the actual geometry contained in that file, save at a broad level, but rather because he wants to take advantage of the part history associated with that geometry as a convenient means of specifying a new design. Obviously, the pre-existing file must be one that contains geometry which is sufficiently similar to the desired geometry to be useful for this purpose.
- The second method involves at least some degree of copying of the CAD file. It is important to appreciate, however, that the fact that the CAD draftsman has chosen to use a pre-existing CAD file to take a short cut in this way does not necessarily mean that the aerodynamicist who specified the design copied any of the geometry from the pre-existing CAD file.
- If a CAD draftsman using Catia employs the second method, and he executes a "save as" command without checking the "new document" option, the resulting file will have the same UUID. The UUID is a code contained in the metadata associated with the file which identifies the file independently of the filename. Thus if two Catia files have the same UUID, it indicates derivation of one file from the other by the CAD draftsman. As explained above, it does not necessarily indicate derivation of the design by the aerodynamicist.
The relationship between Force India and Aerolab prior to April 2008
- The relationship between what was then Midland and Aerolab started in around November 2006, shortly after Mr Gascoyne re-joined as CTO. By that time Mr Gascoyne had worked with Mr Migeot on two occasions: Renault had used the services of FondTech and Toyota had used the services of Aerolab while Mr Gascoyne worked for them.
- Force India has had its own wind tunnel facility at Brackley since 1997. In 2006 the largest model that the Brackley wind tunnel could accommodate was 40% scale. In order to improve its aerodynamic development capability, Midland decided to upgrade the wind tunnel to accommodate a 50% model. This involved taking the tunnel out of operation for several months. During this period a wind tunnel in Huntingdon operated by Lola Cars was rented. A 50% scale model was run in the Lola tunnel for the first time in about November 2006. It was immediately appreciated that the Lola tunnel could not satisfactorily cope with the weight of the model, causing problems with the data sampling system.
- It was around this time that Mr Gascoyne rejoined. At that time Midland was the worst performing team in F1. Mr Gascoyne decided to use the Aerolab wind tunnel, and to ask Aerolab to assess the entire aerodynamic design of the Midland car and suggest improvements. Thus Aerolab were not merely providing a wind tunnel facility, but were also reinforcing Midland's aerodynamic department. For this purpose Midland engaged Aerolab under a three year development contract.
- Accordingly the 50% model was converted to fit in the Aerolab tunnel, which involved creating a new centre spine among other things. This took about two months. During this period there was a meeting between representatives of Midland and of Aerolab at Force India's premises at Silverstone in December 2006. I shall consider what was said at this meeting below.
- From February 2007 the model was tested in Aerolab's wind tunnel and work was carried out to optimise the aerodynamic design of the car. To this end, a file transfer protocol (FTP) site was set up to facilitate the exchange of wind tunnel data and CAD files between Force India and Aerolab.
- By April 2007 the problems with the Lola tunnel had been resolved, and during April, May and June 2007 what was by then Spyker ran two aerodynamic development programmes in parallel at Lola and Aerolab. In August 2007 the upgraded Brackley wind tunnel became operational and the UK development programme was transferred from Lola to Brackley. Aerolab continued to work on the development of the 2007 season car until October 2007, at which point it started work on the 2008 season car.
The Force India-Aerolab Development Contract
- On 3 April 2008 Force India entered into an aerodynamic development contract with Aerolab ("the Development Contract") which replaced the previous contract. The Development Contract included the following terms:
i) The duration of the Development Contract was until 31 December 2009 (clause 2).
ii) Aerolab was obliged to deal with Force India in the utmost good faith and to use its best endeavours to ensure that its staff did likewise (clause 3(c)).
iii) Intellectual property (including copyrights and designs) created or developed by Aerolab pursuant to the Development Contract became the sole property of Force India (clause 3(h)).
iv) The agreed fee for this work was 246,833 per month in 2008 and 253,400 per month in 2009 (clause 4).
v) The Development Contract was governed by and to be construed in accordance with English law and the parties agreed to submit to the exclusive jurisdiction of the English courts (clause 8(e)).
- Clauses 5, 6 and 7 provided as follows:
a. For the purposes of this Article, 'Information' will mean IP materials, Prototype Materials, software, drawings, electronic data, product or program descriptions, layouts and renderings, timing and planning schedules, records, papers, print-out, designs, sketches, model parts, samples, parts, components and systems, cars, models or prototypes, procedures, specifications and standards, visual or audio-visual media and any other type of information on whatever media including, without limitation, business for operational secrets, methods or inventions.
b. AEROLAB will maintain, and will procure that each of its employees, agents and subcontractors will maintain the confidentiality of, and avoid any disclosure to any third party of any of the Information which AEROLAB has obtained or gathered from FORCE INDIA or has created or developed as part of the performance of the work under this Agreement, unless prior written approval has been obtained from FORCE INDIA. All AEROLAB employees, representatives or advisers have signed a Confidentiality Agreement (see Appendix of the Agreement).
c. Such Information will be used exclusively for the work conducted under this Agreement. It will be made accessible to the personnel of and subcontractors of AEROLAB only insofar as required for such purposes. Any subcontractors who gain access to such confidential information shall be subject to the same terms and conditions concerning confidentiality as AEROLAB to this Agreement.
d. Having obtained written consent from FORCE INDIA to disclose certain limited information to a specified third party for a clearly defined purpose, the Information may be disclosed only after receipt of written confirmation from such third party that it will avoid further disclosure to any other third party and will use the Information only for such defined purpose and in accordance with the terms of this article.
e. The obligation of non-disclosure in this article is not applicable to Information:
*which is in the public domain other than by breach of this Article 4 or any other obligation of confidentiality; or
*which is made available AEROLAB by a third party who was not subject to an obligation of non-disclosure in respect of such Information and other than by violation of this Article or any other obligation of confidentiality; or
*of which AEROLAB was free to disclose and which that AEROLAB can prove was already in its possession prior to its disclosure by FORCE INDIA and prior to the date hereof of the effective date of any previous outstanding obligation of confidentiality with FORCE INDIA; or
*which is independently developed in good faith by employees of AEROLAB, such employees having had no access to such information.
f. Neither AEROLAB nor its subcontractors will derive rights from any such information received from the other.
g. Upon request from FORCE INDIA, AEROLAB and its subcontractors will forthwith (at the option of FORCE INDIA) deliver up to FORCE INDIA or destroy all Information received under this Agreement and any other property of the other in their passion of control (including in each case transcriptions, copies, records and further developments thereof) (together hereinafter called 'Products') at any time such a request has been received, and automatically after the termination of the Agreement. If and to the extent FORCE INDIA requests AEROLAB and its subcontractors to destroy or have destroyed the Products then forthwith following destruction, AEROLAB will certify that all such Products have been destroyed and evidence of compliance therewith will be provided to FORCE INDIA on request.
h. AEROLAB will take reasonable steps to provide secure working areas in which to undertake the Services for FORCE INDIA and in particular restrict access to such areas only to such employees or representatives of AEROLAB for whom it is necessary to have access. Visitors can only be allowed access to such areas with the express permission of FORCE INDIA. No person connected or associated in any way with any competitor of FORCE INDIA shall be permitted access to this area or to view the wind tunnel facilities generally whilst AEROLAB is working for FORCE INDIA Services.
a. During the term of this Agreement, neither AEROLAB as an entity nor individual employees of AEROLAB will participate in any way in services of which the subject is the aerodynamic development of Formula 1 racing cars for customers other than FORCE INDIA.
b. However, AEROLAB is not prevented by this Agreement from making its wind tunnel available to third parties involved in Formula 1 for the performance of tests, provided that AEROLAB restricts its contribution to provision of the wind tunnel and the staff necessary for operation of the same and, in particular, does not give any assistance and advice with performance or evaluation of tests.
a. Either party shall be entitled to terminate this agreement forthwith upon the giving of written notice to the other in the event that the other shall have committed a serious or persistent breach of the terms of this agreement and (if such break shall be capable of remedy) shall have failed to remedy the same within 2 weeks of the service of written notice specifying details of the breach complained of.
b. If delivered by recorded delivery or similar system, the time of receipt shall be evidenced, if necessary, by production of the proof of delivery of the postal service and otherwise shall be deemed to have occurred no later than 2 days after dispatch (5 days if sent by air mail).
c. On termination of the Agreement the provisions of clause 5.g must be complied with as soon as practically possible."
- The confidentiality agreement to be signed by employees contained in the Appendix referred to in clause 5(b) provided as follows (paragraph numbers added):
" I am aware that AEROLAB Srl ('AEROLAB') have entered into a number of agreements with other companies ('customers') to perform services and undertake projects in the field of racing car aerodynamics.
 I have been seconded to the team of people who will be working on the projects and providing the services.
 I acknowledge that the agreements between the customers and AEROLAB contain confidentiality clauses and that AEROLAB will be communicating with me to inform me of my obligations to them under these agreements.
 I accept that the customers feel that the information that may become available to me is of significant importance to them, and a separate agreement on confidentiality of information is required. This agreement will survive my employment with AEROLAB and/or AEROLAB's agreement with the customers for a period of two years.
 I understand that in the case of my employment with AEROLAB being terminated for reasons outside my control and I feel that this agreement restricts my ability to find alternative employment I can write to AEROLAB requesting a written release of all or part of this agreement, and AEROLAB will not unreasonably withhold such release.
 I undertake to keep information entrusted to me or discovered by me in the course of my work on the customers projects and/or providing services to the customers in complete confidence and I will not use or attempt to use the information in any manner except for the purposes for which it shall have been disclosed. I will not disclose or transmit any of the information to any person other than those persons within AEROLAB to whom it is strictly necessary to the purposes of the performance of the Services.
 I understand that the requirement to keep information confidential will cease once it becomes publicly available or I receive it from another source without a duty of confidentiality. I undertake to check out as far as practically possible whether receiving such information would be a breach of confidentiality.
 I will return all records, papers, print-outs, designs or sketches whether contained in written form, computer memories, disks, cassettes or whatsoever other form containing any of the information to a person or persons duly authorised by AEROLAB in this respect or destroyed forthwith if required by AEROLAB.
 I have read the foregoing and clearly understand it. I agree to be bound by the whole contents of this document."
Aerolab's work for Force India in 2008-2009
- In July 2008 the FIA published a draft of the new Regulations for the 2009 season. This included major changes to the aerodynamic aspects of the cars. The new Regulations had been developed in a collaboration between the F1 teams (with the exception of Force India), the FIA and FondTech with a view to making races more exciting. To adjust to the new rules, many teams (including Force India) commenced the development of their 2009 cars during the 2008 season. At least in the case of Force India, they started work even before the draft was published.
- From March 2008 Aerolab worked on the development of Force India's 2009 car pursuant to the Development Contract. Aerolab worked primarily on the rear wing and diffuser, although naturally these were fitted to and worked in conjunction with the complete Force India model.
- By the beginning of 2009 Mr Phillips had decided that running two aerodynamic development programmes in parallel, one in the UK and one in Italy, was too expensive and logistically challenging to be sustainable. He recommended to Mr Key that Force India should close down the Aerolab development programme once the contract had expired. I do not think it is a coincidence that this was shortly after Mr Gascoyne's departure. At that time, of course, the Development Contract had approximately a year still to run.
- By this point Aerolab was experiencing problems with getting timely payment of the fees due under the Development Contract from Force India. In an email dated 4 January 2009 Mrs Sweeney apologised to Mr Migeot for this and offered a payment plan to address the outstanding balance. This was acceptable to Mr Migeot, but by 19 February 2009 Force India had defaulted on the payment plan and Mr Migeot was having to chase Mrs Sweeney for payment. On 2 March 2009 Mrs Sweeney wrote to say that Force India had experienced a delay in receiving sponsorship money, but that its shareholders had confirmed funding support to enable Aerolab to be paid. On 11 March 2009 Mr Migeot complained that Aerolab had not been paid for its work since mid-December 2008 and threatened to stop work at the end of 13 March 2009. No payment was made by Force India, and so Aerolab stopped work during the period 16-25 March 2005. After a series of apologies from Mrs Sweeney, Force India made a payment which cleared the outstanding balance from December 2008 and the January 2009 invoice. Mr Migeot's evidence was that this payment coincided with Force India requesting Aerolab to do some work on the design of the diffuser, suggesting to him that Force India was capable of paying when it needed Aerolab.
- After this, Aerolab continued to experience difficulties in obtaining payment from Force India. Aerolab's January 2009 invoice, payment of which was due on 15 January 2009, was not paid until 30 March 2009. Aerolab's February 2009 invoice due on 15 February 2009 was not paid until 5 May 2009. Aerolab's March 2009 invoice due on 15 March 2009 and Aerolab's April 2009 invoice due on 15 April 2009 were only part paid on 23 June 2009. Force India's excuse was that it had not received shareholder funding. As Mr Migeot pointed out in his fourth witness statement, however, there is no evidence to show that this was in fact the reason for Force India's non-payment. Force India continued to race two F1 cars at a Grand Prix in a different country every other week, and its team principal Vijay Mallya was a very rich man.
- It appears that by April or May 2009 Force India was desirous of terminating the Development Contract. Mr Phillips therefore, as he put it, "took the precaution of ensuring that Aerolab were not given any work in connection with the development of our 2010 car and that, as far as possible, model updates for the ongoing 2009 development were kept to a minimum". Thus Force India stopped sending Aerolab updated geometry from its own wind tunnel sessions. This led Mr Migeot to suspect that the real reason Force India was not paying its bills was that it no longer wished to work with Aerolab.
- On 4 June 2009 Mr Migeot wrote formally to Force India to record its "persistent (and serious) breach of your financial obligations" under the Development Contract, and inviting it "to cure forthwith your breach by settling our outstanding credit". The amount outstanding at that point was 764,260. On 9 June 2009 Force India replied proposing a payment plan. Force India did not honour this plan, however. By the end of July 2009 Force India owed Aerolab 846,230, the equivalent of more than three months' work.
The ending of the relationship between Force India and Aerolab
- On 2 July 2009 Mr Key sent Mr Phillips and others an email recording a conversation with Mr Migeot as follows:
"FYI I have spoken to Jean Claude Migeot this afternoon regarding an exit strategy from Aerolab for the latter half of this year, based on no renewal of the contract for 2010, immanent [sic] cost cutting measures in F1 over the next few years and the desire to have a clean and sensible break with Aerolab rather than a sharp stop to part of our programme in December.
We have agreed to hold a meeting in week 29 (two weeks time) at Silverstone to review our approach to this, although this may be brought forward to Nurburgring. During our discussions I stressed the desire to have an amicable agreement in place such that after the shut down period we reduce our tunnel usage to zero, but that we may wish to maintain technical input from Aerolab staff and possibly some manufacturing support for the Brackley programme, Jean Claude was ok with this but obviously needs to look after his own interests with Aerolab and as such the way forward (primarily in terms of budgets and costs to us) will be significantly influenced by what tunnel customers he can find short term. That said I think it will be possible to have a reasonable discussion about how we proceed."
- On 14 July 2009 Mr Key sent Mr Migeot an email enquiring as to a suitable date for a meeting. Mr Migeot replied on 15 July 2009 saying:
at the time we spoke it really seemed the F1 landscape was about to be cleared. Instead everything got mixed up again in Germany
As the question of FI replacement is central to any discussion we can have about anticipating the end or scaling down our collaboration it is necessary to postpone our meeting hoping it will be a matter of for days for the situation to become manageable."
- So far as the evidence goes, there was no further discussion on this subject between Mr Key and Mr Migeot at this stage. As noted above, however, Force India was not paying Aerolab and its debt was mounting.
- On Friday 31 July 2009 Mrs Sweeney sent Mr Migeot an email saying that Force India was "'unable to remit our payment to you as previously planned", and would not be able to discuss the matter further until after the end of the FOTA August shutdown (as to which, see below). On the same day Mr Gascoyne telephoned Mr Migeot about the Lotus project and offered to engage both FondTech and Aerolab (see further below). As a consequence of these events, Mr Migeot decided that Aerolab would stop working for Force India with effect from the end of that day, and start working for Lotus on Monday 3 August 2009.
- Accordingly, Mr Migeot telephoned Mr Liboni, who was on holiday but due to return to work on 3 August 2009, and instructed him to transfer all Force India data (most of which was in the form of CAD files) from Aerolab's servers to an external hard drive and put this in a crate with Force India's model parts as soon as possible.
- It is clear that no-one at Force India became aware of Mr Migeot's decision before finishing work on 31 July 2009 and going on holiday during the shutdown. On the contrary, Mr Belcher sent the Aerolab aerodynamicists an email that afternoon seeking confirmation that they were clear as to what they could and could not do during the shutdown period, and Mr Crosetta replied saying "Any development and manufacturing activities relating to the Force India program will be temporarily stopped". In a later email the same day Mr Crosetta said that Aerolab would resume work on 17 August 2009.
- I will discuss what Mr Liboni did in response to Mr Migeot's instructions more fully below, but one step he took on 3 August 2009 was to disable Force India's connection to the Aerolab servers. On the same day Aerolab sent Force India an invoice for 228,500 for the month of August 2009, in accordance with its usual practice of issuing invoices prospectively at the beginning of each month. The sum of 228,500 was a reduced fee to reflect the FOTA shutdown which had previously been agreed between Mr Migeot and Mr Key in May 2009. At about the same time Mr Migeot instructed Aerolab's Italian lawyers to prepare an application to secure the debt.
- Soon after Force India's staff returned to work on Monday 17 August 2009 they discovered that the connection to Aerolab's servers had been severed. They deduced from this that Aerolab had stopped working for Force India. As Mr Phillips put it in his first witness statement:
"Shortly after returning from the shutdown period I discovered that Aerolab had ceased all work for Force India. No further work was carried out by Aerolab for Force India after 31 July 2009."
- Mr Migeot's evidence was that Mr Key telephoned him a couple of days later to ask what was going on. Mr Migeot told Mr Key that Aerolab had stopped work on 31 July 2009, that Force India's stuff had been packed in a box and would be returned when Aerolab received all the money it was owed and that Mr Migeot had put the matter in the hands of his lawyers. He also told Mr Key that Aerolab had been subcontracted by FondTech for various works, but did not reveal the identity of FondTech's customer.
- Mr Key did not give evidence, but his account of what appears to be the same conversation was recorded by him in an internal email on 24 August 2009 as follows:
"I have spoken to Jean Claude from Aerolab today regarding the current situation, not too surprisingly he is somewhat upset with the level of payment due at present. I suggested I would discuss internally where we stand and get back to him from a technical perspective regarding how we proceed, however with regards to any change of plans with Aerolab prior to the end of the year he is not willing to discuss this until the payment situation has been resolved.
He mentioned that given recent history the situation is currently with his lawyers, although we have not heard from their side yet at present it could well be immanent [sic]. I think therefore we should briefly review a plan tomorrow and try and give best assurances on how the situation will be addressed."
- It appears that there were subsequent telephone conversations between Mr Migeot and Mr Key to see if the dispute could be settled, but in the event no agreement was reached.
- On 26 August 2009 Mr Belcher sent an email to a number of colleagues saying:
"I can confirm that Aerolab has stopped working and communicating with us.
It would appear that the connection to our server has been unplugged and our IP on this server is at risk.
I believe that these events have come about due to payment issues however I have no official communication of the situation from Aerolab."
- Later the same day David Lippiatt, Force India's IT manager, sent Mr Liboni an email in which he noted that the server connection hadn't been running for a couple of weeks. He went on:
"I understand that there may be a bit of a disagreement between the companies at the moment. If that is the case, what is the status of our server and router with you?"
Mr Migeot instructed Mr Liboni not to reply to this.
- On 28 August 2009 Aerolab applied to the Tribunale di Monza for an order for protective seizure of Force India property at the forthcoming Italian Grand Prix in Monza on 13 September 2009 to secure the outstanding debt. In its application Aerolab set out the position with regard to the payment of its invoices down to the end of July 2009, quoted Mrs Sweeney's email of 31 July 2009 and then stated:
"No communication has been passed between the parties, and Aerolab has not received any payment of the amount due, which, with August's monthly payment, amounts to 1,074,730.00."
- On 2 September 2009 Force India was notified that the application would be heard on 7 September 2009. It was then adjourned to 11 September 2009. It is not clear whether the Tribunale di Monza granted Aerolab the order it sought on that occasion, but it is common ground that the upshot was that Force India provided security to the full amount claimed either to prevent seizure, or to secure release, of its property. The security is still being held to await the outcome of the present proceedings.
- On 18 September 2009 Force India's solicitors wrote to Aerolab stating:
"As you are aware, our client will not be requiring your services for the remainder of the contract.
We are aware from press reports that your sister company, FondTech, has agreed to carry out aerodynamic work for the new Lotus F1 team."
It appears that the first sentence I have quoted refers to the discussions between Mr Key and Mr Migeot. The letter went on to require Aerolab to comply with the confidentiality provisions in the Development Contract. Although no complaint of breach of the Development Contract was made by Force India in this letter, Force India now relies upon it as constituting an acceptance of alleged repudiatory breaches of the Development Contract by Aerolab.
- On 21 September 2009 Aerolab's Italian lawyers replied saying "This is to inform you that contrary to your representation, no relationship exists between Aerolab srl and FondTech, which are two separate and independent companies". This statement was untrue, and there is no satisfactory explanation as to how it came to be made.
- On 12 February 2010 Aerolab commenced proceedings in this jurisdiction against Force India claiming the sum of 1,074,730 plus damages under the Development Contract. In its Particulars of Claim Aerolab pleaded:
"In the light of [Force India's] persistent actual and repudiatory breaches, [Aerolab] accepted [Force India's] repudiation by ceasing all work for [Force India] in August 2009. Accordingly, the [Development Contract] was terminated in August 2009."
- In the Corporate Defendants' opening skeleton argument for trial, it was accepted for the first time that Force India was not liable to pay Aerolab's invoice for August 2009 because Aerolab had done no work for Force India during that month. Accordingly, Aerolab restricted its claim to the sum of 846,230 due as at 31 July 2009. Force India's only defence to this claim is a set off of the damages it claims for breach of confidence.
Aerolab's access to Force India data after 31 July 2009
- As at 31 July 2009 Aerolab held a substantial quantity of CAD files containing designs for Force India parts, including CAD files for all the parts in respect of which complaint is made by Force India in these proceedings.
- On 3 August 2009 Mr Liboni restricted access to the folder containing Force India's data to the aerodynamicists and CAD draftsmen. This was to allow the aerodynamicists and CAD draftsmen to transfer personal files from this folder to their personal areas. A number of witnesses gave evidence that the aerodynamicists and CAD draftsmen were in the habit of developing parametric files and studies on their own initiative while working for a client that they regarded as their own property.
- Also on 3 August 2009 Mr Liboni ordered two external hard drives, which arrived on 14 August 2009. He then made two copies of the data in the Force India folder on these drives, one for Aerolab and one for Force India to take away. He gave the former to Mr Migeot who removed it from Aerolab's premises.
- On 19 August 2009 Mr Liboni restricted access to the Force India folder to himself.
- On 20 August 2009 Mr Liboni sent the aerodynamicists and CAD draftsmen an email instructing them to remove all confidential data relating to Force India from their personal folders after first copying it to a backup folder. (The purpose of requesting them to copy the data to the backup folder was so that Mr Liboni could archive it as he had previously done with the data in the Force India folder). Mr Liboni did not police this instruction, however.
- Some of the CAD draftsmen accepted that they had copied Force India CAD files into their personal folders. It appears that some had already done this prior to 31 July 2009, but Mr Legnani and possibly others made such copies after that date. Furthermore, it appears that some copies remained accessible for some time after 20 August 2009.
- On 21 August 2009 Mr Liboni shut down the Force India server.
- Between 24 and 28 August 2009 Mr Liboni attempted to delete all data relating to the Force India project on the Aerolab server. In September 2009 he attempted to delete any remaining files on all of Aerolab's computers and CAD workstations, including any files in temporary or cache folders. It appears that no attempt was made to delete any emails or copies of files attached to emails. As I shall relate below, Mr Crosetta was able to access a number of emails in early September 2009.
- In summary, Aerolab's aerodynamicists and CAD draftsmen had access to all the Force India CAD files until 19 August 2009. Even after that, there was some degree of access on the part of at least some of the aerodynamicists and CAD draftsmen.
Force India's performance in 2009
- During most of the 2009 F1 Championship Force India's cars were at the back of the grid. After they achieved the slowest qualifying times for the Chinese Grand Prix in mid April 2009, both of Force India's drivers (one of whom was the very experienced Giancarlo Fisichella) blamed the car's lack of downforce, and expressed the hope that this would improve. Force India did not achieve any success until the Spa Grand Prix at the end of August 2009, however. Force India ended the 2009 season in ninth place with 13 points. The Constructors' Championship was won by Brawn with 172 points.
Litespeed's F1 application for 2010
- Until 31 March 2009 there were only 10 teams in F1. In April 2009 the FIA decided to increase the number to 13 teams with effect from the 2010 season, and announced that applicants for one of the new places had to apply during the week 22 May to 29 May 2009.
- On 8 May 2009 Mr Gascoyne was approached by Litespeed F3 Team Ltd ("Litespeed") to act as a consultant to prepare an application. Mr Gascoyne's company MGI Aviation Ltd (later known as MGI Motorsport Ltd) subsequently entered into a consultancy agreement with Litespeed to provide Mr Gascoyne's services during the period 12 May 2009 to 12 June 2009. A new company called Litespeed GP Ltd, which was soon renamed Lotus Technologies Ltd, was incorporated to make the application.
- The application involved preparing a full technical and budget proposal for building and operating an F1 team for a period of three years. To achieve this, Mr Gascoyne approached a number of sub-contractors. These included Mark Tatham trading as MTO Consulting ("MTO"), Hall & Bell Gbr trading as Composite Designs ("CD") and FondTech. Mr Gascoyne had worked with Phil Hall and Duncan Bell of CD at Toyota and with Mr Tatham at both Tyrrell and Toyota. Messrs Tatham, Hall and Bell were experienced F1 racing car designers. Both CD and MTO were based in Cologne in Germany. Mr Gascoyne had worked with Mr Migeot of FondTech and Aerolab on a number of previous occasions, including while at Force India. In addition, Mr Gascoyne approached Cosworth to supply engines and Xtrac to supply gearboxes.
- Mr Gascoyne met Mr Migeot to discuss the project on 13 May 2009 and he met Mr Hall and Mr Bell to discuss the project on 14 May 2009. At that stage, they decided to proceed on the basis that, unusually, the structural design of car would be started prior to the aerodynamic design.
- Mr Hall's role in the project was essentially that of project manager. On 18 May 2009 Mr Hall emailed Mr Gascoyne a rough project plan involving finalising the car layout in June 2009, detailed car design from July to December 2009, chassis homologation in December 2009, gearbox/rear crasher homologation in January 2010, car building from mid-January 2010 and roll-out in the first or second week of February 2010. On 20 May 2009 Mr Hall sent Mr Gascoyne a draft budget.
- Around the same time Mr Migeot provided Mr Gascoyne with some information regarding the aerodynamic design of the car by FondTech. He indicated that he did not intend to renew Aerolab's contract with Force India when it expired, and thus Litespeed would be able to use Aerolab's facilities as well after 31 December 2009.
- After the submission of Litespeed's application on 28 May 2009, Mr Hall and Mr Bell continued working at their own risk. On 7 June 2009 they sent Mr Gascoyne a chassis design budget. In addition, discussions continued with Cosworth, Xtrac and Mr Migeot. Also on 7 June 2009 (i.e. three days after his letter to Force India dated 4 June 2009) Mr Migeot sent Mr Gascoyne an email commenting on a presentation about Lotus' wind tunnel facilities which Mr Gascoyne had prepared the previous day, in which Mr Migeot stated inter alia:
Find attached a worksheet illustrating the Aerolab complete costs situation.
On the left you will find the present situation with our current customer. As in our previous meeting this is a very 'open-book' presentation i.e. showing the real costs for Aerolab and applying the margin at the end to get a 10% net profit which is required in our business to reinvest continuously in the facility and its neverending development.
For the 2010-2012 proposal I have been very straightforward, basically keeping the actual cost distribution assuming we will continue to operate in a very similar fashion.
Coming to 2009
, assuming Aerolab is in a position to start working on 1st July, its current staff is adequate to produce a complete model in 2 months (of course if the information necessary to design is flowing straightaway) which would allow 4 months of testing before the end of the year.
If Aerolab was to remain bound by its current contract all 2009, FondTech is free and has the capacity to run almost all of the desired 2009 programme:
- To design and build a new model in July-August FondTech will need to recruit probably 3 external CAD designers, some interim model makers and use more of external production (unfortunately it is the holiday period).
- Our latest wind tunnel (FT/2) will have between September and December only 11 days available per month which at 16 hours per day make 176 hours/month, just 10% short of what is asked (196 hours).
- FondTech hour cost is higher than Aerolab's mainly because of its more recent wind tunnel and bigger and older staff (fixed costs are therefore higher).
Lotus' F1 application
On 12 June 2009 Litespeed was informed that its application for a place in F1 had been unsuccessful. Shortly afterwards, however, an FIA representative informed Litespeed that one of the existing teams might withdraw, and that if that happened Litespeed was first reserve. Litespeed did not have the funds to continue, however. It was at this point that Mr Fernandes stepped in and agreed with Mr Gascoyne to fund continued work on a "minimum spend" basis. Thus it was that, as stated above, Lotus effectively came into existence in early July 2009 (although to begin with it used the name "Air India Litespeed F1 Team").
On 7 July 2009 MGI and CD entered into a 10 week design agreement running until 15 September 2009. During this period CD had a team of six working on the project, in conjunction with Mr Tatham of MTO who acted as chief designer. At around the same time, Mr Gascoyne put CD and MTO in touch with Mr Migeot, and Mr Migeot provided some limited input on the proposed design of the car. Beginning on 17 July 2009, CD and MTO started circulating weekly design progress reports. Initially these were very high level documents, but later they became more detailed.
On 29 July 2009 BMW Sauber announced its withdrawal from F1, and Lotus was unofficially led to believe that it would be awarded BMW Sauber's place. By this time CD/MTO had produced a draft full scale car design and production plan. This meant that getting the aerodynamic work started became the next critical step, beginning with the design and construction of a 50% scale model.
As mentioned above, on 31 July 2009 Mr Gascoyne telephoned Mr Migeot. Mr Migeot's evidence was that Mr Gascoyne called shortly after Mr Migeot received Mrs Sweeney's email. Mr Migeot said that he could offer the services of Aerolab as well as FondTech, since Aerolab had terminated its agreement with Force India for non-payment. Accordingly it was agreed between Mr Gascoyne and Mr Migeot that FondTech and Aerolab would design and manufacture two scale models for wind tunnel testing.
Mr Gascoyne recorded the conversation in an email to Mr Fernandes shortly afterwards:
"The most significant aspect to guarantee car performance for 2010 is the Aerodynamic program. The intention was to use the Fondtech tunnel in Italy for 2009, switching to full time in the sister Aerolab tunnel when it became available in Jan 2010. However, having discussed the situation with Jean Claude Migeot of Aerolab, the Aerolab would be available immediately (due to non payment from Force India, they have already been served notice of termination). I am proposing that we used both tunnels, starting immediately from August for the whole of 2009 and 2010. Although this increases the cost we can easily cope with this in the new budget and this gives us an Aerodynamic program better than most other teams. We are also starting from the current level of Force India due to the historical knowledge, not starting as a new team."
It is clear that at that stage, and for some time afterwards, Mr Migeot was concerned about Aerolab's position vis-ΰ-vis Force India. In particular, he did not want Aerolab publicly associated with Lotus until after its application to the Tribunale di Monza had been determined. To begin with, therefore, Mr Migeot and Mr Gascoyne proceeded on the basis that the services would be provided by FondTech, with Aerolab acting as a sub-contractor to FondTech. To this end, FondTech and Aerolab entered into a sub-contract agreement on 2 September 2009. Only in November 2009 was Aerolab's involvement in the project openly acknowledged. Even in paragraphs 15 and 16 of his first witness statement in support of Aerolab's claim made on 1 June 2010, Mr Migeot was economical with the truth with regard to Aerolab's involvement with the Lotus project prior to October 2009.
On 7 August 2009, the FIA announced that they would conduct a new application process, with applications required by midnight on 17 August 2009. Nevertheless, Mr Gascoyne and his colleagues were confident of success. Furthermore, they needed to continue the development of the car in case they were successful.
The Lotus application was duly submitted on 17 August 2009. It included a two page statement of "Car Philosophy and concepts (Aero only)" setting out FondTech's approach to the aerodynamic design of the car in general terms, two pages of "Model Design and Deadlines Dates", a spreadsheet setting out a wind tunnel programme which reflected the availability of Aerolab's wind tunnel and an email from Mr Migeot to Mr Gascoyne dated 17 August 2009 setting out updated contractual proposals.
On 14 September 2009 it was announced that Lotus had gained entry into F1.
The FOTA August 2009 shutdown
FOTA agreed to a shutdown for all F1 teams for the period Monday 3 August to Sunday 16 August 2009 inclusive. During this period no team was allowed to carry out any aerodynamic development, nor could Aerolab have carried out any such work for Force India. All that Aerolab could have done under the Development Contract was wind tunnel maintenance. Since Lotus did not have an F1 entry during this period, the shutdown did not apply to Lotus, nor did it prevent Aerolab carrying out development work for Lotus.
The design of the initial Lotus model
As part of its case on copying, Force India contends that FondTech and Aerolab started work on the design of the initial wind tunnel model for Lotus in late July 2009, that is to say, even before Aerolab claims to have terminated the Development Contract. The Defendants dispute that Aerolab did any work prior to 3 August 2009, but Mr Migeot accepted that Enrico Goldoni, FondTech's drawing manager and possibly a few others at FondTech, had made a start on sketching a few things. In addition, he said that some of Aerolab's staff, who had little to do owing to the situation with Force India, had created some tasks for themselves, such as running yaw tests, and Mr Balboni had revised the construction history of the Force India rear wing to make it more user friendly. Mr Balboni did not mention doing this in his own evidence, but this account is supported by a comparison of the rear wing files examined by Mr White and Mr Strevens.
The high point of Force India's case on this point is an email which Mr Migeot sent Mr Gascoyne on 31 July 2009. The first part of this reads as follows:
"First of all thanks to renew the collaboration once again with FondTech/Aerolab. It's a great pleasure to restart a fresh challenge with whom we know and whom we trust, for everyone in Sant'Agata and for me personally.
Unfortunately I am too short of time to give you a complete budget tonight but I will work it through the week-end.
The bullet points from my side are:
- As of today midnight Aerolab will stop all work for Force India (That had been decided before your call today anyway). This is confidential info so don't leak it because there will be a legal fight about the termination of the Aerolab/Force India relationship.
- This means all Aerolab workforce is available from Monday (except those in holiday because this is august now).
- Together FondTech and Aerolab will design and build 2 identical 50% models. The target should be to start testing in the Aerolab tunnel in week 41 (5 October). Budget proposal will follow on Monday.
Counsel for Force India emphasised the statement "Aerolab has already drafted many surfaces". Mr Migeot denied that this showed that Aerolab had already started work on the project. I accept that denial, for the following reasons.
- Drawings are already flowing from Compositedesigns to us and Aerolab has already drafted many surfaces. As soon as we have put everything together we need to meet (think when and where) to review all model specifications."
First, the evidence of both Mr Migeot and Mr Gascoyne was that the key conversation between them was the one on 31 July 2009. Mr Migeot's evidence that it was the coming of this telephone conversation shortly after Mrs Sweeney's email which made him decide to terminate the Development Contract and offer Mr Gascoyne Aerolab's services was convincing and supported by the documentary evidence. For example, on 31 July 2009 Georgia Pelacani sent Mr Migeot by email copies of all the documentation relating to the Development Contract, including a copy of the contract, invoices and correspondence. I infer that this was so that he could send these documents to his lawyers.
Secondly, Mr Hall's unchallenged evidence was that "Aero began work in earnest on the project from around 1 August 2009".
Thirdly, the email begins by saying that Aerolab will stop work for Force India as of midnight and will all be available from Monday.
Fourthly, there is quite a lot of other documentary evidence to support the view that Aerolab started work on 3 August 2009. Four examples will suffice. The first is an email from Mr Gascoyne to Mr Hall and Mr Tatham on 31 July 2009 saying "Can you contact Jean Claude directly
to pass over chassis geometry to get started on the model." Mr Hall contacted Mr Migeot to arrange an FTP link later the same day. The second is an email from Mr Migeot to Messrs Crossetta, Liboni, Balboni and Neira on 31 July 2009 saying "FYI we have left. For now nothing changes until Monday morning." The third is an email from Mr Tatham to Mr Migeot on 1 August 2009 saying "Please see attached our basic car dimensions to allow you to start the model design", and attaching his design progress report dated 31 July 2009 and a document headed "2010 Air Asia Litespeed F1 Parameters for Aero Design" dated 1 August 2009. The fourth is the minutes of the meeting on 3 August 2009 (as to which, see below).
Fifthly, there is no reliable documentary evidence of any significant work having been done by Aerolab during this period, let alone "many surfaces". Counsel for Force India relied upon a few stray folder entries and files which he put to various witnesses in cross-examination, but I have considerable reservations about the reliability of this evidence so far as the dates are concerned. For example, one of the documents purports to record modifications to the diffuser master surface, but these include 194 modifications supposedly made on 1 January 1970, which is obviously impossible.
Sixthly, the statement that "Drawings are already flowing from Compositedesigns to us" was an overstatement. I think that Mr Migeot was likewise overstating when he said many surfaces had been drafted. It appears that the reason for the exaggeration was that the email was intended to be, and was, forwarded to Mr Fernandes by Mr Gascoyne.
On balance, I think that in this instance Mr Migeot wrote Aerolab when he meant FondTech, although on the whole he was careful to distinguish the two. I recognise that another possible explanation is that Aerolab had started work under the cover of being a sub-contractor to FondTech. Even if that is the correct explanation, however, I am not persuaded that a significant amount of work was done prior to 3 August 2009.
On 1 August 2009 Mr Migeot drafted an outline schedule and budget for the project from 3 August 2009 to 26 October 2009 in an Excel spreadsheet. The spreadsheet has two pages, one of which shows the number of hours required by Aerolab and FondTech's aerodynamicists, CAD draftsmen and modelmakers week by week and the other of which shows the projected costs. The schedule envisaged Aerolab and FondTech designing and building an initial model in nine weeks. Mr Migeot's evidence was that this was based on FondTech having successfully designed and built a Volkswagen Formula 3 50% model from scratch in eight weeks some 18 months previously. Mr Migeot used the same engineer who had coordinated that project, namely Mr Lenoci, to coordinate the construction of the Lotus model.
On 3 August 2009 CD sent FondTech designs for the monocoque, side crash structures, nosebox and radiators/coolers of the car by FTP. Subsequently they also sent a model of an Xtrac gearbox with their suspension geometry, wheels, front and rear suspension and rear impact structure.
Also on 3 August 2009 Mr Migeot held a meeting attended by many of the senior staff of FondTech and Aerolab. As the minutes record, Mr Migeot told his staff that the meeting had been called to discuss "a new client", Lotus, which had just received the approval of the FIA for entry into F1. The minutes then state "For Aerolab, today, Monday 3 August 2009, marks the end of its relationship with Force India". They go on to outline the project and who will do what. Particular points of note are as follows:
To prepare two models in two months starting from today. JCM prepared a worksheet/program which he distributed during the meeting and which fixes the days for the first sessions ...
The aerodynamics office:
Aerolab: during the first two weeks of August, the period in which Luca C and Hugo N will be absent on holiday, the aerodynamic study will be carried out by the two junior engineers Davide P and Alessandro M.
FondTech: the two engineers who will follow this new project will be Luca G and Edoardo L.
To optimise the work co-ordination, JCM believes that it is indispensable to have a FondTech engineer present in Aerolab full time. The person chosen for this role is Edoardo L who will be in Aerolab from tomorrow.
During this initial phase, it is indispensable that every designer is constantly followed by an aerodynamic engineer.
This morning the first designs have arrived in Aerolab from the technical officer in Cologne which started to design the structural parts of the car on instruction of Mike G (chassis, nose, side impact tubes, wheelbase
The first thing to do from tomorrow is to create a relatively detailed planning. Given the holiday absence of Alberto B and, as from Wednesday, the absence of Enrico G, the job, the job of putting together the planning has been assigned to Edoardo L.
Although it is not recorded in the minutes, it is common ground that Mr Migeot told his staff during the meeting that they should not invent anything. Mr Migeot's evidence was that what he meant by this was that they should use their past experience and not try to do anything radically new. It is clear that many of his employees understood his words in a different way, however. The clearest contemporary documentary record is contained in a note which Mr Lenoci sent Mr Neira (with a copy to Mr Crosetta) on 12 August 2009, when Mr Neira had just returned from vacation and Mr Lenoci was just about to depart on vacation. This begins as follows:
1. The starting aerodynamic configuration must reflect, to the extent possible, a recognised structure that can be drawn quickly, without any need at this level to develop new shapes. The design of the internal structure can, however, take into account the direction that aerodynamic development is to take as soon possible (see RIS v diffuser).
2. Guidelines are (JCM) to invent as little as possible, unless time and costs dictate otherwise. Therefore use the previous F1 model as much as possible where design work is concerned."
Mr Migeot's evidence was that his staff had misinterpreted him. I do not accept this. Mr Lenoci was far from alone in understanding his words in this way, and I do not believe that that can have been an accident. On the other hand, nor do I accept the submission of counsel for Force India that Mr Migeot instructed his staff systematically to copy the Force India CAD files. As I will discuss below, there was some copying of Force India CAD files. Mr Migeot's evidence was that he was surprised and disappointed by this. I accept that evidence. Looking at all the evidence, I conclude that Mr Migeot intended his staff to take as their starting point the design of the Force India car at the level of the general shape and configuration of its component parts, but no more. That explains why, as counsel for Force India emphasised, there is no record of Aerolab and FondTech having carried out any initial work on the overall design of the model before plunging into the designs of the individual parts and relatively little evidence of any overall direction of the project so far as the design of the model was concerned, particularly during the initial stages. In the event, some of Mr Migeot's employees went further than he had intended.
In considering the process by which Aerolab and FondTech designed the initial Lotus model, it is important to appreciate six important points, none of which is disputed:
i) The general aerodynamic design of the Force India 2009 car was in the public domain, having been raced at 10 Grands Prix by August 2009.
It is also important to appreciate that most of Force India's claims relate to what was done during the early stages of the project. Indeed, during the trial counsel for Force India focussed very largely on what was done during the first two weeks in August 2009, suggesting that there had been extensive access to Force India CAD files during this period.
ii) As discussed above, as at the beginning of August 2009 the Force India car was the least successful car in 2009 F1 Championship.
iii) The structural and mechanical components of the car were being independently designed by MTO/CD. The aerodynamic components for the Lotus model had to fit those structural and mechanical components.
iv) Lotus had decided to use a Cosworth engine and Xtrac gearbox, which were different to the engine and gearbox used by Force India. Again, the aerodynamic components had to accommodate this engine and gearbox.
v) The FIA Regulations for the 2010 season contained two important changes from the 2009: refuelling was to be prohibited, meaning that the car would have a significantly longer wheelbase and a higher ride height to accommodate a bigger fuel tank; and the width of the front tyres was to be reduced from 270 mm to 245 mm. These changes had to be reflected in the aerodynamic design of the car. In addition, it was confirmed that the use of double diffusers, which had been made possible by a controversial reading of the 2009 Regulations, would be allowed in the 2010 season.
vi) It was always intended that the initial design would be subject to changes during the course of wind tunnel testing from October 2009 onwards, that is to say, well before the car was going to be raced for the first time.
The following aerodynamicists and CAD draftsmen worked on the project during the first seven weeks (that is to say, until the end of the week beginning 14 September 2009):
i) Aerolab aerodynamicists: Mr Crosetta (on holiday for most of the first two weeks), Mr Neira (on holiday until 11 August 2009), Mr Mirani (on holiday week commencing 24 August 2009) and Mr Paganelli (on holiday weeks commencing 31 August 2009 and 7 September 2009). Mr Crosetta worked on the front and rear wings and Mr Neira worked on the diffuser, while Mr Mirani and Mr Paganelli worked mainly on the spine.
I shall consider the design of each of the parts in issue below, but at this stage I shall refer to some of the key items of documentary evidence with regard to the chronology of the design process. It should be borne in mind that CD and MTO were working in parallel with FondTech and Aerolab during this period. Their work can be traced in some detail through the MTO/CD weekly design progress reports mentioned above, but I shall only make occasional reference to them.
ii) FondTech aerodynamicists: Mr Lenoci (on holiday week beginning 17 August 2009) assisted to a minor extent by Luca Gasparini and Alberto Maggioni. Mr Lenoci worked mainly on the mid-section parts.
iii) Aerolab CAD draftsmen: Mr Balboni (on holiday week beginning 3 August 2009), Mr Carafoli (on holiday weeks beginning 7 and 14 September 2009), Mr Columbanu (on holiday weeks beginning 3 and 10 August 2009), Mr Domenicali, Mr Legnani (on holiday weeks beginning 24 and 31 August 2009) and Mr Urru (on holiday weeks beginning 10 and 17 August 2009).
iv) FondTech CAD draftsmen: Mr Branchini, Mr Cremonini and Mr Nita, assisted by Florin Pruteanu (an external draftsman) and to a minor extent by Mr Bevacqua and Debora Alberghini. The FondTech draftsmen started work on the project later than the Aerolab draftsmen.
On 4 August 2009 Mr Crosetta sent an email to Mr Mirani and Mr Paganelli. Although Mr Crosetta was supposed to be on holiday during the first two weeks of August 2009, he is recorded as having attended the meeting on 3 August 2009. Furthermore, it is clear from this email and the one quoted below that he was contributing to the design process on 4 August 2009. I therefore infer that he postponed his departure on holiday by a couple of days. This email includes the following passages:
"Engine: I don't think its much different to one we already know (it's pretty much fixed by the regulations). Let's use ours for the moment.
Back suspension: let's use what we know, at least until we've got the defined pick-up point (in practice we only need the LWR WB).
What's important to do now is to draw the front and rear spines: we'll do the rest as soon as we've got all the information.
The central spine can be drawn modifying the existing one. The changes I have in mind are:
- a bit higher at the rear ..
- balance: same position (can't go further forward without pointless complicated work being done)
- get rid of the channel in the internal zone
- the floor can be kept as a single piece, but it would be better to remove the mini chassis/seat rail under the main beam.
Same applied for the front spine:
- it can be kept the same almost identical.
Later on 4 August 2009 Mr Mirani sent an email to a number of his colleagues summarising the work done that day at Aerolab. This includes the following passages:
"Enrico D: definition of the engine cover on the geometry received from the client. Two possibilities have been put forward
The bodywork needs to be adapted in line with what they've sent us
Marco U: definition of two versions of the RW, both of which are usable. Work on closing the surfaces of the Chin started.
Davide C: definition of the front parametric chassis: where the nose is concerned, the plan is use the file that they've sent.
GianMarco L: work continued on the shadow diffuser.
Tomorrow the idea is to use part of the resources available to give detailed consideration to a solution for the spine, working together with FT (EL)."
This email contains an error, in that Mr Carafoli was working on the rear wing and Mr Urru was working on the chassis.
Mr Crosetta replied shortly afterwards commenting on what had been done. In this email he said:
"Once the external surface has been closed off, you should however be concentrating on the no. 1 priority at this point: we need to make a model that lets us offer test in the tunnel before defining the car in its actual form. First of all we need the central spine, front spine, the floor, etc.
For the moment let's put all the rest on stand-by.
So: we've got the nose, chassis, wheelbase: use the current spines and modify them so that they are within the dimensions that already know.
We need to sort out:
- floor, reference plane and plank
Then we can move on to the rest of the model
On 5 August 2009 Mr Lenoci sent Mr Hall an email asking which CAD parts CD would design and the schedule for delivery to FondTech. He also said "FYI, we've started with the model spine design which, following the CAD already received from your side, now mostly involves [various points]". Mr Hall replied suggesting a meeting would be beneficial. Mr Lenoci responded:
"I agree with you, but we can't help anticipating the model design as much as we can, as we already have some capability and we could get a benefit later.
Therefore let us hopefully wait for the green light and arrange the meeting shortly after it.
Meanwhile we proceed with this preliminary study and try and get into the best position for the official start."
On 7 August 2009 a document was prepared showing the "state of the art [of the] LL model". This depicts and describes the spine and its interaction with the monocoque.
On 10 August 2009 Mr Tatham sent Mr Lenoci MTO's preliminary front suspension coordinates, saying that the geometry would be updated later to suit the narrow 2010 wheels. By this date, the MTO chassis design specification had reached issue 4 running to 44 pages.
On 11 August 2009 Mr Mirani sent Mr Crosetta an email updating him on the work done. This includes the following passages:
"Here's a summary of the work:
- 100% of our efforts focussed on the design of the spine
- The front spine will, I believe, be released today. Alberto saw it yesterday. They started from the front spine because they already had the raw materials to do it with.
- The other areas of the spine are also at a fairly advanced stage of being defined. The main priority is of course the central spine. This too has already had Alberto's approval.
- As far as the front spine is concerned, provision has been included (with the boss also requesting this) for a FW regulation system, on the basis of the one seen with other FT clients. The drawing of the CAD is pretty much done.
- The rear spine, however, is the one that is currently further back, as only the preliminary parallelepipedons have been drawn in order to assess volumes.
- As far as the surfaces are concerned, work has been halted in order to draw and define the metal parts to be cut.
- The next priority is the underside, again as a result of the time needed for the work. Then come the suspensions, given that the initial information is now starting to come in concerning the coordinates for the pick up points
- Work (previously) finished on the body is the TEC [engine cover], LOLE [lower leading edge], the diffuser to a large extent, FW and RW, chin, nose and monocoque, bodywork, rear suspension and FBB [forward bargeboard]. Bear in mind though that a large part of the preliminary work carried out has been or will have to be looked at again on the basis of FS's [full size's] needs to. I think we'll be able to get a clearer picture of the car overall
next Monday if the Anglo-German bunch come over.
A detailed planning schedule has been drawn up which now sets out 100% of the items necessary to build the model in its entirety
Later the same day Mr Neira sent Mr Migeot and others an email saying:
"I got back today
Yesterday Mark Tatham asked us to send our CAD proposal in relation to the bodywork and side impact structure (SIT) for them to look and possibly for the SIT tubes to be repositioned.
We're waiting for their new radiator configuration and engine/gearbox volume. The Technical Department is currently only working on the design of the spine.
Can we send this information or is it too early?"
Mr Migeot replied:
"I think it's important to send the studies, even if they're not finalised yet, as soon as possible to Mark in relation:
- the belly, so that the design of the side crash can be evolved
Later still that day Mr Lenoci sent an email (with copies to Mr Hall, Mr Migeot and others) saying that he had uploaded to the FTP server "the CAD data of our bodywork and front underbody extension proposal together with an old compatible side impact structure", and going on to raise various queries.
- the diffuser, so the structure of the rear crash can be defined."
On 12 August 2009 Mr Lenoci sent Mr Neira (with a copy to Mr Crosetta) his notes on the project from which I have quoted above. In his covering email he commented "In my view it's important to get the drawings of the structural part of the model finished, start production and start to draft the suspensions". Mr Lenoci notes also include the following passage:
1. We'll have to send everything that we've done so far to LF1 [Lotus F1]: the shadow diffuser with the suspensions in order to prompt a reaction from them concerning the geometry of the suspensions and gearbox and our structural part of the model in order to demonstrate that we are already at a good point.
3. The nose? Send them the front wing with the draft pylons maybe they will react."
On 13 August 2009 Mr Migeot held a meeting with his senior staff at Aerolab. The minutes record Mr Neira stating as follows:
"LF1 Plan: LF1's plan proceeds as follows:
- Model spine: front spine has been drawn, central spine will be drawn by 14 August, rear spine is in a development phase depending on the position of the rear suspension and the rear crash.
- Bottom: start drawing on 13 August.
- Suspensions/hubs: FSU start drawing on 17 August, RSU start drawing on 23 August.
- Rims: waiting for info from LF1, start mechanical drawing on 18 August.
- Bodywork: start drawing on 7 September. Some details on radiators, pipes, crash, exhaust pipes (to regulate top deck height) are missing. The attention is on cooling system issues and huge engine volume.
- 11 August: a proposal for bodywork, sidepod and front floor LE was sent to LF1.
- 13 August: a proposal for diffuser, positioning of rear suspension triangle and rear crash was sent to them.
- On stand by for Mark Tatham's reply about the bottom's thickness.
There could be a possible meeting with LF1 in Aerolab on 18 August. Both Aerolab's groups of aerodynamicists will participate. Edoardo Lenoci will be away for holidays (back on 14 August)."
On 13 August 2009 Mr Neira sent Messrs Hall and Tatham (with copies to Mr Migeot and others) an email in which he said:
"This is a summary about the tasks that we are currently developing on Italy and which we will present to you [at] next week's meeting.
Edoardo is on holiday so I'll take in charge the communications with you in the meantime.
1. Model Design
- Centre Spine: work in progress. Will be released tomorrow
- Rear Spine: parametric study defined. Waiting for rear suspension members and rear crash volume
- Design started today considering a rearwards thickness 14FS (on the Diffuser area as our recent experience). Nominal thickness 10FS as you suggested.
- Preliminary pickup points received for front and rear members. Mechanical design will start early next week.
- BBS files have been downloaded today. Mechanical internal model design will start early next week.
2. Part Numbers and cad groups definition
A proposal will be sent to you late tomorrow with regard this subject.
By our side we have uploaded on your ftp server a surface study regarding Double Decker diffuser based on the rear suspension RLWB position.
This file contains also the bodywork study (SURFACES_STUDY.CATPart)
A second file including the sump (ballast), frontboard, and a slightly wider nose is available on the server (SURFACES_STUDY_PART_2.CATPart)
These files are on: /From ALB/2009.08.13 Surfaces Study/
- We notice the limited rear suspension geometry for the RLWB forward leg position. This has a big impact of Double decker diffuser concept and all around this area (with regard central expansion and legality). A second impact is related to bodywork rear-end and coke expansion.
We have drawn a plan-view shape of the RLWB with the current pickup points to have a legal solution. Could you have a look to this proposal in order to discuss in detail next week. Legality is related to the diffuser slot in order to see only RWLB fairing (or unsprung components) when seen from beneath. Please note that the diffuser surface is not finished and untrimmed but only general concept for your overview and impact on the rear-end area.
- The volume of Xtrac gearbox is big and the position of the driveshaft high. On the surfaces study you will find the position of the gearbox with respect the diffuser to have an idea about the implications. No issues on that some solutions are possible increasing the Boatshape volume, but reducing diffuser central expansion.
- On the files we have sent you, you will find a proposal of a rear impact structure. The file was done before receiving your gearbox volume but is easily modifiable. Do you think it is possible to have a lower RIS structure in order to have a full span rear lower ring (in a more clean flow)?
- With regard the side impact structure, the proposal we are presenting to you is similar to what we have worked in the past (and we know that works). What do you think about having a shorter tube wheelbase? A shorter tube wheelbase will allow to have profiled lower outboard Sidepod extension and more freedom for Sidepod undercut definition.
- We have a proposal for the nose with a wider geometry which could simplify the geometry of the FW pillars. This file was designed before we received your 2010 cockpit but the file is fully parametric. What do you think about?
With regard nose, frontboard, RIS, sump, lower outboard SP extension we have parametric files. If some of the geometries are of your interest we could send them through."
Later the same day Mr Neira sent Mr Mirani and others an email saying "On Monday Simone should start work on the front wing mechanics and model parts".
On 18 August 2009 Mr Tatham and Mr Hall attended a meeting at Aerolab to discuss the progress of the design of the car. Mr Tatham made notes of the discussion, which ranged over the whole of the car.
On 25 August 2009 Mr Pagenelli sent Messrs Hall and Tatham (with copies to Mr Migeot and other colleagues) a PowerPoint summarising the weekly design update of the model, saying his covering email "We are now working on the definition of front and rear suspensions, rear spine, rims, skid block and chassis".
On 2 September 2009 Mr Migeot sent Mr Gascoyne an email recording that FondTech and Aerolab's aerodynamicists had worked 714 hours, their CAD draftsmen 957.5 hours and their CNC operators and model makers 645.5 hours on the project in August 2009.
On 4 September 2009 Mr Crosetta sent Mr Migeot an email summarising the events that had led to the design by Aerolab of the rear wing used by Force India at the recent Spa Grand Prix. Mr Crosetta attached to this email 18 emails between Aerolab and Force India recording the design process. Mr Migeot's evidence, which I accept, was that he asked for this information for the purposes of negotiations with Mr Key. As counsel for Force India pointed out, however, this episode demonstrates that Mr Crosetta was able to access such information even in early September 2009.
On 9 September 2009 Mr Migeot had a meeting with the Aerolab and FondTech aerodynamicists to discuss aerodynamic development of the Lotus model. The minutes of the meeting include the following passages:
"At the moment the balance target is at 42%. Obviously the balance target will change in connection with the possible (although not yet confirmed) changes to front tyres size.
The balance range that will be used is still unknown: =/1 2% (so 40-44%) seems to be a good range. HN, LC and AMI point out that the previous client asked for a wider balance range (+/1 4%), which seems excessive. To be confirmed with the client.
Given recent experience and considering efficacy is close to 3.1 (all the coefficients are proportional to a surface of 1.47 m2), the assessment of the downforce for the configuration R30 (Start-up shall be Czt = 2.95 (correct value 2.75).
Just to recap, the load targets are as follows:
Start-up Spec (Oct 2009): Cxt = 0.95 Czt = 2.95 A% = 42% (correct value Cxt = 0.95 Czt = 2.75)
Launch Spec (Jan 2010): Cxt = 0.95 Czt = 3.10 A% = 42%
(5 pt in load per month)
The discussion revealed that the most responsive areas which realistically can give immediate considerable profit are:
- Diffuser (central expansion + wheel cut-out area)
- Rear Wing complex (in particular RBW)
- Sidepod extension and side Sidepod wings
LC suggested that the very first work to be done on the model should be: bring it to a balance close to the target and evaluate the level of cooling. The first group that enters the tunnel will prepare a first revision on some front wing basic parameters (flaps, transitions, strakes, cascade), followed by a revision of the diffuser and RBW. A first 'loop' on all the sensitive areas of the care should be concluded by the end of October so as to be ready for the second loop in November once the model's sensitivity is known.
Following the announcement that Lotus had obtained entry into F1 on 14 September 2009, CD increased its team to 28 from 17 September 2009. By this time they had a comprehensive design in outline, but the details needed for the final design were missing. Production of the first full scale parts began around the end of September 2009.
Similarly, FondTech and Aerolab's work on the design of the initial model was well advanced. On 17 September 2009 Mr Migeot sent Mr Gascoyne an email saying:
"1) We are getting close to be able to CFD the starting configuration. We are missing the loaded tyre profile (front and rear). When should we get this info from Bridgestone?
2) Again for Bridgestone: The availability of rubber tyres is fundamental to confirm our wt planning. Deadline on our side: 1st set 05-October, 2nd set 19-October. Can we have a confirmation quickly that these dates are compatible with whatever procedure Lotus has to go though to get the model tyres?
3) In order to review our drag targets we are using the 2009 timing data (top speeds) from various public origins and 'historical' data (rolling resistance). Is it possible to have access to:
- full official timing datasheets (all laps, Q and R) from all 2009 GP?
- latest available Bridgestone data for rolling resistance?
- telemetry data for the 2010 tracks from 2008 or 2009 tests or GP?
- engine max power: assumed 733 HP for the Cosworth, do you agree?"
On 21 September 2009 Mr Lenoci sent Mr Tatham an email (with copies to Mr Hall, Mr Migeot and others) saying:
"Please find uploaded in the ftp server (/From ALB/2009.09.21/10A-S80-0001/) the CAD assembly comprising every master surface the model is made of.
There are 2 assembly files:
The former contains all the surfaces we worked on so far and used to manufacture the model parts: there are a few details missing (windscreen, cameras, etc) which are on their way to be completed, but we preferred to you the most relevant parts asap.
The latter file includes all the internal mechanical components we used to model the outer surfaces.
The definition of suspension uprights and drums is almost completed, therefore I'm confident we can send you CAD files within this week.
Please have a look on this overall geometry and tell us if it is still compatible with any of your internal/structural components update (gearbox, exhaust manifold and engine)."
On 2 October 2009 the first initial Lotus model was completed ready for wind tunnel testing in the Aerolab tunnel. This was in fact ahead of schedule, since testing had not been planned to begin at Aerolab until 12 October 2009, with testing of a second model planned to begin at FondTech on 26 October 2009.
Mr Migeot's unchallenged evidence was that the design of the initial Lotus model took Aerolab and FondTech's aerodynamicists 1,336.5 hours and Aerolab and FondTech's CAD draftsmen 2,530 hours. Aerolab and FondTech charged Lotus 132,144 for this work.
On 3 October 2009 Mr Migeot asked Mr Lenoci to take some photographs of the initial Lotus model and of the Aerolab/ FondTech team. Since they had not yet received the 2010 tyres from Bridgestone, Mr Migeot asked someone to take out some Force India wheels (i.e. wheel rims and tyres) to prop up against the model to make it look finished. Mr Lenoci emailed five photographs of the model to Messrs Gascoyne, Hall and Tatham the same day. Mr Gascoyne recollected receiving the photographs while at the Singapore Grand Prix, which took place on 27 September 2009, but his recollection was at fault on this point.
On 4 October 2009 Mr Migeot sent Mr Gascoyne an email in which he set out the current state of the Aerolab/FondTech program, recording that the Aerolab starting configuration model had been completed and that the FondTech model was due to be finished on 16 October 2009. He went on:
"I don't want to delay the testing waiting for the new tyres. Tomorrow we will mount 'old tyres' on our rims and we will run [session] 01-A with something not quite correct in terms of tyre width and front wheel position but least we can clear all the possible problems with a new model and repeat the useful tests in 01-B as soon as we got a proper config. Better than do nothing do you agree?
I am not sure how long I will be able [to] hang on the old tyres (as the FI situation looks like it will be resolved in the next days) but I have no other option
On 5 October 2009 Mr Gascoyne replied saying "Please proceed with the testing sessions as stated". Mr Gascoyne accepted that he must have appreciated that the "old tyres" were Force India tyres. He gave evidence in his second witness statement that he had forgotten about this until reminded of this email exchange. Counsel for Force India submitted that that was incredible, but I do not agree. More importantly, perhaps, counsel for Force India relied on this evidence as showing that Mr Gascoyne was prepared to agree to Mr Migeot's misuse of Force India property. I do not accept that either. The tyres were not Force India's property, but Bridgestone's, and the email said that Aerolab would use their own rims. In these circumstances I accept Mr Gascoyne's evidence that he did not attach much significance to the use of the Force India tyres as a stopgap until the Lotus ones arrived.
On 7 October 2009 Mr Gascoyne visited Aerolab, and saw the model. Counsel for Force India relied on Mr Gascoyne's failure to mention this in either of his witness statements as damaging to his credibility, since it showed that Mr Gascoyne had not merely seen photographs of the Lotus model on his Blackberry as he suggested. I am prepared to accept, however, that Mr Gascoyne had forgotten about this when he prepared his witness statements.
In an email to Mr Fernandes dated 9 October 2009 Mr Gascoyne said:
"On visiting Aerolab on Wednesday I found out that they have a F3 windtunnel model and an upgrade package they developed for Volkswagen last year. I offered this as 'technical assistance' from us to Litespeed, instead of capital investment as it has no cost to us. Nino was very excited by this so the deal was easy to finalise."
On 13 October 2009 Mr Lenoci sent Mr Balboni an email saying:
I would like to ask you something I am not sure about: the brake drum and inlets (front and back) have been directly copied from F.I., right? LF1 is asking me to provide no trimmed surfaces (I guess they mean the master surfaces) of these, but I am not sure that they exist.
Anyway it doesn't seem strictly correct to give them out to LF1
Mr Balboni replied:
"What you say is correct. Well we can ask LF1 if they can obtain them by themselves. "
The Lotus press release and its aftermath
On 14 October 2009 Lotus issued a press release headed "Lotus F1 Racing takes to the windtunnel". The opening paragraph read as follows:
"Just one month after confirmation of its entry into the 2010 Formula 1 World Championship, Lotus F1 Racing is already heading into the windtunnel with a 50% scale model of its first Formula 1 car. The as yet undesignated model is the product of the recent collaboration between Lotus F1 Racing Chief Technical Officer Mike Gascoyne and the team technical's technical partners, and represents an important step in the team's preparations for the next season."
The press release then continued with an "interview" with Mr Gascoyne, which mentioned the involvement of FondTech, but not Aerolab. It was illustrated with two of Mr Lenoci's photographs of the initial Lotus model with the Force India wheels. The "notes to editors" stated that high resolution images could be downloaded from the team's website.
Counsel for Force India suggested to Mr Gascoyne in cross-examination, and submitted in his closing submissions, that the photographs had been incorporated into the press release without his knowledge while he had been on a flight to Kuala Lumpur. Mr Gascoyne's evidence was that he had approved the use of the photographs. Given that the press release was put together by (among others) Silvi Schaumloeffel, who in addition to being Lotus's public relations person was Mr Gascoyne's partner, I accept his evidence on this point. I do not consider it implausible that Mr Gascoyne should have approved the use of the photographs despite the fact that he should have appreciated from Mr Migeot's email dated 4 October 2009 that they showed the Force India tyres. I do not find it surprising that he should not have put two and two together, or that he should not have been particularly concerned even if he did.
The press release was reproduced, in particular by the Autosport website, on the same day.
Also on the same day Mr Key sent a colleague an email attaching copies of the photographs of the Lotus model that had been downloaded from the internet and forwarded to him. He commented that Force India believed that the tyres shown were Force India's and that it might well be the case that the wheels also belonged to Force India. He also commented that a number of aspects of the design of the model appears to be the same as or derived from the Force India design.
On 15 October 2009 Chris Lettis, a senior model designer at Brawn GP, sent Dominic Turner an email saying "do you spot any of your old bits on Lotus WT model on Autosport?!?".
On the same day Mr Migeot had a meeting with the senior staff at Aerolab. The minutes record him as saying:
"Unexpectedly Lotus published two photographs which were taken at Aerolab the day after the model's completion, without asking for Jean-Claude's consent. At the very least we can expect some controversy over this!"
On 16 October 2009 Chris Scarborough, a technical writer for Autosport, sent Ms Schaumloeffel an email saying:
"I understand to the untrained eye, that many F1 cars and individual parts look the same. But I have closely observed and illustrated F1 cars for the past ten years. Having seen the wind tunnel model photos, I have to remark that certain parts of the car bear more than striking resemblance to Force India's car."
Ms Schaumloeffel replied offering Mr Scarborough a telephone interview with Mr Gascoyne the following Monday.
On the same day Chris Balfe, editor of an F1 website called pitpass.com, sent Ms Schaumloeffel an email saying:
"Since we ran your press release earlier this week, we have been contacted by three different sources each claiming the same thing. Namely, that the model shown is not a new Lotus but an old Force India."
Ms Schaumloeffel replied saying that Lotus would get back to Mr Balfe the following Monday once Mr Gascoyne had returned.
On 19 October 2009 Mr Gascoyne forwarded Mr Scarborough's email to Mr Migeot saying:
"Please see below an email from autosport re use of Force India parts. Speaking to the guy he mentioned that the tyres are marked up and identifiable as having been used in Aerolab. I am sure you have been most careful to avoid any cross over of IP from Force India but can you confirm that this is the case and just taken care in the future."
Mr Migeot replied to Mr Gascoyne saying:
- Pictures of 3rd October: fully Lotus model but complete wheels from FI (just standing around for picture purpose and not even well positioned!). Pictures were taken following your sms request and at no time it was understood they would have been published.
- Wind tunnel test from 12th October until today: full 'Lotus' model with used FI tyres mounted on Lotus rims.
Mr Gascoyne responded:
- Lotus tyres (2 sets) received this morning from Bridgestone. Tyres will be swapped on the model probably by tomorrow."
"No problem, just avoiding any [mis]understanding. I was fully confident the model was completely new but I think the issue has come from the wheel. At the end of the day the wheels are BBS IP and the tyres belong to Bridgestone so no issues, we just need to be covered if any questions are asked. The jorno's have been satisfied with the reply.
I have said testing will be carried out using 2010 tyres anyway."
On the same day Mr Gascoyne sent two emails to Mr Balfe, the first saying:
"In reply to your enquiry the model is an entirely new model manufactured by FondTech on behalf of Lotus F1 Racing and is based on a 2010 spec chassis geometry designed at our DO in Cologne, and includes a fuel tank to comply with the 2010 ban on refuelling and associated increase in wheelbase caused by these regulations. It is also based on the Cosworth engine installation and cooling requirements, and the Xtrac gearbox package. The nosebox, crash structures and front and rear suspension is also as specified by our design team. The bodywork is a first iteration based on generic current trends, but this will rapidly evolve as a result of our windtunnel testing, the first week of which took place last week. Unfortunately, due to obvious reasons, we will not be able [to] issue pictures of these updates."
The second said:
"As an aside the confusion may have come about as the photo is taken with a set of old 2009 tyres. We are testing with 2010 tyre[s] and these were just used for the photo (the tyres are actually the property of Bridgestone)."
On 27 October 2009 Mr Gascoyne sent Mr Fernandes and a representative of Proton (Lotus' main sponsor) an email saying:
"At the start of the project I approached Jean Claude Migeot to enquire about the supply of wind tunnel services. Jean Claude owns two Wind Tunnels in Italy, one run by a company called Fondtech, and the other by a company called AeroLab. Both companies have supplied wind tunnel services extensively in F1, notably FondTech to Tyrrell and Renault, and AeroLab to Toyota and recently Force India. We contracted FondTech to supply us with a wind tunnel model and wind tunnel testing time for 2009 as AeroLab had a contract with Force India to the end of 2009. However, in August AeroLab stopped working with Force India due to breach of contract through non-payment of bills. We have subsequently engaged AeroLab on a 3 year contract to supply wind tunnel services.
The wind tunnel model was designed exclusively for us by FondTech. In the terms of our contract with them we have to supply them with Chassis surfaces, suspension geometry, details of the Cosworth engine installation, radiator installation, and Xtrac gearbox installation, and also front, rear and side impact structures. All of this has been supplied by our design team and is unique to our own design and makes the model unique. Fondtech have designed the first iteration bodywork, based on their experience and recent expertise. As most of the designers have recently been working on the Force India project this expertise naturally is based on their development work. However, at no time have any design, drawings or other form of IP been used directly to the design of our car, only the design expertise of the designers. We have had the complete assurance from FondTech that this is the case, and any issue Force India have should be directed at FondTech, not Lotus. In this respect it is no different from an employee moving from one team to another. That employee cannot take physical designs from one team to another, but is free to use the skill and experience he has gained for his new team. In this case we have effectively employed around 40 wind tunnel staff at one go.
In summary I can confirm that Lotus have had absolutely no access to any information that could possibly infringe the IP rights of Force India, and I am happy for any relevant authority to fully audit the team to ensure this is the case. I have been informed by both FondTech and AeroLab that they have not infringed the IP rights of Force India in the design of the bodywork for the wind tunnel model, and as there is now no further information flow between AeroLab and Force India, there is no way they could do so in subsequent developments of our aerodynamic design. Even the most simple of investigations on our model will rapidly identify it as unique to our design and different to any other car on the grid."
On 28 October 2009 Mr Migeot sent Ms Schaumloeffel and Mr Gascoyne some photographs of the Lotus model on its first day of testing in the FondTech wind tunnel, this time with Lotus wheels, and authorised them to release these pictures. It is not clear whether these photographs were in fact released by Lotus, but this does not matter.
On 4 November 2009 Mr Gascoyne sent Mr Migeot an email saying that Mr Fernandes had asked for a letter confirming that there were no IP issues with the Lotus model and Force India. Later the same day Mr Migeot sent Mr Fernandes an email in which he said:
"I am coming to the particular reason of this letter. Mike has asked me to clarify to you the situation between Force India and Aerolab. It is as follows:
- Aerolab and Force India had a 3 year agreement expiring on 31-December-09
- Aerolab has formally terminated this agreement on 4th June for serious and persistent breach of Force India financial obligations (the termination was possibly effective 2 weeks later) but has still worked through June and July for Force India following written promises to receive back payments in a short time.
- All work was stopped definitively on 31st July and all properties of Force India have been sealed and packed then. They are still at Aerolab premises until the dispute will be resolved.
- A legal action was started at the same time by Aerolab and the matter is currently before Italian courts (Force India had to post a significant bond to guarantee our credit and avoid the seizure of its cars during the Monza GP)
- By letter of 18th September their lawyer stated to me Force India no longer needs Aerolab services.
- Despite Force India offering by the same letter to close the matter Aerolab is not yet happy with their offer and so far the controversy still drags and may well end up in the English courts.
In the meantime during August and September, as you know, FondTech has built the 2 Lotus models using its own staff and subcontracting the Aerolab personnel too. On 2nd September [sic this should be October] the Aerolab model was completed but the Bridgestone tyres were not yet available (there were delivered on 12th September). On 3rd September when Mike asked me for some pictures of the models I have asked to take the wheels from the Force India out of their box and put them around the Lotus model to make pictures that you have soon. I was not aware these pictures would be made public (my mistake not to have warned Mike and I take full responsibility for that). Obviously every other part of the model is a genuine Lotus part, fully designed and built under our model supply agreement.
I would not deny the wheels on these pictures to be Force India's but this is to be sorted between Aerolab and Force India and I very much hope we can close the whole dispute shortly. Any other claim in relation with these pictures is wrong and vain and above all Lotus position is 100% clean.
I apologize for the length of all these details but I want to be absolutely precise and transparent with yourself so there should be no shadows about this story. Aerolab is suing Force India and not vice versa!
I want to issue a press release tomorrow in order to make public before your visit in Italy that Aerolab had stopped its collaboration with Force India already some time ago and is now fully committed to Lotus. I will let you have it before hand for information and check."
On 11 November 2009 Aerolab issued a press release headed "Aerolab to help spearhead Lotus F1 Racing's Grand Prix Assault" which began "Aerolab, the world-leading aerodynamic engineering company, is delighted to announce a new partnership with Lotus F1 Racing". The press release was clearly designed to give the impression that Aerolab was only just starting to work with Lotus.
At some point Force India complained to the Italian criminal authorities that the design of the initial Lotus model had been copied from Force India. On 19 January 2010 the Italian police searched Aerolab's and FondTech's premises and took away the crates containing the old Force India model, the hard drive containing the Force India data and a copy of the Lotus data they had at that point.
On 2 February 2010 Force India's solicitors sent a letter before action to Aerolab alleging misuse of confidential information and infringement of Community design right, UK design right and copyright. The letter also referred to the appearance of Force India's wheels in the photographs in the press released. On 12 February 2010 Aerolab's solicitors replied acknowledging the use of Force India's wheels and apologising, but otherwise denying Force India's allegations.
On 15 February 2010 FondTech signed an agreement with 1 Malaysia backdated to 1 September 2009 for the delivery of the two windtunnel models, and both Aerolab and FondTech signed aerodynamic development contracts with 1 Malaysia backdated to 1 October 2009. Clause 5(i) of the first agreement provides:
"FONDTECH warrants that the information and services which it supplies to 1 MALAYSIA will not infringe the intellectual property rights of any third party and FONDTECH agrees to indemnify 1 MALAYSIA against any losses incurred by 1 MALAYSIA as a result of any breach of this warranty and in particular FONDTECH shall indemnify 1 MALAYSIA against any costs (including any legal costs) incurred by 1 MALAYSIA in defending any 'successful claim' by a third party."
At around the same time Force India instigated criminal proceedings in Italy against Mr Migeot, Mr Gascoyne, Mr Fernandes and 11 Aerolab employees.
On 16 September 2010 Aerolab and FondTech received a copy of an expert report prepared for the Italian Public Prosecutor by an aerodynamic engineer called Marco Giachi, in which Mr Giachi concluded that there had been copying of Force India CAD files by Aerolab and FondTech.
Aerodynamic development of the Lotus model
The initial Lotus model produced 223.3 points of downforce with an aerodynamic efficiency of 2.512. By comparison the Force India model to which Aerolab had access as at July 2009 (which did not represent Force India's most advanced geometry for the reasons explained above) produced about 272 points of downforce with an efficiency of 2.87.
Mr Migeot explained the aerodynamic development of the Lotus model from October 2009 in some detail in his fourth witness statement. None of this evidence was challenged. It is not necessary to set it all out in this judgment, but a flavour can be gained from what happened in the first two sessions. In the first session between 12 and 21 October 2009 the front wing was almost completely redesigned, adding 8.1 points of downforce. In the second session between 21 and 30 October 2009, the design of the diffuser was changed significantly, adding 9.4 points of downforce. By the end of 2009, the model was producing 263.3 points of downforce, a total gain of about 40 points (18%). Aerolab and FondTech charged Lotus 1,669,800 for the wind tunnel testing carried out up to 31 December 2009.
During this period Mr Migeot sent an email to his staff on 25 November 2009 in which he said:
"I would like to remind you all (without wishing to be critical and purely because we have to keep our feet back on the ground) that the model's performance is still well below the level expected to make the right impression. I am absolutely happy about all the improvements and consistency between the two tunnels but the truth is that we are still (as of yesterday) 7.5% below the level we were expecting to start with a month a ago. What's more that level (which I gave as target) is just a point of reference using a 2009 car which on average has been the slowest (passing the Q1 with at least one car only 5 times out of 16 in dry qualifications). This is only to give you guys an idea of the mountain we still need to climb
Counsel for Force India relied upon this email and a number of other documents as showing that Mr Migeot had taken the aerodynamic performance of the Force India 2009 car as the target for the aerodynamic performance of the initial Lotus model, and that this was evidence of copying of the Force India 2009 car. As I will explain below, I accept the first proposition, but I do not accept that this in itself demonstrates copying of the Force India car.
On 31 December 2009 FondTech and Aerolab released the initial complete surface geometry for the launch version of the Lotus car to MTO/CD. After the release of the launch geometry, Aerolab and FondTech continued aerodynamic development of the car. Further changes were made yielding further gains in downforce.
Parts which were not changed
As a result of the aerodynamic development described above, many of the aerodynamic parts of the initial Lotus model were replaced by differently designed parts during that period. Force India makes no complaint in respect of the replacement parts. It is common ground, however, that certain of the initial parts which are the subject of complaint survived with either no or few changes, and that full sized equivalents of those parts were incorporated into the Lotus car which raced in at least the first few races of the F1 2010 season. These are the front part of the front wing turning vane, the front wing mainplane and flap profiles, the vortex generator, the rear wing central section and assembly, rear brake duct lower element and the rear view mirror.
Transfer of data to Lotus
Mr Djayapertapa joined Lotus in December 2009 to set up a CFD facility to supplement the team's wind tunnel programmes. To begin with, he had no direct interest in the development of the car, and no experience of F1. In the week commencing 14 December 2009 he visited Aerolab to collect data that he could use to help him develop a CFD system which agreed with results generated in the wind tunnels. For this purpose, copies of CAD files for the Lotus model developed by FondTech and Aerolab were copied onto his laptop. After he had returned to the UK, he and a colleague converted the geometry into so-called "watertight" geometry for CFD purposes using computers at Lotus' premises in Hingham and at two contractors.
On 6 January 2010 Mr Dodman, Mr Milne and John Gleeson of Lotus visited Aerolab. While they were there, they were given a DVD containing copies of all the geometry that FondTech and Aerolab had developed for the Lotus project to that date, including master surfaces and model parts. After their return to the UK, they reviewed the geometry which FondTech and Aerolab had created. For this purpose Lotus' IT department loaded the files onto computers at Hingham.
Aerodynamic development by Lotus
In January 2010 Lotus started to take over the aerodynamic design of the car. The first thing Mr Dodman did was to replace the front wing design which Aerolab and FondTech had developed with a new design. A front wing of the new design was fitted to the Lotus model on 25 February 2010. After further development a full size version of the design was fitted to the Lotus car in time for the fifth race of the 2010 season. Mr Milne worked on the diffuser. He decided to change this to a "vaned" double diffuser. The new design of diffuser was fitted to the car by the tenth race of the season.
The 2010 F1 Championship
The first race of the 2010 F1 Championship took place in Bahrain on 14 March 2010. There were 19 races in total. The Lotus team scored no points and finished tenth, just ahead of HRT and Virgin which also scored no points. As a result of finishing tenth, Lotus secured some $8 million in prize money. By comparison, Force India scored 68 points and finished seventh, while RBR scored 498 points to win the Constructors' Championship.
Force India claims that Aerolab has acted in breach of clauses 5 and 6 of the Development Contract. It also claims that the other Defendants have acted in breach of equitable obligations of confidence or are jointly liable for such breaches. Prior to trial the parties agreed that the law applicable to all of these claims for breach of confidence should be taken to be English law.
So far as Force India's copyright claim is concerned, it only asserts infringement of its United Kingdom copyrights. It has not attempted to introduce a claim for infringement of its Italian copyrights into the proceedings following the decision of the Supreme Court in Lucasfilm Ltd v Ainsworth  UKSC 39,  3 WLR 487.
There are a number of issues between the parties with regard to the Development Contract which it is necessary to resolve before proceeding further.
Date of termination
Aerolab contends that it terminated the Development Contract by accepting Force India's repudiatory breaches with effect from 31 July 2009. Force India contends that it terminated the Development Contract by accepting Aerolab's repudiatory breaches on 18 September 2009, although Force India does not accept that it is under any liability to Aerolab in respect of the period after 31 July 2009. Aerolab does not rely upon clause 7 of the Development Contract, whereas Force India does.
Counsel for Force India did not dispute that Force India's persistent non-payment of the sums due under the Development Contract culminating in Mrs Sweeney's email dated 31 July 2009 indicating that no payment would be forthcoming until 17 August 2009 at the very earliest amounted to a repudiatory breach of the Development Contract. Rather, he submitted that Aerolab had not accepted that breach by 18 September 2009.
Counsel for Aerolab submitted that Aerolab had accepted the breach by conduct on 3 August 2009 with effect from the end of 31 July 2009. As he pointed out, in Vitolf SA v Norelf Ltd  1 WLR 1391 Phillips J (as he then was) left open the question whether an innocent party could accept an anticipatory repudiation by conduct which was not communicated to the party in anticipatory breach, but held (at 1395E) that acceptance of repudiation could be effected by acts as opposed to by words. Furthermore, he went on to hold (at 1395G-H) that it was possible for the innocent party to demonstrate that he was treating the contract as at an end by taking action that was incompatible with his own continued performance of the contract and even simply by failing further to perform his own contractual obligations. This analysis was endorsed by the House of Lords ( AC 800).
In my judgment Aerolab accepted the breach by its conduct in disabling the server connection on 3 August 2009. This was an overt act which in the prevailing circumstances I consider was sufficient unequivocally to demonstrate to Force India that Aerolab was treating the Development Contract as at an end. In my view it is immaterial that Force India did not discover what Aerolab had done until about 17 August 2009. Furthermore, Mr Phillips' evidence quoted above shows that Force India quickly appreciated that Aerolab had ceased all work for Force India, and thus was treating the agreement as at an end. Still further, I consider that the emails dated 24 and 26 August 2009 (see paragraphs 79 and 81-82 above) confirm that Force India understood by then that Aerolab was in dispute with it over the Development Contract.
Whether the date of termination should be taken to be 31 July 2009 or 3 August 2009 is more difficult. In the circumstances, however, I consider that Aerolab would have been understood to be treating the Development Contract as at an end with effect from the end of 31 July 2009. Given that the server connection was not cut off until 3 August 2009, it is understandable that Aerolab should have issued its August 2009 invoice on 3 August 2009 and claimed payment of it, but in my view Aerolab is correct now to concede that Force India is not liable to pay this invoice.
Breach of clause 6(a)
Force India contends that Aerolab acted in breach of clause 6(a) of the Development Contract by working for Lotus from late July 2009 to 18 September 2009. I have found as a fact that Aerolab did not do any aerodynamic development for Lotus prior to the end of 31 July 2009. In the light of my conclusion that the Development Contract came to an end with effect from the end of 31 July 2009, it follows that the work which Aerolab admittedly did for Lotus thereafter was not a breach of clause 6(a).
Does clause 5(b) continue after termination?
Force India contends that the confidentiality obligations in clause 5 of the Development Contract, and in particular clause 5(b), continue after termination. Aerolab disputes this.
The Development Contract must be construed in accordance with the principles stated by Lord Hoffmann in Investors Compensation Scheme Ltd v Bromwich Building Society  1 WLR 96 at 912-913 and summarised by him in Chartbrook Ltd v Persimmon Homes Ltd  UKHL 38,  1 AC 1101 at  in the statement that "the question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean".
In my judgment a reasonable person having the background knowledge that was available to Force India and Aerolab in April 2008 would have understood the words of clause 5(b) to mean exactly what they appear to say. That clause says that Aerolab "will maintain
the confidentiality of, and avoid any disclosure to any third party of any of the Information
". As so expressed, the obligation is indefinite. The clause does not say "while this Agreement continues" or "until termination of this Agreement" or anything of this nature. Counsel for the Defendants argued that such a limitation was to be implied from other provisions in clause 5, in particular clause 5(g). I do not accept that argument. Clause 5(g) contains an additional protection for Force India. It does not warrant reading down the language of clause 5(b).
I consider that this interpretation is supported by paragraph 4 of the draft employee confidentiality agreement contained in the Appendix referred to in clause 5(b). That endures for two years after the termination of employment "and/or" the Development Contract. While to some extent this cuts both ways, in that a contrast can be drawn between paragraph 4 and clause 5(b), it seems to me that on balance it confirms that the parties cannot have intended the obligation imposed by clause 5(b) would end as soon as the Development Contract ended.
The enforceable scope of clause 5(b) after termination
On its face, clause 5(b) applies to all Information falling within the definition in clause 5(a) obtained by Aerolab from Force India or created by Aerolab for Force India except for Information falling within clause 5(e). In short, it appears to cover all such Information which is not in the public domain. Aerolab contends that, if it continues after termination, clause 5(b) is only enforceable in so far as it applies to trade secrets, arguing in short that the principles developed in relation to employees apply equally to a contractor in the position of Aerolab. Force India disputes this. Since essentially the same dispute arises with regard to the scope of the equitable obligation of confidence which it is common ground bound FondTech, I shall deal with this issue in that context.
Breach of confidence: the law
The clearest statement of the elements necessary to found an action for breach of confidence remains that of Megarry J in Coco v A.N. Clark (Engineers) Ltd  RPC 41 at 47:
"First, the information itself ... must 'have the necessary quality of confidence about it'. Secondly, that information must have been communicated in circumstances importing an obligation of confidence. Thirdly, there must have been an unauthorised use of the information to the detriment of the party communicating it."
This statement of the law has repeatedly been cited with approved at the highest level: see Lord Griffiths in Attorney General v Guardian Newspapers Ltd (No 2) ("Spycatcher")  1 AC 109 at 268, Lord Nicholls of Birkenhead in Campbell v MGN Ltd  UKHL 22,  AC 457 at  and Lord Hoffmann in Douglas v Hello! Ltd (No 3)  UKHL 21,  1 AC 1 at .
The necessary quality of confidence
The expression "the necessary quality of confidence" was coined by Lord Greene MR in Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215. Lord Greene defined this quality by antithesis: "namely, it must not be something which is public property and public knowledge".
Relative confidentiality. Confidentiality is a relative concept: see Franchi v Franchi  RPC 149 at 153 (Cross J); Schering Chemicals Ltd v Falkman  QB 1 at 28 (Shaw LJ) and 37 (Templeman LJ); Stephens v Avery  Ch 449 at 454 (Sir Nicolas Browne-Wilkinson V-C); Spycatcher at 177 (Sir John Donaldson MR) and 282 (Lord Goff); and Attorney-General v Greater Manchester Newspapers Ltd (The Times, 7 December 2001, Dame Elizabeth Butler-Sloss P). This principle may apply differently to different categories of confidential information, and it has come to be particularly recognised in cases involving private personal information, but it is not restricted to such cases.
In Vestergaard Frandsen A/S v Bestnet Europe Ltd (No 2)  EWHC 1456 (Ch),  FSR 2 at -,  I suggested that the well-known decision of Roxburgh J in Terrapin v Builders Supply Co (Hayes)  RPC 375 could be explained as having been based on the relative confidentiality of the plaintiff's designs. As counsel for Force India submitted, the decision of the Court of Appeal in Saltman v Campbell can be explained in the same way. Thus Lord Greene said at 215:
"What the defendants did in this case was to dispense in certain material respects with the necessity of going through the process which had been gone through in compiling these drawings, and thereby to save themselves a great deal of labour and calculation and careful draughtsmanship. No doubt, if they had taken the finished article, namely, the leather punch, which they might have bought in a shop, and given it to an expert draughtsman, that draughtsman could have produced the necessary drawings for the manufacture of machine tools required for making that particular finished article. In at any rate a very material respect they saved themselves that trouble by obtaining the necessary information either from the original drawings or from the tools made in accordance with them. That, in my opinion, was a breach of confidence."
Counsel for Force India submitted that it followed from cases such as Saltman v Campbell and Terrapin that it was no defence to a claim for breach of confidence for the defendant to show that the information he had used was available in the public domain if he had not in fact obtained it from a public domain source. This submission is contradicted by the decision of the House of Lords in O. Mustad & Son v Dosen  1 WLR 109, however. In that case their Lordships dismissed the claimant's claim for an injunction for breach of confidence on the ground that the claimant had published the information in question in a patent. As Lord Buckmaster famously said at 111, "The secret, as a secret, had ceased to exist". It was not suggested that the defendant had obtained the information from the patent. Indeed, it could not have been suggested, because the patent was only applied for, let alone published, after the misuse complained of had started. It might well be argued that Mustad v Dosen does not address the question of the defendant's liability for financial relief in respect of the period prior to publication of the patent, which for some reason does not appear to have been in issue. But it shows that there can be no continuing claim for breach of confidence once the information is in the public domain whether or not the defendant obtained the information from that source. The difference between cases like Mustad v Dosen and cases like Terrapin lies in the accessibility of the information, not in the means of access used by the defendant.
The distinction is highlighted by the decision of Morritt J (as he then was) in Alfa Laval Cheese Systems Ltd v Wincanton Engineering Ltd  FSR 583. The defendant had formerly manufactured a cheese block former for the plaintiff from drawings supplied by the plaintiff under an agreement containing obligations as to confidentiality. After the agreement was terminated, the defendant produced its own design of former. The plaintiff brought proceedings inter alia for breach of confidence. Morritt J held, applying Terrapin, that the plaintiff had an arguable case with regard to the inner lining of the tower of the former, since the design could only be ascertained by dismantling the tower. By contrast, he held, distinguishing Terrapin, that information relating to "the dimensions and functions of certain pipes" was not confidential because "the pipes are of standard size and the results of [the plaintiff's] tests and experiments [to determine the optimum size] is plain for all to see."
In cases concerning design drawings like Saltman v Campbell, Terrapin and Alfa Laval v Wincanton, much will depend on the level of generality of the information asserted to be confidential. If the claimant contends that information relating to the shape and configuration of the article depicted in the drawings is confidential, but the shape and configuration of the article can readily be ascertained from inspection of examples of the article which have been sold or are otherwise publicly accessible, then the claim will fail. If, on the other hand, the claimant contends that detailed dimensions, tolerances and manufacturing information recorded in the drawings are confidential, that information cannot readily be ascertained from inspection, but only by a process of reverse engineering and the defendant has used the drawings as a short cut rather than taking the time and effort to reverse engineer, then the claim will succeed.
Trivial information. Confidentiality does not attach to trivial or useless information. The information need not be commercially valuable, but the preservation of its confidentiality must of substantial concern to the claimant: Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 438 (Deane J). This is not a high threshold, however.
Circumstances importing an obligation of confidence
An obligation of confidence may, of course, be imposed by contract. In the absence of any contractual obligation, an obligation of confidence may arise in equity. An equitable obligation of confidence will arise as a result of the acquisition or receipt of confidential information if, but only if, the acquirer or recipient either knows or has notice (objectively assessed by reference to a reasonable person standing in his shoes) that the information is confidential: see Lord Ashburton v Pape  Ch 469; Coco v Clark at 48 (Megarry J); Francome v Mirror Group Newspapers Ltd  1 WLR 892; English & American Insurance Co Ltd v Herbert Smith  FSR 232; Spycatcher at 281 (Lord Goff); Pizzey v Ford Motor Co Ltd (The Times, 8 March 1993); Shelley Films Ltd v Rex Features Ltd  EMLR 134; Valeo Vision SA v Flexible Lamps Ltd  RPC 205; Hellewell v Chief Constable of Derbyshire  1 WLR 804 at 807 (Laws J, as he then was); Creation Records Ltd v News Group Newspapers Ltd  EMLR 444; Al Fayed v Commissioner of Police of the Metropolis  EWCA Civ 780 at  (Clarke LJ, as he then was); Campbell v MGN at  (Lord Nicholls), - (Lord Hoffmann),  (Lord Hope of Craighead) and  (Baroness Hale of Richmond); and Douglas v Hello (No 3) at - (Lord Hoffmann).
The scope of the obligation of confidence: trade secrets
It is settled law that, after the termination of a contract of employment and in the absence of an enforceable restrictive covenant, a former employee is entitled to use for his own benefit or that of third parties information which forms part of his own skill, knowledge and experience even if it is confidential and was learnt during the course of his employment, but is not entitled to use any trade secrets of his former employer.
In Faccenda Chicken Ltd v Fowler  Ch 177 at 135G-138H Neill LJ delivering the judgment of the Court of Appeal stated the principles to be applied in such cases as follows:
"(1) Where the parties are, or have been, linked by a contract of employment, the obligations of the employee are to be determined by the contract between him and his employer: cf. Vokes Ltd v Heather (1945) 62 RPC 135, 141.
(2) In the absence of any express term, the obligations of the employee in respect of the use and disclosure of information are the subject of implied terms.
(3) While the employee remains in the employment of the employer the obligations are included in the implied term which imposes a duty of good faith or fidelity on the employee. For the purposes of the present appeal it is not necessary to consider the precise limits of this implied term, but it may be noted: (a) that the extent of the duty of good faith will vary according to the nature of the contract (see Vokes Ltd v Heather, 62 R.P.C. 135); (b) that the duty of good faith will be broken if an employee makes or copies a list of the customers of the employer for use after his employment ends or deliberately memorises such a list, even though, except in special circumstances, there is no general restriction on an ex-employee canvassing or doing business with customers of his former employer: see Robb v Green  2 QB 315 and Wessex Dairies Ltd v Smith  2 KB 80.
(4) The implied term which imposes an obligation on the employee as to his conduct after the determination of the employment is more restricted in its scope than that which imposes a general duty of good faith. It is clear that the obligation not to use or disclose information may cover secret processes of manufacture such as chemical formulae (Amber Size and Chemical Co. Ltd v Menzel  2 Ch 239), or designs or special methods of construction (Reid & Sigrist Ltd v Moss and Mechanism Ltd (1932) 49 RPC 461), and other information which is of a sufficiently high degree of confidentiality as to amount to a trade secret. The obligation does not extend, however, to cover all information which is given to or acquired by the employee while in his employment, and in particular may not cover information which is only 'confidential' in the sense that an unauthorised disclosure of such information to a third party while the employment subsisted would be a clear breach of the duty of good faith. This distinction is clearly set out in the judgment of Cross J in Printers & Finishers Ltd v Holloway  1 WLR 1,  RPC 239 where he had to consider 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 his judgment, delivered on 29 April 1964 (not reported on this point in  1 WLR 1), he said  RPC 239, 253:
'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.'
The same distinction is to be found in E. Worsley & Co. Ltd v Cooper  1 All ER 290 where it was held that the defendant was entitled, after he had ceased to be employed, to make use of his knowledge of the source of the paper supplied to his previous employer. In our view it is quite plain that this knowledge was nevertheless 'confidential' in the sense that it would have been a breach of the duty of good faith for the employee, while the employment subsisted, to have used it for his own purposes or to have disclosed it to a competitor of his employer.
(5) In order to determine whether any particular item of information falls within the implied term so as to prevent its use or disclosure by an employee after his employment has ceased, it is necessary to consider all the circumstances of the case. We are satisfied that the following matters are among those to which attention must be paid:
(a) The nature of the employment. Thus employment in a capacity where 'confidential' material is habitually handled may impose a high obligation of confidentiality because the employee can be expected to realise its sensitive nature to a greater extent than if he were employed in a capacity where such material reaches him only occasionally or incidentally.
(b) The nature of the information itself. In our judgment the information will only be protected if it can properly be classed as a trade secret or as material which, while not properly to be described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret eo nomine. The restrictive covenant cases demonstrate that a covenant will not be upheld on the basis of the status of the information which might be disclosed by the former employee if he is not restrained, unless it can be regarded as a trade secret or the equivalent of a trade secret: see, for example, Herbert Morris Ltd v Saxelby  1 AC 688, 710 per Lord Parker of Waddington and Littlewoods Organisation Ltd v Harris  1 WLR 1472, 1484 per Megaw L.J.
We must therefore express our respectful disagreement with the passage in Goulding J's judgment at  ICR 589, 599E, where he suggested that an employer can protect the use of information in his second category, even though it does not include either a trade secret or its equivalent, by means of a restrictive covenant. As Lord Parker of Waddington made clear in Herbert Morris Ltd v Saxelby  1 AC 688, 709, in a passage to which Mr. Dehn drew our attention, a restrictive covenant will not be enforced unless the protection sought is reasonably necessary to protect a trade secret or to prevent some personal influence over customers being abused in order to entice them away.
In our view the circumstances in which a restrictive covenant would be appropriate and could be successfully invoked emerge very clearly from the words used by Cross J in Printers & Finishers Ltd v Holloway  1 WLR 1, 6 (in a passage quoted later in his judgment by Goulding J  ICR 589, 601):
'If the managing director is right in thinking that there are features in the plaintiffs' process which can fairly be regarded as trade secrets and which their employees will inevitably carry away with them in their heads, then the proper way for the plaintiffs to protect themselves would be by exacting covenants from their employees restricting their field of activity after they have left their employment, not by asking the court to extend the general equitable doctrine to prevent breaking confidence beyond all reasonable bounds.'
It is clearly impossible to provide a list of matters which will qualify as trade secrets or their equivalent. Secret processes of manufacture provide obvious examples, but innumerable other pieces of information are capable of being trade secrets, though the secrecy of some information may be only short-lived. In addition, the fact that the circulation of certain information is restricted to a limited number of individuals may throw light on the status of the information and its degree of confidentiality.
(c) Whether the employer impressed on the employee the confidentiality of the information. Thus, though an employer cannot prevent the use or disclosure merely by telling the employee that certain information is confidential, the attitude of the employer towards the information provides evidence which may assist in determining whether or not the information can properly be regarded as a trade secret. It is to be observed that in E. Worsley & Co. Ltd v Cooper  1 All ER 290, 307D, Morton J attached significance to the fact that no warning had been given to the defendant that 'the source from which the paper came was to be treated as confidential.'
(d) Whether the relevant information can be easily isolated from other information which the employee is free to use or disclose. In Printers & Finishers Ltd v Holloway  RPC 239, Cross J considered the protection which might be afforded to information which had been memorised by an ex-employee. He put on one side the memorising of a formula or a list of customers or what had been said (obviously in confidence) at a particular meeting, and continued, at p. 256:
'The employee might well not realise that the feature or expedient in question was in fact peculiar to his late employer's process and factory; but even if he did, such knowledge is not readily separable from his general knowledge of the flock printing process and his acquired skill in manipulating a flock printing plant, and I do not think that any man of average intelligence and honesty would think that there was anything improper in his putting his memory of particular features of his late employer's plant at the disposal of his new employer.'
Paragraphs (4) and (5) are primarily concerned with the scope of the implied term as to post-termination use of confidential information in a contract of employment. What about an express term which prevents misuse of confidential information after the end of the contract of employment?
For our part we would not regard the separability of the information in question as being conclusive, but the fact that the alleged 'confidential' information is part of a package and that the remainder of the package is not confidential is likely to throw light on whether the information in question is really a trade secret."
It is necessary to put on one side three issues which are not relevant for present purposes. The first is the extent to which an express contractual covenant not to disclose (in particular to third parties such as regulators or the media), as opposed to use, confidential information may be enforceable even if it is not limited territorially or in time (as to which see in particular Attorney General v Barker  3 All ER 257). The second is the extent to which disclosure in the public interest is a defence to a claim for breach of such a covenant (as to which, see Price Waterhouse v BCCI Holdings (Luxembourg) SA  FSR 251; London Regional Transport v Mayor of London  EWCA Civ 1491,  EMLR 4; Campbell v Frisbee  EWCA Civ 1374,  ICR 141; Attorney General v Parry  EWHC 3201 (Ch),  EMLR 13; Attorney General v R  UKPC 23,  EMLR 24; and HRH Prince of Wales v Associated Newspapers Ltd  EWCA Civ 1776,  Ch 57). The third is the effect of a repudiation of the contract by the party seeking to enforce the covenant (as to which, see General Billposting Ltd v Atkinson  AC 118, Rock Refrigeration Ltd v Jones  ICR 938 and Campbell v Frisbee).
The key question for present purposes is the impact of the doctrine of restraint of trade on the enforceability of covenants against the use of confidential information by employees after their employment has ended. In this regard controversy has been caused by the passage in paragraph (4) of Neill LJ's judgment in Faccenda Chicken beginning "We must therefore express our respectful disagreement" (see e.g. the comments of Scott J in Balston Ltd v Headline Filters Ltd  FSR 330 at 347). As the authors of Goulding (ed), Employee Competition (2nd ed) point out at 3.72, it is important to distinguish between restrictive covenants which prevent an ex-employee competing with his former employer and covenants which merely prohibit the use of confidential information. So far as restrictive covenants in the strict sense are concerned, subsequent case law suggests that it may be sufficient for the employer to demonstrate that it has confidential information falling short of trade secrets in order to be able to justify a reasonably drawn covenant: see in particular Lansing Linde Ltd v Kerr  1 WLR 251 and FSS Travel & Leisure Systems Ltd v Johnson  FSR 505. On other hand, it can be argued that the purpose of a restrictive covenant is to protect an employer who has trade secrets which are not clearly distinguishable from, or mixed up with, lower grade confidential information.
Be that as it may, it seems clear that a covenant against post-employment use of confidential information is unenforceable as being in restraint of trade in so far as it purports to prevent the ex-employee from using for his own benefit or that of a subsequent employer information which has become part of his general skill, knowledge and experience: see Balston v Headline and Ixora Trading Inc v Jones  FSR 251. Thus, in the absence of a restrictive covenant in the strict sense, the position of an ex-employee is the same whether his contract contained an express confidentiality clause or only an implied term, namely that he can only be restricted from using information which is a trade secret or akin thereto. (In this regard it may be noted that the recent decision of the Court of Appeal in Caterpillar Logistics Services (UK) Ltd v Huesca de Crean  EWCA Civ 156 proceeded upon the basis that the covenant against use of confidential information only restrained misuse of trade secrets: see Stanley Burnton LJ at .)
In Vestergaard v Bestnet  EWHC 657 (Ch) at  I said:
"It was common ground between counsel for VF and counsel for the Defendants that, whether it was express, implied or equitable in origin, the scope of any obligation of confidence owed by Dr Skovmand to VF did not extend beyond information that amounted to trade secrets of VF's once Dr Skovmand ceased to work for VF. It was agreed that, although Dr Skovmand was a consultant, in this respect his position was analogous to that of an employee. Accordingly, after the termination of the relationship, he was entitled to use for his own benefit or that of third parties information forming part of his own skill, knowledge and experience even if it was learnt during the course of the relationship, but he was not entitled to use any trade secrets. While I am not sure that this approach would apply to all consultants, in the particular circumstances of the present case I am prepared to adopt the agreed position of counsel. That being so, it is not necessary to explore the precise jurisprudential basis for it."
Counsel for the Corporate Defendants contended that this principle was equally applicable in the circumstances of the present case. He submitted that, even if clause 5(b) of the Development Contract continued to have effect after termination, Aerolab's employees could not be prevented from using information which had become part of their skill, knowledge and experience, even if it was learnt during the course of their work for Force India, when working for Lotus, as opposed to trade secrets. In support of this submission, he pointed out that, if Aerolab's employees had left Aerolab's employment on 1 August 2009 and joined a new employer, they could not have been prevented from putting their skill, knowledge and experience at the disposal of the new employer. He argued that it made no difference that they remained employed by Aerolab.
Counsel for Force India disputed this. He submitted that there was a fundamental distinction between an employment contract and a contract between a client and a contractor. He argued that the rationale for this distinction was that there was an inequality of bargaining power in the former situation which was not present in the latter situation. Furthermore, he pointed out that it was well established that covenants which would not be enforceable as between employer and employee could be enforceable as between the vendor and purchaser of a business, and that in Dyno-Rod plc v Reeve  FSR 148 Neuberger J (as he then was) had held that a franchise agreement was closer in this respect to the vendor/purchase type of case than the employer/employee type.
Counsel for the Corporate Defendants replied that there was no fundamental distinction for present purposes between an employment contract and a contract for the provision of services by an independent contractor. Indeed, nowadays it could frequently be difficult to distinguish between the two. (Or, more accurately, where to place a particular relationship on the spectrum between employment contract at one end and entrepreneurial contract for services at the other end.) Furthermore, it was not always the case that the employer or client had greater bargaining power than the employee or contractor, particularly where highly skilled employees/contractors were concerned. He submitted that the sale and purchase of a business clearly raised different considerations as between vendor and purchaser, and that the position of an employee of the business which was being sold was no different to that of an employee of any other business. As for Dyno-Rod v Reeve, the reasoning in that case was based on the proposition that a franchise agreement was akin to a lease of the franchisor's goodwill.
Neither counsel was able to cite any authority which was directly in point, and so I must consider the matter on principle. In my judgment the logic of counsel for the Corporate Defendants' argument is compelling, and I accept it. In the circumstances of the present case, paragraph 4 of the Appendix to the Development Contract is again relevant here, although again it cuts both ways to some extent. This provides that Aerolab's employees are free to use the customer's confidential information after two years. It therefore recognises their need to use such information in subsequent employment. While this might argue against them being free to use such information prior to then, it seems to me that the key point about paragraph 4 is that it would permit the employees to use confidential information of the status of trade secrets after that point. I do not consider that it could be relied upon to stop the employees from using information which had become part of their own skills, knowledge and experience prior to the expiry of the two years.
Nevertheless, the argument should not be pressed beyond its proper limit. This point is illustrated by Saltman v Campbell. In that case, the plaintiffs instructed the defendant to make tools for the manufacture of leather punches in accordance with drawings which the plaintiffs provided to the defendant for this purpose. The defendant used the drawings to make tools, and the tools to make leather punches, on their own account. The Court of Appeal held that that was an actionable breach of confidence. In my judgment it would have been no answer to the claim for the defendant to have argued that its employees were free to use their own skill, experience and knowledge. Admittedly, this is partly because there does not appear to have been any evidence that the defendant's employees had experience in the design of tools for manufacturing leather punches. More fundamentally, however, it seems to me that the Court of Appeal would have held that the precise dimensions and so forth recorded in the drawings constituted confidential information akin to a trade secret.
What is a trade secret?
When it comes to determining whether information constitutes a trade secret, two further authorities are of assistance in addition to Saltman v Campbell and Faccenda Chicken. First, in Thomas Marshall Ltd v Guinle  Ch 227 at 248E-H Sir Robert Megarry V-C said:
"If one turns from the authorities and looks at the matter as a question of principle, I think (and I say this very tentatively, because the principle has not been argued out) that four elements may be discerned which may be of some assistance in identifying confidential information or trade secrets which the court will protect. I speak of such information or secrets only in an industrial or trade setting. First, I think that the information must be information the release of which the owner believes would be injurious to him or of advantage to his rivals or others. Second, I think the owner must believe that the information is confidential or secret, i.e., that it is not already in the public domain. It may be that some or all of his rivals already have the information: but as long as the owner believes it to be confidential I think he is entitled to try and protect it. Third, I think that the owner's belief under the two previous heads must be reasonable. Fourth, I think that the information must be judged in the light of the usage and practices of the particular industry or trade concerned. It may be that information which does not satisfy all these requirements may be entitled to protection as confidential information or trade secrets: but I think that any information which does satisfy them must be of a type which is entitled to protection."
Secondly, in Lancashire Fires Ltd v S.A. Lyons & Co Ltd  FSR 629 at 668-669 Sir Thomas Bingham MR delivering the judgment of the Court of Appeal said:
"In Faccenda Chicken (at page 137) the Court of Appeal drew attention to some of the matters which must be considered in determining whether any particular item of information falls within the implied term of a contract of employment so as to prevent its use or disclosure by an employee after his employment has ceased. Those matters included: the nature of the employment: the nature of the information itself: the steps (if any) taken by the employer to impress on the employee the confidentiality of the information: and the case or difficulty of isolating the information in question from other information which the employee is free to use or disclose. We have no doubt that these are all very relevant matters to consider. In the ordinary way, the nearer an employee is to the inner counsels of an employer, the more likely he is to gain access to truly confidential information. The nature of the information itself is also important: to be capable of protection, information must be defined with some degree of precision: and an employer will have great difficulty in obtaining protection for his business methods and practices. If an employer impresses the confidentiality of certain information on his employee, that is an indication of the employer's belief that the information is confidential, a fact which is not irrelevant: Thomas Marshall Ltd v Guinle  Ch 227 at 248. But much will depend on the circumstances. These may be such as to show that information is or is being treated as, confidential; and it would be unrealistic to expect a small and informal organisation to adopt the same business disciplines as a larger and more bureaucratic concern. It is plain that if an employer is to succeed in protecting information as confidential, he must succeed in showing that it does not form part of an employee's own stock of knowledge, skill and experience. The distinction between information in Goulding J's class 2 and information in his class 3 may often on the facts be very hard to draw, but ultimately the court must judge whether an ex-employee has illegitimately used the confidential information which forms part of the stock-in-trade of his former employer either for his own benefit or to the detriment of the former employer, or whether he has simply used his own professional expertise, gained in whole or in part during his former employment."
Who is liable for breach of confidence and in what circumstances?
It is important to distinguish between three questions which are sometimes confused: first, whether there is an equitable obligation of confidence at all; secondly, if there is an obligation of confidence, whether contractual or equitable, what conduct amounts to breach of the obligation; and thirdly, who is liable for such a breach.
As discussed above, whether an equitable obligation of confidence arises as result of the acquisition or receipt of confidential information depends on the acquirer or recipient knowing or having notice that the information is confidential. Once an equitable obligation of confidence has arisen, however, the decision of the Court of Appeal in Seager v Copydex Ltd  1 WLR 923 establishes that the person subject to the obligation may be held liable for acting in breach of it even though he is not conscious of doing so.
In that case Mr Seager had invented a patented carpet grip which he manufactured and marketed under the trade mark Klent. There were protracted negotiations between Mr Seager and Copydex over a proposal for Copydex to market the Klent. One of the issues in the negotiations was the price at which Mr Seager was to supply the product. During a meeting with two representatives of Copydex Mr Seager disclosed to them an alternative design of grip which could be produced more cheaply. Although there was a dispute as to precisely what had been disclosed at the meeting, there was no dispute that the disclosure was in confidence (see Lord Denning MR at 929 and 931). The alternative design was not covered by Mr Seager's patent. The negotiations fell through, and Copydex subsequently manufactured and sold a grip essentially in accordance with the alternative design under the trade mark Invisigrip which Mr Seager had suggested. Copydex also applied to patent the alternative design. The Court of Appeal upheld Mr Seager's claim for breach of an equitable obligation of confidence, holding that Copydex must have unconsciously made use of the information which Mr Seager gave them (see Lord Denning at 931, Salmon LJ at 935-936 and Winn LJ at 939). There is no reason to think that the Court's decision would have been any different had the obligation of confidence been a contractual one.
At first blush, the decision of the Court of Appeal in Vestergaard v Bestnet  EWCA Civ 424 may appear to be inconsistent with its earlier decision in Seager v Copydex, but as I have explained in British Sky Broadcasting Group plc v Digital Satellite Warranty Cover Ltd  EWHC (Ch) 2662 at -, I believe that the two can be reconciled.
Primary liability for breach of confidence attaches to the person who acts in breach of the obligation, that is to say, the person who uses or discloses the information (who for convenience I will call the principal). It is possible for an accessory to be liable in two situations, however.
The first situation is where the obligation is contractual, and the accessory induces the principal to act in breach of contract. To be liable for inducing breach of contract, the accessory party must know that he is inducing a breach of contract. It is not enough that he knows he is procuring an act which, as a matter of law or construction of the contract, is a breach. He must actually realise that it will have that effect. Turning a blind eye is sufficient for this purpose, but negligence is not: see OBG Ltd v Allan  UKHL 21,  AC 1 at - (Lord Hoffmann).
The second situation is where the obligation is equitable. In Vestergaard v Bestnet (No 2) I held at , following Carnwath J (as he then was) at first instance in Lancashire Fires v Lyons  FSR 629 at 650-651, that an accessory who participates in a common design with the principal to act in breach of the principal's equitable obligation of confidence is jointly liable with the principal, and that for this purpose the principles laid down in the joint tortfeasance cases such as Unilever plc v Gillette (UK) Ltd  RPC 583 at 608-609 are applicable. In that context, it is well established that it is not necessary to show that there is a common design to commit the tort: it is sufficient if the parties combine to secure the doing of acts which in the event prove to be torts.
Counsel for the Corporate Defendants submitted that this was wrong. He argued that liability for inducing breach of a contractual obligation required knowledge on the part of the accessory that the act was a breach of confidence, and that it would be anomalous if there could be accessory liability for breach of an equitable obligation of confidence without such knowledge. In support of this argument, he relied on an analogy with accessory liability for breach of trust, which requires dishonesty: see Royal Brunei Airlines Sdn Bhd v Tan  2 AC 378, Twinsectra v Yardley  UKHL 12,  2 AC 164 and Barlow Clowes International Ltd v Eurotrust International Ltd  UKPC 37,  1 WLR 1476. He also relied on Article 39 of the Agreement on Trade-related Aspects of Intellectual Property Rights which forms Annex 1C to the Agreement establishing the World Trade Organisation signed in Morocco on 15 April 1994 (commonly known as "TRIPS"), to which the European Union and all its Member States are party. Counsel for Mr Gascoyne adopted this argument. Persuasively though the argument was advanced, I do not accept it. My reasons are as follows.
First, as I have pointed out above, the principal can be liable for breach of an equitable or contractual confidence even though he is not aware that what he is doing amounts to a breach of confidence. I see nothing inherently objectionable in holding that an accessory can likewise be liable without such awareness.
Secondly, in many cases, the question of accessory liability does not actually arise, because the putative accessory has acquired or received the information with notice, even if not knowledge, that it is confidential. In those circumstances, the putative accessory will come under his own equitable obligation of confidentiality, and will therefore be primarily liable for any disclosure or use of the information regardless of whether he is aware that those acts amount to a breach of confidence. The issue only arises where the accessory has not acquired or received the information.
Thirdly, as a matter of practical reality, I do not think that the requirement for knowledge of the consequences would be an onerous one for a claimant to satisfy in circumstances where the accessory has induced the principal to act in breach of a contractual obligation of confidence. If the accessory knows of the obligation, he is likely to know that the act will be a breach of that obligation. Conversely, I do not think an accessory is likely to be held liable for the principal's breach of an equitable obligation without a close involvement in the principal's acts, and hence at least some degree of knowledge of their consequences. Thus I think the difference between the two tests highlighted by counsel for the Corporate Defendants is more apparent than real. Although it could have made a difference in Vestergaard v Bestnet, that was because the claimants had failed to plead a case of inducing breach of contract against Bestnet, and in the event it did not matter because Bestnet was held to be primarily liable: see -.
Fourthly, counsel for the Corporate Defendants accepted that it would be sufficient in the equitable context if the accessory had "constructive" knowledge that the act involved a misuse of confidential information by the principal. But this already involves accepting an apparently different test to that applied in the contractual context.
Fifthly, counsel for the Corporate Defendants' reliance upon the supposed analogy with accessory liability for breach of trust overlooks the fact that the analogy was specifically rejected by the Court of Appeal in Campbell v MGN  EWCA Civ 1373,  QB 633 at -, albeit in the context of an argument about primary liability. In short, accessory liability for breach of trust requires dishonesty, albeit objective dishonesty rather than self-conscious dishonesty, and there is no reason to require dishonesty for accessory liability for breach of confidence. Even inducing breach of contract does not require dishonesty, as opposed to knowledge.
Finally, I do not regard Article 39 of TRIPS as particularly relevant in these circumstances. Article 39 provides in part as follows:
"1. In the course of ensuring effective protection against unfair competition as provided in Article 10bis of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2
2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information:
(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
(b) has commercial value because it is secret; and
(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
In my view this is concerned with primary liability rather than accessory liability. Furthermore, it is well established in other contexts that "contrary to honest commercial practices" is an objective test.
The designs in issue
The Force India 2009 model consisted of around 370 parts, of which about 203 were aerodynamic parts and the remainder mechanical parts. Force India alleges copying of 71 designs. Of these 57 are designs or precursors of designs for wind tunnel model parts and 14 are assemblies or combinations of individual model part designs. Of the 57 individual model part designs, 36 are for aerodynamic components, the full size equivalents of 25 of which were visible on the Force India F1 car during the 2009 season. The remaining 21 out of 57 are mechanical wind tunnel model parts which have no equivalent in a full size car.
Of the 36 aerodynamic designs:
i) nine are front wing parts;
ii) 12 are wheel barrel and brake duct parts;
iii) four are rear diffuser parts;
iv) two are rear wing parts;
v) nine are miscellaneous development parts which never made it onto the Force India racing car.
Force India's claim to confidential information
As Laddie J explained in Ocular Sciences Ltd v Aspect Vision Care Ltd  RPC 289 at 359-361, it is essential in breach of confidence actions for the claimant to give full particulars of all of the information alleged to be confidential. In short, it is only once the information has been particularised that it is possible accurately to determine (a) whether it has the necessary quality of confidence and (b) whether it has been misused.
The pleaded case
Paragraph 26 of Force India's Re-Re-Re-Amended Particulars of Claim identifies the confidential information relied on by Force India as follows:
the Copyright Works [defined previously as "the CAD data files listed in Annex 1, save for the file relating to the Helmet]
comprise information which is not in the public domain and which, therefore, constitutes the confidential information of the Claimant. In particular:
26.1 precise dimensions of the aerodynamic surfaces of the relevant parts; and/or
26.2 details of the modularity of the relevant parts (that is the precise way in which they relate to other parts);
26.3 details of the aerodynamic system of the relevant parts (that is the spatial relationship between the parts);
26.4 the specific designs of the parts listed in Annex 1, Part B."
The parts listed in Annex 1, Part B are parts the designs of which Force India say were not made available to the public, namely mechanical parts and aerodynamic parts which were not fitted to the race car.
Counsel for the Defendants submitted in his closing submissions that Force India's pleaded case did not include an allegation that the CAD data files per se constituted confidential information. Although I was initially attracted by this submission, on reflection it seems to me to be an overly narrow reading of the statement of case. I consider that the Particulars of Claim makes it reasonably clear that Force India contends that the CAD files contained confidential information of the kinds specified, and therefore were themselves confidential.
What was in the public domain?
Force India does not dispute that (with the exception of the designs of the parts listed in Annex 1, Part B) the designs of the parts in issue were, at the level of the overall shape and configuration of the parts in question, in the public domain as at the end of July 2009. Force India contends, however, that the information particularised above was not in the public domain. Apart from the pleading point just discussed, this led to two disputes at trial.
Photographs. It is common ground that, as described above, it is normal for F1 teams to study each others' cars closely, in particular by means of close-up photographs. Force India accepts that the information obtainable from such photographs was in the public domain, but says that this does not extend to information of the kinds particularised above. The Defendants for their part accept that very precise dimensions were not obtainable from such photographs and therefore were not in public domain. The question is where one draws the line. I shall consider this below.
FMCG. FMCG International Ltd ("FMCG") is a leading distributor of sports memorabilia. It is the Official Force India F1 Team memorabilia outlet. It sells a wide range of race-used parts from Force India F1 cars via its website at prices ranging from £95 to £245. Having discovered this in January 2012, Mr Migeot arranged for a friend to place an order for four parts, namely the (Spyker) 2007 front wing mainplane, the 2009 front wing flaps as raced in the Italian Grand Prix that year, the 2009 front wing endplate and turning vane as raced at the German Grand Prix that year and the 2009 rear wing mainplane. As Mr Migeot explained, it is technically straightforward to obtain precise dimensions from such parts by measuring arms and/or laser tracking. Furthermore, the profile of the Force India 2009 front wing mainplane which is alleged to have been copied by Aerolab/ FondTech is the same as the profile of the 2007 front wing mainplane.
The only witness whom Force India called to deal with this issue was Mr Halliwell. He explained that there was an agreement between Force India and FMCG dated 10 June 2009 under which Force India was to store parts for 18 months, after which they would be collected and sold by FMCG, with FMCG accounting to Force India for 75% of the sale price. He said that he had been informed by FMCG's CEO that FMCG had made three or four collections from Force India, the first of which was in February 2009. Not only does Force India have no record of what had been collected, however, but neither does FMCG. Even more oddly, neither Force India nor FMGC has any records of what FMCG sold prior to 5 August 2010. Mr Halliwell was unable to explain this, beyond saying that he had been told by FCMG that they had lost their records.
Mr Halliwell gave evidence that Force India was careful to ensure that "critical" parts were not sold until they were 18 months old. As counsel for the Corporate Defendants was able to demonstrate in cross-examination, however, FMCG advertised a 2008 front wing for sale on 25 October 2009. This could only have been obtained by FMCG from Force India during the February 2009 collection, when it was considerably less than 18 months old. Mr Halliwell could not explain how this had happened. Counsel for Force India submitted that this must have been an isolated error. I do not accept that.
Overall, I conclude that Force India has been rather lax about what FCMG is permitted to sell. As counsel for the Corporate Defendants submitted, this sheds light on the value of the confidential information alleged to have been misused by the Defendants. As counsel for Force India submitted, however, the Defendants have not established that any of the parts in issue had been sold by FMCG as at the beginning of August 2009. It follows that none of the information said by Force India to be confidential had come into the public domain by this route at the relevant date.
Is any of the information trivial?
Counsel for the Corporate Defendants submitted that some of the information claimed to be confidential was trivial. In my judgment this principle has little application in the circumstances of the present case. As will become apparent, I accept that some individual dimensions of some of the parts in dispute may properly be described as trivial, but it does not follow that the combinations of dimensions in issue are trivial.
Counsel for the Corporate Defendants submitted both in opening and in closing that Force India had failed in its statements of case or evidence to identify which precise dimensions were confidential and had allegedly been misused by the Defendants, although he did not dispute that the general nature of Force India's case was made reasonably clear by the combination of its Particulars of Claim and its Annex 1, a Scott Schedule and its Annexes and Mr Strevens' reports.
In my view it is important to distinguish for this purpose between what the Aerolab/FondTech CAD draftsmen did and what the aerodynamicists did. As will become clear below, I consider that a number of the initial Lotus model parts were drawn by a process which involved misuse of confidential information, since it involved the CAD draftsmen using the Force India CAD files to take a short cut; but it does not necessarily follow that the aerodynamicists misused any Force India confidential information in creating the designs of those parts. It is when one comes to consider the latter point that it becomes crucial to identify the precise dimensions alleged to have been confidential and to have been misused by the aerodynamicists. As will also become clear, in this context I agree with counsel for the Corporate Defendants that Force India's case is lacking in particularity.
In so far as the CAD draftsmen used Force India CAD files to take a short cut, then I consider that they misused confidential information akin to a trade secret. The CAD files were the product of a considerable degree of skill and labour; they comprised valuable information; they were not in the public domain; they were protected by express contractual obligations of confidence, including obligations directly affecting Aerolab's employees; there was a great deal of evidence that such information was regarded in F1 as highly confidential and that it was well known that there were severe penalties for misusing it; and the information was generally separable from the employees' skill, knowledge and experience, even if some individual dimensions were memorable and could be regarded as forming part of the employees' skill, knowledge and experience.
Counsel for the Corporate Defendants also submitted that Force India had failed in its statements of case or evidence to identify any features of modularity of the parts in issue which were confidential and not in the public domain. I agree with this. Furthermore, even if certain aspects of the modularity were not in the public domain, this is the kind of information which I regard as falling squarely within the skill, knowledge and experience of Aerolab and FondTech's employees.
Counsel for the Corporate Defendants also submitted that Force India had failed in its statements of case or evidence to identify any features of spatial relationship of the parts relied on which were confidential and not in the public domain. Apart from a few exceptions discussed below, I again agree with this. Furthermore, this is also the kind of information which I regard as mainly falling within the employees' skill, knowledge and experience.
Annex 1 Part B
I will deal with these parts individually below.
Aerodynamic parts the full-sized equivalents of which were installed on the Force India car
Front wing endplate and turning vane. The Lotus front wing was designed by Mr Crosetta. Mr Crosetta's evidence, which I accept, was that he was familiar with the design of front wings from previous experience and knew most of the fundamental measurements from memory. He wanted to start with a simple endplate and turning vane as a flexible base for development of the Lotus model. He admitted that he instructed Mr Balboni to reproduce the main parameters of the Force India endplate and turning vane. Mr Balboni admitted referring directly to the Force India model part CAD file (Aerolab did not have the Force India master surface file) when drawing the Lotus parts. The Lotus parts are very similar to the Force India ones, but Mr Balboni did not reproduce any of the Force India geometry exactly.
The basic shape of the Force India endplate and turning vane were in the public domain. The evidence establishes that some of the precise dimensions of the Force India endplate and turning vane were either regulated or trivial. Counsel for the Corporate Defendants submitted that Force India had not identified the remaining precise dimensions of the endplate and turning vane upon which it relied, explained why these precise dimensions were confidential, nor demonstrated that these particular dimensions had been reproduced in the Lotus model with the necessary degree of precision to amount to use of confidential information.
I accept this submission so far as the result is concerned, but not the process. In my judgment Mr Balboni's use of the Force India model part CAD file to draw the Lotus parts was a misuse of confidential information. He referred to the Force India CAD file as a short cut rather than drawing the parts from scratch, which he admitted would have taken him longer (he estimated three days rather than two). On the other hand, Force India has not established that any particular dimensions which were confidential were reproduced in the resulting design.
Although Force India advanced a claim in respect of the assembly of the endplate and turning vane, in my view this adds nothing to its claim in respect of the individual parts, since the general relationship between the Force India parts was in the public domain.
Front wing transition element. Mr Crosetta decided to use a similar concept to that of the Force India transition element, which was also used by Brawn, but adapt it to the different geometry of the Lotus model's front wing. Mr Crosetta's evidence was that he gave Mr Balboni the necessary dimensions to produce the CAD drawing. Mr Balboni did not recall referring to a Force India CAD file when doing so, but Mr Dernie's opinion was that Mr Balboni had done so given that the Lotus design reproduced the regulation box trim of the Force India design. Nevertheless, there are numerous differences between the Force India and Lotus transition elements: in particular, the Lotus element has a vertical transition in its aerodynamic surface to accommodate the lowering of mainplane, its forward surface has a different profile and it has a different trailing edge.
The basic shape of the Force India transition element was in the public domain. The evidence establishes that a number of its precise dimensions were regulated. Counsel for the Corporate Defendants submitted that Force India had not identified the remaining dimensions upon which it relied, explained why these precise dimensions were confidential, or demonstrated that these dimensions have been reproduced in the Lotus model with the necessary degree of precision.
I accept this submission so far as the result is concerned, but not the process. In my judgment Mr Balboni referred to the Force India CAD file rather than drawing the part from scratch. On the other hand, Force India has not established that any particular dimensions which were confidential were reproduced in the resulting design.
Front wing mainplane and primary and secondary flaps. During the Force India/Aerolab collaboration, Mr Crosetta took a note of the Force India front wing profiles by extracting a number of data points from a Force India CAD file. He admitted that, to create the initial Lotus model front wing mainplane, primary flap and secondary flap profiles, he reprocessed these points to create profiles which were very similar (although not quite identical) to the Force India profiles, placed them in an arrangement which was different to the Force India arrangement, and gave these to Mr Balboni in an Excel file. Mr Balboni created the three-dimensional surface of the Lotus front wing aerofoils by extruding these profiles horizontally between the endplate and their regulated inboard positions. The differences in the arrangement are that all three aerofoils were shifted down by 9.35 mm; the distance between the trailing edge of the mainplane and the leading edge of the primary flap differed by 0.39 mm and between the trailing edge of the primary flap and the leading edge of the secondary flap differed by 0.52 mm; and the angle of incidence of the Lotus flaps relative to the mainplane was increased by 6.6Ί.
The Defendants accept that the precise dimensions of the Force India profiles were not discernible from photographs. Counsel for the Corporate Defendants relied on evidence that, compared to more developed profiles, these profiles were of a basic type which has not changed much in years. Nevertheless, in my judgment the dimensions were confidential information, and that information was misused in the design of the Lotus profiles.
Force India has not identified any other dimensions of the Force India model mainplane or flaps which have the necessary quality of confidence and have been reproduced in the Lotus model with the necessary degree of precision.
Although Force India advanced a claim in respect of the assembly of the mainframe and the primary and secondary flaps, in my view this adds nothing to its claim in respect of the individual parts, since the general relationship between the Force India parts was in the public domain. Furthermore, save in one respect, the relationship between the Lotus parts was different, as explained above. The exception was the dimensions of the slot gaps between the mainplane and primary flap and between the primary flap and secondary flap. There was no evidence that Force India had spent any time or effort optimising these dimensions, however, nor that they had been reproduced in the Lotus model with any particular degree of precision.
Front wing strakes. The front wing strakes were not part of the initial Lotus model front wing. Mr Crosetta designed a set of strakes for testing on the Lotus front wing during the first wind tunnel session, but these were discarded with a view to fitting revised strakes at a later stage. He knew the spacing of the strakes from his work on the Force India model, and used the same spacing. Otherwise, his evidence was that he designed the strakes himself. I accept this evidence.
The individual strakes are very simple parts, and the major dimensions are either regulated or defined by the standard thickness of model parts. Furthermore, the precise dimensions of the Lotus strakes are different. No doubt for this reason, counsel for Force India concentrated on the spacing between the strakes. The strakes are visible in photographs of the Force India front wing, however. Their positioning could have been worked out to a reasonable degree of accuracy from such photographs and the relevant regulation. Their precise positioning was actually at 50mm intervals. There is no evidence that this precise dimension was the result of detailed testing. The round number suggests otherwise. Mr Dernie thought it likely that this positioning was simply the first one tried in the Force India wind tunnel. In any event, I consider that this rather memorable number formed part of Mr Crosetta's skill, knowledge and experience. Accordingly, I reject Force India's claim in relation to the strakes.
Y400 endplate and mounting pad. The unchallenged evidence of the Defendants' witnesses was that, save for regulated dimensions, there was no relevant similarity between these parts. I therefore dismiss this claim.
Front wing mainplane pillar pocket infill. Mr Strevens accepted in his report that there was no evidence of copying in relation to this part. Accordingly, this claim was not pursued by Force India.
Front wing assembly. Force India's claim in respect of overall front wing assembly adds nothing to its case for the same reasons as I have given in relation to the sub-assemblies considered above. Counsel for Force India relied upon the acceptance by Mr Dernie in cross-examination that the Lotus front wing assembly was a modified version of the Force India one, but Mr Dernie also said that aerodynamically the changes were quite big. As he explained, simply dropping the aerofoils by 9.35 mm had a profound effect on the flow pattern created by the front wing. This increased the ground effect, thereby increasing the effective camber of the aerofoils, while their actual camber was further increased by the flap angle change. The net result was a significant change in the loading of the front wing, and, combined with the different Y400 endplate, a change to the front wing vortices. This evidence does not begin to establish any misuse of confidential information other than that identified above.
Front and rear barrels, front and rear brake ducts, disc bell
It is admitted that Aerolab and FondTech copied the Force India model barrels, brake ducts and disc bell in the initial Lotus model as a stopgap while they waited for the full size barrel, brake duct and disc bell geometry to be released by MTO/CD. It is also admitted that the use of the dimensions of the Force India barrels, brake ducts and disc bell in combination in the initial Lotus model was a misuse of confidential information. Force India's claim in respect of the assembly adds nothing, however.
The MTO/CD geometry was independently designed in Germany. The Defendants accept that a Force India rear brake duct winglet profile does appear to have been added to the MTO/CD geometry during a later testing session. But this profile would have been visible to the public on the Force India. Accordingly it is not established that this involved misuse of any Force India confidential information.
Mr Legnani admitted copying the geometry of the helmet directly from a Force India CAD file. It is common ground, however, that the helmet was originally designed by Arai. It appears that Force India's claim is based on the fact that it scanned an Arai helmet to create the CAD data. Although there is no specific evidence on the point, counsel for the Corporate Defendants submitted that it was probable that Arai had sold the helmet to the public, and hence its external geometry was in the public domain. I accept that submission. Accordingly I reject Force India's claim in respect of this part.
The rear wing for the Lotus model was designed by Mr Crosetta, who had also designed the Force India rear wing. Mr Crosetta's evidence was that, although he made use of the experience he had gained in designing the Force India rear wing, he created a new design. Mr Carafoli admitted, however, that he had used a Force India master surface file as a means of realising the rear wing geometry specified by Mr Crosetta. On the evidence, this was the master surface which had been revised by Mr Balboni on his own initiative in mid-July 2009 in an effort to make its construction history more user-friendly (see paragraph 116 above). In my judgment this was a misuse of confidential information by Mr Carafoli for the reasons explained above.
Counsel for Force India submitted that Mr Carafoli had drawn the rear wing without any input from an aerodynamicist, and therefore could not have made any aerodynamically significant alterations to the design of the rear wing. I do not accept this submission. The primary basis for the submission is Mr Carafoli's evidence that he had built the rear wing area by 4 August 2009 taken in combination with the evidence that Mr Crosetta was supposed to be on holiday at that time. For the reasons given above, however, I have concluded that Mr Crosetta deferred his departure on holiday until after 4 August 2009. Therefore he was in a position to give Mr Carafoli directions as to what he wanted. Furthermore, as I shall discuss below, the Lotus rear wing is in fact aerodynamically different to the Force India rear wing. Mr Carafoli did not have the expertise to design the rear wing. It follows that Mr Crosetta must have.
Central section. Mr Crosetta's evidence was that he designed the central section. Mr Dernie's opinion was that the surface geometry of the Lotus central section was different to that of the Force India central section. This is supported by Mr White's evidence. As Mr Dernie acknowledged, there are similarities in the brackets at either side of the central section, but Force India made no attempt to show that the dimensions of these brackets was of any significance. I presume that this is because the brackets simply hold the central section in place in the model. I therefore conclude that Mr Carafoli misused Force India's confidential information when he used the master surface file to take a short cut, but Mr Crosetta did not misuse any confidential information in creating the design.
Rear wing assembly. Although not separately pleaded in Annex 1 to the Particulars of Claim, the Scott Schedule makes it clear that Force India advances a claim in respect of the rear wing mainplane and flap profiles. Mr Strevens showed that, if the Force India mainplane was reduced in scale, the flap was enlarged and the two repositioned with respect to each other, then there was a fairly good match with the Lotus parts. Mr Crosetta denied using the same profiles for Lotus as for Force India. In my judgment the similarity between them, to the extent that there is similarity, is explicable by the facts that the same person designed both and that Mr Carafoli used the Force India file to take a short cut. I therefore conclude that Force India's claim is made out with respect to Mr Carafoli's use of the file, but not with respect to the actual design of the mainplane and flap.
So far as the rear wing assembly as a whole is concerned, Mr Dernie pointed out that the Force India rear wing is pillar mounted, while the Lotus rear wing is endplate mounted, which creates a major aerodynamic difference between them as well. In addition, the angle of incidence of the aerofoils relative to one another is different. Dr Hurst accepted that the difference in the rear wing arrangement would affect the flow pattern. He speculated that the Lotus flap angle was adjustable, but there is no evidence that this is correct, still less that the flap angle was ever adjusted to match the Force India angle. I therefore reject Force India's claim in respect of the assembly.
The diffuser was perhaps the most heavily disputed area of the Lotus model at trial. It is convenient to consider two general points before turning to the individual parts of the diffuser of which complaint is made.
The first concerns the timing of the work. The Defendants' case is that the Lotus diffuser was designed by Mr Neira, who had not only designed the Force India diffuser, but also had considerable experience of diffuser design before that. It is common ground that Mr Neira only returned to work from his holiday on 11 August 2009. Counsel for Force India submitted that work had been done on the diffuser before this, at least by Mr Legnani. There are a number of pieces of documentary evidence which support this submission, notably Mr Mirani's email dated 4 August 2009 (see paragraph 136 above) and Mr Mirani's email dated 11 August 2009 (see paragraph 141 above). Mr Neira's evidence was that he was the only aerodynamicist who worked on the design of the diffuser, and the only one qualified to do so. Furthermore, neither Mr Mirani nor Mr Pagenelli suggested that they worked on the design. Mr Neira's evidence was that he started work on the design after he returned from holiday. But that begs the question of what Mr Legnani was doing prior to that. At this point it is relevant to note that Mr Legnani had also worked as a CAD draftsman on the Force India diffuser.
The second point concerns the CAD files. Mr Strevens pointed to commonality of UUID and construction histories in several Force India and Lotus diffuser master surface files as evidence of copying. Mr Legnani said in his witness statement that he did not copy or refer to any Force India CAD files when drawing the Lotus parts, but followed Mr Neira's instructions. (By contrast, he admitted copying other Force India CAD files, such as the helmet and rearview mirror). He said that he could only assume that the commonalities were due to the same parametric files being used to create both the Force India and Lotus diffuser surfaces.
Mr Neira explained that such files are a piece of surface geometry created by a draftsman whose construction histories have been built by the draftsman in such a way as to enable changes to be made to the important geometric parameters of that particular surface. This construction history is then used as a convenient means of developing a finished surface with a particular combination of key parameters. The use of the same parametric file as a starting point for two different surfaces is capable of explaining why two surfaces containing different geometry share the same UUID and a somewhat similar construction history. But I am not persuaded that this explains the degree of similarity in the construction histories identified by Mr Strevens.
In cross-examination, Mr Legnani admitted creating an exploded drawing of the diffuser from Force India CAD files for model parts as a visual reference when drawing up a list of model parts that would have to be made for the Lotus model. Although this amounts to an admission of some degree of copying, it does not explain the commonalities of UUID and construction history.
Drawing these threads together, in my view the Defendants' evidence does not satisfactorily explain what Mr Legnani was doing prior to 11 August 2009. Nor does it satisfactorily explain the degree of similarity in the construction histories. In my judgment the best explanation of these matters is that Mr Legnani tried to get a head start in Mr Neira's absence by copying some Force India CAD files and perhaps trying to adapt them to the MTO/CD geometry. When Mr Neira returned, Mr Legnani used these as a basis for implementing Mr Neira's instructions. I also consider that this helps to explain how Mr Neira was in a position to send MTO/CD a surface study for the diffuser as early as 13 August 2009 (see paragraph 147 above), albeit that I accept that this was incomplete.
It does not necessarily follow that Mr Neira misused Force India confidential information in creating the design of the Lotus diffuser, however. He was adamant that he had used his own expertise. I think it is clear that he set out to create a similar design to the one he had just designed for Force India, but again it does not follow that he crossed the line into misuse of confidential information. That needs to be considered part by part. In this connection, it is telling that Force India only complains about a selection of lateral diffuser parts and none of the central diffuser parts, save for a small section of the secondary inlet.
Diffuser strake. The strake in issue is an interior strake of the lateral diffuser. Mr Neira explained that the function of this strake is to prevent air from the tyres contaminating the diffuser and that he had learnt from experience that the ideal dimensions of this strake were as narrow as possible, 210 mm long with an exit angle of 10Ί. The upper surface of the strake matches the lower surface of the lateral diffuser roof. The origin of that geometry is dealt with below. Mr Neira's evidence was that he gave his draftsman instructions on the strake geometry he wanted, did not need to refer to any Force India geometry when doing so and did not in fact refer to any Force India geometry. This evidence was unshaken in cross-examination, and I accept it. I therefore conclude that Mr Neira specified the Lotus model diffuser strake using his own skill and knowledge without referring to any Force India CAD file, albeit that Mr Legnani appears to have based the drawing on one.
Profiled foot. Mr Neira had the idea for adding a profiled leading edge to a trim in the wheel cut out area of the Force India lateral diffuser in late July 2009, and a study of this for the Force India model had been started but not concluded by the end of the month. Because of the breakdown in the relationship between Aerolab and Force India, this was never sent to Force India. Mr Neira wanted to use the same basic idea on the Lotus model. A profiled foot did not form part of the initial Lotus model, however. The trim and the profiled foot were added to the Lotus model lateral diffuser during the first diffuser testing session from 21 to 30 October 2009.
The profiled foot was drawn by Mr Urru. His evidence was that he was asked by Mr Neira to adapt the Force India study for the Lotus model. This explains the commonalties in UUID and construction history observed by Mr Strevens. I suspect that Mr Neira thought that there was nothing wrong in asking Mr Urru to do this because the study had never been sent to Force India. Be that as it may, Mr Neira did not simply reproduce the previous design. On the contrary, Mr Strevens' evidence confirms that the geometry of the profiled edge is different. Accordingly, I conclude that this is another instance where the CAD draftsman has taken a short cut, but it has not been shown by Force India that the aerodynamicist has misused any confidential information in creating the Lotus design.
Outboard area. As counsel for the Corporate Defendants submitted, Force India's case on the outboard area is rather confused. The pleaded case relates to two different versions of the Force India diffuser design, with different outboard areas. The first was the version used at the Barcelona Grand Prix, the second was the version used at the Silverstone Grand Prix. Mr Strevens accepted that there were multiple differences between the Lotus model outboard area and both of these, and that he was not a position to comment on the aerodynamic significance of those differences. Force India's only positive evidence on the outboard areas is a comparison made by Mr Strevens between a third Force India outboard area design, an incomplete master surface which never formed part of the Force India car, and the Lotus model design.
Mr Neira was unshaken in his evidence that he had designed the outboard area independently, using his skill and expertise as a designer of diffusers. The Lotus outboard area is similar in outline, but differs in detail from the Force India one used by Mr Strevens for his comparison. Force India has not identified any specific dimensions which Mr Neira is alleged to have reproduced. I therefore conclude that Force India has not made out its claim that Mr Neira misused Force India confidential information in designing the outboard area.
On the other hand, Mr Strevens' analysis is persuasive that the Lotus CAD file was derived from the Force India CAD file. This was an area of the diffuser which Mr Legnani worked on. I conclude that he used the Force India CAD file as a short cut. I recognise that strictly speaking this does not form part of Force India's pleaded case, but given that the issue was fully explored at trial I see no unfairness to the Defendants in allowing the point to be taken.
Lateral roof profile. As counsel for the Corporate Defendants submitted, Force India's case on the lateral roof profile is even more confused than its case on the outboard area. The pleaded case relates to a Force India master surface file. For no apparent reason, Mr Strevens did not compare this with the corresponding Lotus file. Instead, it appears that he compared the Lotus file with one of the Force India model part files pleaded in relation to the outboard area. What he pointed out was a similarity in the roof profile.
Mr Neira accepted that he used very similar lateral diffuser roof geometry in both models, but explained that he had used this profile for years, could construct it from a limited number of parameters which were well known to him and instructed his draftsman to use these parameters without making any reference to the equivalent Force India geometry. I accept this evidence, which was supported by the evidence of Mr Dernie and Dr Hurst.
It was put to Mr Neira that Mr Legnani had carried out his instructions by modifying a Force India CAD file. The lateral roof is adjacent to the outboard area, and Mr Strevens' evidence as to derivation covers both. My conclusion is the same.
Secondary inlet. The only similarity between the secondary diffuser inlet geometries on the respective models is the curve at the leading edge. These are not identical and the rest of the two parts are very different. In this case there is no suggestion that the leading edge curve was created by modifying a Force India CAD file.
Mr Neira explained the considerations which dictate the geometry of the secondary diffuser inlet leading edge. In essence, all teams place a volume on the leading edge of the inlet extending around to its upper surface (the lower surface being a regulated plane). If this volume is too large, it restricts the flow into the secondary diffuser. If it is too small, this is not correct either. Adding a small radius was therefore a common solution. There was no serious challenge to this evidence. Mr Neira accepted that the curved inlet of the Force India diffuser had been developed at Brackley, but pointed out that that geometry was provided to Aerolab and that he was very familiar with its characteristics as a result. I therefore conclude that Mr Neira specified the Lotus model secondary diffuser inlet geometry using his skill and knowledge without making use of any Force India CAD file. Nor did the CAD draftsman take a short cut.
Aerodynamic parts which were not installed in the Force India car
Sidepod inboard and outboard lower leading edge. Mr Lenoci's evidence was that he designed the initial Lotus model sidepod lower leading edge from scratch. It was not put to Mr Lenoci that he had in fact used the geometry of the Force India lower leading edge, even as a starting point. Mr Lenoci's evidence was corroborated by Mr Legnani, who drew the parts in accordance with Mr Lenoci's instructions. Furthermore, the Lotus design is different to the Force India design, particularly in the case of the outboard lower leading edge. I therefore reject Force India's claim in respect of these parts. The same goes for the assembly of them.
Forward bargeboard. Mr Lenoci admitted that he copied the geometry of the Force India forward bargeboard in the forward bargeboard of the initial Lotus model. Counsel for the Corporate Defendants submitted that the geometry of this part was not of sufficient value to be protectable. I do not accept that submission. I therefore conclude that Force India's claim in respect of this part is made out.
Rearward chin. Mr Paganelli gave unchallenged evidence that the Lotus model rearward chin was designed from scratch. Furthermore, the Lotus design is different to the Force India design. I therefore reject Force India's claim in respect of this part.
Chin. Mr Paganelli admitted that the initial Lotus chin fences had been copied from the Force India design, but gave unchallenged evidence that the remainder of the chin had been designed from scratch. Counsel for the Corporate Defendants submitted that the dimensions of the chin fences were trivial. In support of this submission he pointed out that the chin fences are rectangles whose height appears to be defined by the thickness of the rearward edge of the chin and length by the length of the chin. In my judgment this is borderline case, but I am not persuaded that these dimensions are in combination so trivial as not to be protectable. Accordingly, I consider that Force India's claim is made out in respect of the chin fences, but not the remainder of the chin.
Vortex generator. Mr Lenoci admitted that he based the vortex generator of the initial Lotus model on the Force India vortex generator. Counsel for the Corporate Defendants submitted that the geometry of this part was not of sufficient value to be protectable. In support of this he relied on the fact, during the second wind tunnel session, a rear bargeboard was placed over the vortex generator without loss of downforce. I do not accept that it follows that the information was of no significant value. I therefore conclude that Force India's claim in respect of this part is made out.
Assembly. In my judgment Force India's claim in respect of the assembly of mid-section parts adds nothing to its claim in respect of the individual parts. Dr Hurst accepted that the combination of parts used in the mid-section of the Lotus model did not produce the same flow pattern as to the equivalent combination of parts in the Force India model. For example, the bargeboards were differently positioned in the two models. Furthermore, as he also accepted, the flow pattern coming from the two front wings was different. As Mr Dernie explained, the narrower front wheels on the Lotus model would also have had a substantial impact on the airflow in the mid-section.
Mr Lenoci admitted that he copied the rearview mirror from the Force India mirror, the CAD file for which he had retained in his personal folder. Counsel for the Corporate Defendants submitted that the geometry of this part was trivial. I do not accept that submission. I therefore conclude that Force India's claim in respect of this part is made out.
Front spine. The Force India model front spine assembly consists of the main front spine element and three supporting brackets (two front spine support webs and one centre web) all held in place by an adapter plate which connects to the centre spine. The Lotus model front spine consists of equivalent elements save for the Force India centre web, which has no equivalent in the Lotus model front spine.
Mr Paganelli and Mr Mirani admitted making direct reference to the Force India front spine and front support web geometry when designing the Lotus model equivalents. Aerolab and FondTech admit that this constituted a misuse of confidential information.
Mr Paganelli and Mr Mirani denied making any reference to the Force India adapter plate. Their evidence on this was unchallenged. The CAD draftsman responsible for the drawings was Mr Legnani. Mr Legnani's evidence was confusing, but counsel for the Corporate Defendants very properly accepted that upon analysis it amounted to a concession that he had used a Force India CAD file as a template for the Lotus adapter plate, even though he was adamant that he had not done this for the front spine and support web. Again, therefore, this was a case of the CAD draftsman taking a short cut.
Centre spine. Mr Paganelli's unchallenged evidence was that the geometry of the Lotus model centre spine was created from scratch. (It was put to Mr Paganelli, and he accepted, that in a presentation at an internal meeting on 7 August 2009 he had compared the Lotus central spine with the Force India spine; but that is a different matter.) Furthermore, the geometries of the two centre spines are different.
It was suggested to Mr Carafoli that he had drawn the central spine by modifying, or at least referring to, a Force India CAD file. Mr Carafoli denied this. In the case of the centre spine, there is no UUID or construction history similarity to support Force India's case. The sole fingerprint of copying relied upon is the fact that the precise longitudinal position of the rear bulkhead of the two centre spines is 1300.1 mm.
Mr White explained how this single point of similarity could arise without either Mr Paganelli or Mr Carafoli needing to refer to the Force India CAD file. His explanation was the position of the rear bulkhead of the Lotus model centre spine would be determined by the position of the mounting face of the Lotus model rear spine. As discussed below, it is not disputed that the Lotus model rear spine was created by modifying the Force India rear spine CAD file. Thus the position of the mounting face of the Lotus rear spine is likely to have remained the same as that of the Force India one. This common rear spine position would have led to the common centre spine position. This evidence was unchallenged, and satisfactorily explains the point relied upon by Force India.
Accordingly, Force India's claim for misuse of confidential information is not made out.
Rear spine. Mr Paganelli's evidence was that he specified the geometry of the Lotus model rear spine, adapter plate and spacer using his own skill and knowledge, including his knowledge of the Force India rear spine, without copying any Force India geometry. It was put to Mr Paganelli, and he accepted, that he saw nothing wrong in looking at all of the Force India spine drawings, but it was not established that in the case of the rear spine he had misused any Force India confidential information. Indeed, the respective rear spines are rather different.
Mr Columbanu admitted that he had started with the Force India rear spine CAD files and modified them as a means of realising Mr Paganelli's specification. Again, therefore, this is a case of the CAD draftsman taking a short cut.
Spine assembly. Force India's case in respect of the assembly adds nothing to its case in the individual parts, particularly given that these have no aerodynamic significance.
Wheel rim sealing details
Mr Balboni's unchallenged evidence was that he designed the Lotus model wheel rim sealing details using his own skill and knowledge, without using any Force India CAD file. Accordingly Force India's claim is not made out.
Driveshaft. The dimensions and modularity of the main section of the Lotus model driveshaft which is exposed to the airflow in the tunnel is different to that of the Force India driveshaft. This was structural geometry specified by MTO. The geometry of the two connecting elements within the two driveshafts are all but identical. It is accepted by Aerolab and FondTech that this geometry must have come from the Force India file. Counsel for the Corporate Defendants submitted that this information was not of sufficient value to be protectable, but I do not accept that submission.
In any event, it is admitted that Mr Urru used a Force India CAD file as a short cut when drawing the Lotus parts. Accordingly Force India's claim for misuse of confidential information is made out.
Limit cams and shaft clamps. It is accepted that the Aerolab draftsmen (although it is not entirely clear which ones) replicated at least some of the detailed design and precise dimensions of the Force India cams and clamps in the Lotus model versions. Counsel for the Corporate Defendants submitted that this information was not of sufficient value to be protectable, but I do not accept that submission. Accordingly Force India's claim for misuse of confidential information is made out.
Lower wishbone flexure. It is accepted that some of the dimensions of the Force India flexure are reproduced in the Lotus model flexure. In any event, it is also accepted that the draftsman used the Force India CAD file as a template. Accordingly Force India's claim for misuse of confidential information is made out.
Diffuser fix plate jig. Mr Urru admitted that he started by copying the concept of the jig from the Force India CAD file, which probably explains why he had a copy of the Force India file in his personal area, but he gave unchallenged evidence that he had abandoned this because the jig was useless for the Lotus model since the diffuser geometry was different. It follows that Force India's claim in respect of this part is not established.
Model mounting jig and spacer. Mr Migeot gave unchallenged evidence that the design and precise dimensions of the model mounting jig and spacer were developed by Aerolab prior to any arrangement with Force India or Spyker. It follows that that neither the design nor its precise dimensions form part of Force India's confidential information.
Liability of Aerolab and FondTech for breach of confidence
Aerolab and FondTech accept that they are liable for any misuse of confidential information found to have been made by their respective employees. Aerolab's liability is in contract, whereas FondTech's liability is in equity, but it is not suggested that this makes any difference.
This is a convenient juncture at which to consider Force India's case that the use made by Aerolab and FondTech of Force India's CAD files amounted to systematic copying of key parts of the Force India car, and in particular systematic copying of the aerodynamically significant parts. The suggestion made by Force India is that Aerolab and FondTech's approach was to copy the Force India CAD data, and then to modify it to the extent necessary to suit the different mechanical and structural design created by MTO/CD. In my view Force India has come nowhere near establishing that this was the case. On the contrary, such misuse as I have found to have occurred mainly consisted of opportunistic copying of CAD files by CAD draftsmen in order to take a short cut.
As counsel for the Corporate Defendants submitted, the evidence on the front wing is telling in this regard. It is common ground that the front wing defines the flow pattern for the rest of the car. Save for the detail of the pillars which attach the front wing to the chassis, there was no reason why the front wing of the Force India model could not have been reproduced precisely in the Lotus model. But it was not. In fact, Mr Crosetta discarded the strakes to begin with, asked Mr Balboni to make imprecise reproductions of the Force India front wing endplate and turning vane, transition element and aerofoil profiles, and created a new Y400 endplate and pillar pocket infill. He then arranged these elements differently in space to create a front wing which was, on the evidence of the two expert aerodynamicists, aerodynamically completely different. The effect was to create a very different flow pattern to the remainder of the car.
Force India also alleges that Mr Migeot instructed his employees systematically to copy the Force India model. I have already dealt with the instructions which Mr Migeot gave at the meeting on 3 August 2009. There is nothing else in the evidence to support this allegation. Counsel for Force India placed particular reliance upon the fact that Mr Migeot had set a downforce target for the initial Lotus model of 2.75, which is close to the downforce figure of 2.72 being achieved by the Force India model in late July. Mr Migeot went some way to accepting that he might have set the target for the Lotus model with the Force India model's performance in mind, but disputed that this demonstrated copying. I find that Mr Migeot did set the target by reference to the Force India model's performance, but I see nothing sinister in this. As can be seen from Mr Migeot's email dated 25 November 2009 (see paragraph 193 above), he was simply using his experience of where a 2009 car needed to be to compete even at the back of the grid. Furthermore, in the event the initial Lotus model failed to meet this target by a considerable margin.
Counsel for Force India also relied upon Mr Migeot's reaction when he saw the initial Lotus model for the first time on 2 October 2009 and his reaction to the comments elicited by the Lotus press release on 14 October 2009. Mr Migeot's evidence was that, although he noticed a degree of similarity between the Lotus model and the Force India design, he did not see anything untoward. It was not surprising that people who had worked on designing the Force India car should produce a similar design of model. He knew that the Lotus had different structural and mechanical components designed by MTO/CD, a different engine and gearbox and was designed to comply with different Regulations. He also knew that apparently small differences in aerodynamic design could have a significant impact on performance. Thus the general similarities in shape and configuration did not suggest to him there had been any misuse of confidential information by his staff. Nor did the comments on the press release make him think otherwise. It was Mr Migeot's evidence that it was only after receipt of Mr Giachi's report that he had discovered that Force India CAD files had been copied. Counsel for Force India suggested that the similarities were obviously due to copying, and the only explanation for Mr Migeot's failure to acknowledge this was that he instigated the copying. I do not accept this. I see no sufficient reason not to accept Mr Migeot's evidence on these points, which is perfectly consistent with my findings in relation to Force India's various claims.
Liability of Mr Gascoyne for breach of confidence
Force India's primary case against Mr Gascoyne is one of common design, namely that he agreed with Mr Migeot in late July 2009 that Force India's CAD files would be used as the starting point for the design of the Lotus model. In so far as the misuse of confidential information was committed by Aerolab, and hence amounted to a breach of the Development Contract, Force India contends that Mr Gascoyne thereby induced Aerolab to act in breach of the Development Contract. In that regard, Mr Gascoyne admitted that he was aware of the terms of the Development Contract. In so far as the misuse of confidential information was committed by FondTech, and hence amounted to breach of an equitable obligation of confidence, Force India contends that Mr Gascoyne is jointly liable for that breach in accordance with the principles discussed above.
There is no direct evidence of any kind to support the claim that Mr Gascoyne and Mr Migeot made the agreement alleged by Force India, and both Mr Gascoyne and Mr Migeot denied it. Counsel for Force India submitted that their denials should be disbelieved. In support of this submission he relied upon a number of strands of circumstantial and similar fact evidence.
Since I have already dismissed the suggestion that Mr Migeot instigated the copying by his employees, it follows that I do not accept that it was done pursuant to an agreement between Mr Gascoyne and Mr Migeot. In any event, I find the circumstantial evidence relied upon by Force India entirely unpersuasive. Nor do I consider that the similar fact evidence is probative.
The principal items of circumstantial evidence relied on by counsel for Force India are as follows. The first is the fact that Mr Gascoyne wrote in his email dated 31 July 2009 (see paragraph 110 above) about "starting from the current level of Force India", while, as discussed above, Mr Migeot set his engineers approximately the same downforce target as the level achieved by the Force India model in July 2009. I am unimpressed by this. Mr Gascoyne went on in his email to say "due to the historical knowledge, not starting as a new team". What he was saying to Mr Fernandes was that the advantage of being able to use Aerolab was that Lotus would have the benefit of the skill and experience Aerolab had built up working for (among others) Force India. In any event, even if one assumes that Mr Gascoyne told Mr Migeot that he wanted to achieve a similar level of aerodynamic performance to Force India, that does not begin to show that they agreed that Aerolab would copy Force India CAD files.
Secondly, counsel for Force India relied on statements made by Mr Gascoyne, particularly in presentations to prospective Lotus sponsors, to the effect that Lotus would be aiming to beat not only the other new F1 teams, but also Force India and Toro Rosso by the end of the 2010 season. I am even less impressed by this. Not only was Mr Gascoyne merely talking about overall performance targets, which are dependent on many other factors in addition to aerodynamic performance, but also it is clear that he was talking up the new team's ambitions for entirely understandable reasons. Mr Gascoyne's evidence was that, more realistically, his aim was for Lotus to be the best of the new teams. This was perfectly realistic since Lotus planned to engage Aerolab and FondTech to carry out aerodynamic development throughout the 2010 season, whereas the other two new teams had no such plans. Indeed, one of them planned to rely entirely on CFD for the aerodynamic design of its car, an approach that all the witnesses who were asked agreed was highly unlikely to succeed.
Thirdly, counsel for Force India also suggested that it was incredible that Mr Gascoyne and Mr Migeot should not have discussed the aerodynamic design of the car, as they both said was the case. I do not find this incredible. Mr Gascoyne explained that he was too busy getting the new team up and running to get involved in the design of the car, and so he hired the best contractors he could and let them get on with it. This evidence is supported by the documentary record and corroborated by the unchallenged evidence of Mr Hall. Counsel for Force India also suggested that Mr Gascoyne contradicted himself when he said (in relation to his first email to Mr Balfe dated 19 October 2009, quoted in paragraph 180 above) that "We had asked FondTech and Aerolab do a first iteration bodywork based on generic current trends and based on their knowledge and experience". I see no contradiction, however. It was perfectly clear that Mr Gascoyne wanted Mr Migeot's companies to produce a current design using their knowledge and experience. That went without saying. Even so, Mr Gascoyne may well have actually said something to Mr Migeot along those lines. It does not follow that there was any discussion between them about the aerodynamic design of the car.
Fourthly, counsel for Force India emphasised the time pressure that Lotus and Aerolab/FondTech were under. There is no dispute about this, and I think it does help to explain the short cuts taken by the Aerolab/FondTech CAD draftsmen, but it does not persuade me that there was any agreement between Mr Gascoyne and Mr Migeot of the kind alleged.
Fifthly, counsel for Force India relied upon the reaction of both Mr Migeot and Mr Gascoyne to the initial Lotus model and to the allegations of copying. I have already dealt with Mr Migeot's reaction. I will deal with Mr Gascoyne's below. Again, I do not find this evidence persuasive of any agreement to copy.
Finally, counsel for Force India suggested that Mr Gascoyne and Mr Migeot each had motives to make the agreement alleged. In the case of Mr Gascoyne, the suggested motive was the need to get a competitive car on to the track in a short time frame. In the case of Mr Migeot the suggested motive was financial. Again, I am unimpressed with these points. I have already dealt with Mr Gascoyne's supposed motivation above. As for Mr Migeot, the motivation advanced does not add up. Prior to July 2009, it was already envisaged that Litespeed/Lotus would engage FondTech to begin with and would engage Aerolab at the end of 2009. All that happened in July 2009 was that Aerolab's involvement was brought forward when Aerolab terminated the Development Contract. Why would Mr Migeot agree to copy for that? Furthermore, in the case of both men, the supposed motives are deeply implausible in the light of: (i) the fact that Force India had the worst-performing car in F1 in July 2009; (ii) the fact that (as I shall explain in more detail below) it is not possible to take parts of an aerodynamic package, apply them to a different car and obtain the same aerodynamic performance (let alone the same overall performance of the car); and (iii) the risks they would be running if they had made such an agreement given the severe penalties for misuse of confidential information in F1. It may also be asked why Aerolab and FondTech would agree to indemnify Lotus against Force India's claim (see paragraph 188 above) if Mr Gascoyne had suborned Mr Migeot as alleged.
The final nail in the coffin is the press release of 14 October 2009. If Mr Gascoyne had made the agreement with Mr Migeot alleged, why would he publicise his own wrongdoing in that way? As mentioned above, counsel for Force India tried to establish in cross-examination that the photographs had been incorporated into the press release without Mr Gascoyne's knowledge, but I do not accept that.
As for the similar fact evidence, which counsel for Force India relied upon as showing that Mr Gascoyne had a "relaxed" attitude to confidentiality, I agree with counsel for Mr Gascoyne that it has to be treated with some caution for the following reasons. None of the incidents relied on were pleaded. Only one of them was the subject of evidence from Force India's witnesses. Others were first mentioned in counsel's opening skeleton argument and one was first mentioned in cross-examination. In these circumstances Mr Gascoyne was deprived of the opportunity of obtaining evidence from other witnesses to deal with these allegations. Furthermore, a number of the allegations are based on reading disclosure documents in the worst possible light with respect to not only Mr Gascoyne, but also other persons, some of whom are not involved in this litigation and who have not had the opportunity to defend themselves against the charges made against them.
Five matters were relied on. The first concerns a discussion at the meeting between Force India and Aerolab at Silverstone in December 2006 (see paragraph 57 above). The meeting was attended by Mr Gascoyne, Mr Phillips, Mr Belcher, Mr Key, Mr Crosetta and Mr Neira. Aerolab had previously worked for Toyota while Mr Gascoyne was there. The evidence of Mr Phillips and Mr Belcher was that during the course of the meeting Mr Gascoyne asked Mr Crosetta and Mr Neira whether they had "the Toyota CAD data", and that they understood the purpose of the question was to see whether the data was available for use by Aerolab for Force India's benefit. Mr Crosetta and Mr Neira said that the data had been deleted. In cross-examination, Mr Phillips and Mr Belcher were uncertain in their recollection of the details of the meeting, which is not surprising given that it took place over five years ago, but were unshaken on the essential points. As I have already noted, Mr Key did not give evidence. Mr Gascoyne denied that he had suggested or implied use of the Toyota CAD data. Mr Crosetta and Mr Neira suggested for the first time in cross-examination, albeit in a rather confused manner, that the request had come from Mr Phillips and Mr Belcher. I have to say that I was unimpressed with the evidence of Mr Crosetta and Mr Neira on this point, but it does corroborate the evidence of Mr Phillips and Mr Belcher that the Toyota CAD data was discussed. I accept that Mr Phillips and Mr Belcher accurately recounted their recollection of the meeting, but their recollection does not unequivocally establish that Mr Gascoyne suggested or implied misuse of Toyota's confidential information. In this regard, it is notable that neither Mr Phillips nor Mr Belcher reported Mr Gascoyne's comment to Mr Gascoyne's superior Dr Kolles. It is possible that there was some misunderstanding, the significance of which has grown in Mr Phillips and Mr Belcher's minds in the intervening period.
Secondly, Force India relied upon an email from Mr Milne to Mr Gascoyne dated 16 December 2009 reporting a telephone conversation with James Manderson, a former Toyota employee whom Mr Gascoyne had offered a job as a CAD draftsman. The email includes the following passage:
"Assuming we can't persuade him to join Lotus long term, would you consider hiring him as a contractor for a week or two in the Cologne office in January. This would allow him (with a bit of guidance from me!) to put the Toyota 2010 diffuser into CAD and would be a big help for me going forward. As you've probably gathered from my last email, it is a very complex diffuser design, especially with regard to slots, shadowing, and the outboard diffuser treatment considerably more so than the 2009 designs we have already seen."
Mr Gascoyne's reply was "No problem to go for this".
Mr Milne's evidence was that what he was proposing was to ask Mr Manderson to draw a diffuser based on the Toyota 2010 diffuser design, but modified to suit the Lotus car. Counsel for Force India pointed out that at the date of this email the design of the Toyota 2010 diffuser was not yet in the public domain. As counsel for Mr Gascoyne submitted, however, that is beside the point. Mr Milne was entitled to use the skill, knowledge and experience he gained while employed by Toyota for the benefit of Lotus. In any event, all Mr Milne asked Mr Gascoyne to agree to was hiring Mr Manderson for a week or two. He did not ask Mr Gascoyne to agree to the misuse of Toyota confidential information, nor did Mr Gascoyne do so.
Thirdly, Force India relied upon communications between Mr Gascoyne and Marianne Hinson. She was Force India's Head of Aerodynamic Design until late October 2009, when she gave notice of resignation. She was held to her six month notice period and remained employed by Force India until 29 April 2010. Although a number of communications were relied on in opening, in closing counsel for Force India only pursued one. On 16 December 2009 Mr Crosetta sent Mr Gascoyne and others an email about Aerolab's aerodynamic development work which mentioned in passing using an aerobalance figure of 41%. The next day Mr Gascoyne replied saying "Talking to the guys and also Marianne the[y] both seem to think we should be targeting an aero balance of around 45%". Counsel for Force India submitted that this showed that Ms Hinson had disclosed Force India's aerobalance figure to Mr Gascoyne, and that that was confidential information. Different views were expressed by different witnesses as to whether F1 teams' aerobalance figures were confidential information. My conclusion is that the precise figure was confidential, but not a rough estimate. In any event, I am not persuaded that the email demonstrates that Ms Hinson disclosed the precise Force India figure to Mr Gascoyne. Rather, it appears that he asked her, Mr Milne and Mr Dodman to comment on the aerobalance figure that Aerolab was using, and that they responded by suggesting the rough figure that they considered Lotus should be aiming for based on their experience.
Fourthly, Force India relied upon an email from Mr Gascoyne to Shelley Satherley, his PA, dated 20 May 2009 asking her to send him a Force India spreadsheet "so that I can compare staffing levels in some departments". Ms Satherley duly sent him the document, which it appears that Mr Gascoyne had retained a copy of following his employment by Force India. Mr Gascoyne said that he didn't think this information was confidential. While it may be that strictly speaking retention of the document could be considered to be a misuse of confidential information, I do not accept that information regarding staffing levels is the kind of information the use of which an employer is entitled to prevent following the termination of an employee's employment.
Finally, Force India relied on Mr Gascoyne's email to Mr Fernandes dated 9 October 2009 (see paragraph 163 above). Both Mr Gascoyne and Mr Migeot denied that Mr Migeot had offered to provide to Litespeed any information confidential to Volkswagen, as opposed to expertise developed by Aerolab. I accept those denials.
I conclude that none of the similar fact allegations relied on by Force India is made out. In any event, even if they all had been established, they would at best be weak support for Force India's claim against Mr Gascoyne.
Force India's secondary case against Mr Gascoyne is based on the bare facts that (i) he agreed with Mr Migeot that Aerolab and FondTech would design and manufacture the initial Lotus model and (ii) in the event the design and manufacture of the initial Lotus model involved misuse of confidential information on the part of Aerolab and FondTech, even if Mr Gascoyne was unaware of that at the time. Counsel for Force India argued that, given that it is not necessary to show that an accessory knew that the acts of the principal amounted to a breach of confidence in order for the accessory to be jointly liable, then this was sufficient to render Mr Gascoyne jointly liable at least for FondTech's breach of its equitable obligation of confidence.
I do not accept this argument. When Mustill LJ said in Unilever v Gillette at 609 that "It is enough if the parties combine to secure the doing of acts which in the event prove to be infringement", he was speaking of the specific infringing acts. As counsel for Mr Gascoyne submitted, however, Mr Gascoyne combined with Aerolab and FondTech to secure the design of a half-sized model F1 racing car. He did not combine with them to secure the use of Force India CAD files for that purpose. The method by which Aerolab and FondTech created the design of the model was not the subject of any agreement by Mr Gascoyne and Mr Migeot. On the contrary, Mr Gascoyne relied on Aerolab and FondTech to use their own professional skill and knowledge.
Force India's tertiary case against Mr Gascoyne is that he turned a blind eye to misuse of confidential information by Aerolab and FondTech during the furore over the press release in mid October 2009. Counsel for Force India argued that, even if there was no prior agreement between Mr Gascoyne and Mr Migeot, the comments on the press release must have made Mr Gascoyne realise that there had been copying by Aerolab and FondTech, and yet he did nothing. In my judgment there are a number of flaws in this case.
First, I do not understand how Mr Gascoyne turning a blind eye to the situation in mid October 2009 can possibly make him jointly liable for acts of breach of confidence committed by Aerolab and FondTech prior to that date.
Secondly, Counsel for Force India argued that Mr Gascoyne had failed to put a stop to the continuing misuse of confidential information thereafter. On my findings above, however, there was relatively little continuing misuse of confidential information in relation to any of the aerodynamic parts. There was no reason for Mr Gascoyne to think that mechanical parts such as the spine had been copied. Counsel for Force India argued that one of the consequences of Mr Gascoyne's failure to act was that full-sized parts deriving from misuse of confidential information were manufactured in Germany and then installed on the actual Lotus car in the UK. Counsel for Force India accepted in opening, however, that it was not open to Force India to rely upon receipt of the full-sized parts by Lotus as constituting a misuse of confidential information, whether against Lotus or Mr Gascoyne, unless and until Force India applied to amend its Particulars of Claim to plead such a case; but no such application was ever made.
Thirdly, in any event, I do not accept that Mr Gascoyne turned a blind eye. Mr Gascoyne's evidence was that he himself did not notice any particular similarities between the initial Lotus model and the Force India car either when he received the photographs on 3 October 2009 or when he visited Aerolab on 7 October 2009. This is not surprising given that he had left Force India before serious development of the 2009 car had commenced and had had limited involvement in the aerodynamic design prior to that (as to which, see further below). By contrast, the people who did spot similarities were all very familiar with the aerodynamic design of the Force India car. Nor is it surprising that Mr Gascoyne should have attributed such limited similarities as he was aware of to the use by the designers of the experience they had gained working on the Force India car. There was no reason why Mr Gascoyne should have concluded that Aerolab and FondTech must have misused confidential information comprising the precise dimensions of the parts in issue.
Nor do I regard Mr Gascoyne's reaction to the comments elicited by the press release as in any way suspicious. It is clear that the main focus of concern at the time was the use of the Force India wheels. It is quite true that there were also questions about the similarities in the design, but the journalists appear to have been satisfied with the answers given by Mr Migeot through Mr Gascoyne. Counsel for Force India suggested that Mr Gascoyne's email to Mr Migeot dated 19 October 2009 was suspicious in that it did not ask Mr Migeot more vigorously for an explanation of the similarities. I do not agree with this. Nor, as I have already said, do I regard Mr Gascoyne's first email to Mr Balfe of the same date as suspicious. Furthermore, on 27 October 2009 Mr Gascoyne told Mr Fernandes and a key Lotus sponsor that he was "happy for any relevant authority to fully audit the team" to confirm that it had had no access to any information that could possibly infringe the IP rights of Force India (see paragraph 182 above). That is hardly the statement of a man turning a blind eye to misuse of Force India's confidential information. Still further, on 28 October 2009 Mr Migeot sent him further photographs of the model and authorised him to release these to the public (see paragraph 183 above). Mr Gascoyne's evidence was that this confirmed to him that nothing was an issue other than the use of the Force India wheels. I accept that evidence, which makes obvious sense.
Liability of Lotus for breach of confidence
Force India's claim against Lotus is wholly dependent on its claim against Mr Gascoyne. Counsel for Force India conceded that Force India had no claim against Lotus in respect of acts committed prior to 1 Malaysia and 1 Malaysia UK's respective dates of incorporation. The only pleaded case pursued against Lotus was that Mr Gascoyne should be treated as having acted on behalf of Lotus with effect from those dates, so that, if he was liable as an accessory, so too was Lotus going forward. Since I have rejected the claim against Mr Gascoyne, this claim also fails. Furthermore, as I have already observed, there was relatively little continuing misuse of confidential after those dates anyway.
The copyright claim
The only copyright claim still pursued by Force India is a claim against 1 Malaysia UK introduced by amendment during the trial. Even that claim appears to be a makeweight, since it was dealt with very briefly in counsel for Force India's written and oral closing submissions. Nor is any separate claim for damages advanced in reliance upon it. In those circumstances I shall dealt with it shortly.
The relevant facts are set out in paragraphs 197-198 above. Force India claims that each of its CAD files is a copyright work, that Aerolab and FondTech created CAD files which reproduced substantial parts of its CAD files and that 1 Malaysia UK made electronic copies of the Aerolab/FondTech CAD files in the UK, thereby infringing Force India's UK copyrights. There is no dispute as to subsistence and ownership of copyright in the Force India CAD files. There was some discussion as to whether these were artistic or literary works. In my view they comprise both.
This claim relates to the Aerolab/FondTech CAD files as at 14 December 2009 and 6 January 2010, and subsequent derivatives of those files made by 1 Malaysia UK. There is no dispute that by 14 December 2009 the design of quite a lot of the aerodynamic parts of the initial Lotus model had been changed. This claim therefore only covers those parts the design of which remained unchanged or had not been materially changed. I have identified these in paragraph 196 above.
Counsel for the Corporate Defendants submitted that Force India's evidence did not establish that the electronic copies complained of reproduced substantial parts of the relevant copyright works. While I agree that the evidence is not quite in the form one might expect to see in support of a copyright claim, I consider Mr Strevens' evidence is sufficient to enable me, taken in conjunction with other relevant evidence in the case, to make an assessment of this, since he made extensive comparisons between the Force India CAD files and the Aerolab/FondTech CAD files as at 19 January 2010.
In my judgment the Aerolab/FondTech CAD files do reproduce a substantial part of the corresponding Force India CAD files for the following parts: the vortex generator, rear brake duct lower element and rear view mirror. It follows that the copyright claim succeeds to that extent, but not otherwise.
Quantum: the law
It is very difficult to find a clear, accurate and comprehensive statement of the principles applicable to the assessment of damages or equitable compensation for breach of confidence. The case law is very confused, and none of the existing commentaries deal entirely satisfactorily with it.... I shall begin by sketching the contours of the problem, then examine the authorities, then draw some general conclusions and finally address a couple of specific issues which arise in this case.
Invasions of proprietary rights
The invasion of a proprietary right may cause the owner of the right no financial loss. Nevertheless, it has long been the law that the owner may claim damages in accordance with what the then Nicholls LJ in Stoke-on-Trent City Council v W & J Wass Ltd  1 WLR 1406 at 1416 conveniently labelled as "the user principle". As the by then Lord Nicholls of Birkenhead went on to explain in Attorney-General v Blake  1 AC 268 at 278F-279C:
"A trespasser who enters another's land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land. The same principle is applied where the wrong consists of use of another's land for depositing waste, or by using a path across the land or using passages in an underground mine. In this type of case the damages recoverable will be, in short, the price a reasonable person would pay for the right of user: see Whitwham v Westminster Brymbo Coal and Coke Co  2 Ch 538 , and the 'wayleave' cases such as Martin v Porter (1839) 5 M & W 351 and Jegon v Vivian (1871) LR 6 ChApp 742 . A more recent example was the non-removal of a floating dock, in Penarth Dock Engineering Co Ltd v Pounds  1 Lloyd's Rep 359.
The same principle is applied to the wrongful detention of goods. An instance is the much cited decision of the Court of Appeal in Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd  2 QB 246, concerning portable switchboards. But the principle has a distinguished ancestry. The Earl of Halsbury LC famously asked in The Mediana  AC 113, 117, that if a person took away a chair from his room and kept it for 12 months, could anybody say you had a right to diminish the damages by showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room? To the same effect was Lord Shaw's telling example in Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson (1914) 31 RPC 104, 119. It bears repetition:
'If A, being a liveryman, keeps his horse standing idle in the stable, and B, against his wish or without his knowledge, rides or drives it out, it is no answer to A for B to say: "Against what loss do you want to be restored? I restore the horse. There is no loss. The horse is none the worse; it is the better for the exercise."'
Lord Shaw prefaced this observation with a statement of general principle:
Confidential information is not property, however, even though businessmen often deal with confidential information as if it were property and judges often use the language of property when discussing breach of confidence: see Jefferys v Boosey (1854) 4 HLC 814 at 966 (Lord Brougham); E.I. Du Pont de Nemours Powder Co v Masland (1917) 244 US 100 at 102 (Holmes J, US Supreme Court); Federal Commissioner of Taxation v United Aircraft Corp (1943-44) 68 CLR 525 at 534 (Latham CJ, High Court of Australia); Nicrotherm Electrical Co Ltd v Percy  RPC 207 at 209 (Lord Evershed MR, with whom Hodson and Romer LJJ agreed); Boardman v Phipps  2 AC 46 at 89G-90A (Viscount Dilhorne), 102G (Lord Cohen) and 127F-128A (Lord Upjohn); Fraser v Evans  1 QB 349 at 361 (Lord Denning MR); Moorgate Tobacco Co Ltd v Philip Morris Ltd  RPC 219 at 234 (Deane J, with whom the other members of the High Court of Australia agreed); Cadbury Schweppes Inc v FBI Foods Ltd  FSR 691 at - (Binnie J delivering the judgment of the Supreme Court of Canada); Douglas v Hello! Ltd (No 3)  EWCA Civ 595,  QB 125 at - (Lord Phillips of Worth Matravers MR delivering the judgment of the Court of Appeal) and  UKHL 21,  1 AC 1 at  (Lord Walker of Gestingthorpe); and Coogan v News Group Newspapers Ltd  EWCA Civ 48 at  (Lord Neuberger of Abbotsbury MR, with whom Lord Judge CJ and Maurice Kay LJ agreed). (It may be noted that Rix LJ's statement in Veolia ES Nottinghamshire Ltd v Nottinghamshire County Council  EWCA Civ 1214,  Env LR 12 at  that "confidential information is a well recognised species of property" was made without reference to any of these authorities, although Coogan v News Group was of course decided later.) It follows that the user principle is not directly applicable to claims for breach of confidence. Although proprietary remedies have sometimes been granted in breach of confidence cases, these have been based not purely upon breach of confidence, but upon breach of a fiduciary duty, as for example in Boardman v Phipps.
'wherever an abstraction or invasion of property has occurred, then, unless such abstraction or invasion were to be sanctioned by law, the law ought to yield a recompense under the category or principle ... either of price or of hire.'"
Intellectual property claims
Although confidential information is not property, intellectual property lawyers treat breach of confidence as a branch of intellectual property law. This is partly for the practical reason that, commercially, confidential information is often dealt with as if it were intellectual property (for example, know-how is often licensed together with patents). It is also partly for the doctrinal reason that in commercial contexts breach of confidence is a form of unfair competition, and in that sense akin to infringement of an intellectual property right. Indeed, breach of confidence claims are often combined with claims for copyright infringement, database right infringement and so on.
Whether confidential information truly counts as intellectual property depends on the context. In Coogan v News Group, the Court of Appeal held that confidential information was intellectual property for the purposes of section 72 of the Senior Courts Act 1981. On the other hand, it seems reasonably plain that breach of confidence does not constitute "an infringement of an intellectual property right" for the purposes of Article 8 of European Parliament and Council Regulation 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations ("the Rome II Directive"). Most relevantly for present purposes, in Vestergaard v Bestnet  EWCA Civ 424 Jacob LJ recorded at  that "It is accepted that a claim for misuse of technical trade secrets such as the present is a claim to enforce an intellectual property right" for the purposes of Article 3(2) of European Parliament and Council Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights ("the Enforcement Directive"). This was also common ground between counsel in the present case. Even if confidential information is not strictly intellectual property, however, the close analogy between the two suggests that principles developed in the context of intellectual property law may have application in the field of breach of confidence.
In claims for patent infringement, which are statutory torts concerned with the invasion of a proprietary monopoly right, the approach to the assessment of damages is well established. As Lord Wilberforce explained in General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd (No 2)  1 WLR 819 at 824-827, there are three main types of cases. First, if the patentee exploits the patent in suit by manufacturing and selling products for profit, and he can prove that his profits have been diminished as a result of the infringement, then he can recover his loss of profit. Secondly, if the patentee exploits the patent by granting licences to others either for a lump sum or a running royalty, and he can prove that he has lost the opportunity of granting a licence, he can recover his lost licence revenue. Thirdly, if the patentee cannot establish loss in either of these ways, he may claim damages assessed as a reasonable royalty for the infringing acts. As Nicholls LJ in Stoke-on-Trent v Wass and Lord Nicholls in Attorney-General v Blake pointed out, this is an application of the user principle.
The correct approach to the third type of case was described by Lord Wilberforce in General Tire v Firestone at 826-827 and 833 as follows:
"In such cases it is for the plaintiff to adduce evidence which will guide the court. This evidence may consist of the practice, as regards royalty, in the relevant trade or in analogous trades; perhaps of expert opinion expressed in publications or in the witness box; possibly of the profitability of the invention; and of any other factor on which the judge can decide the measure of loss. Since evidence of this kind is in its nature general and also probably hypothetical, it is unlikely to be of relevance, or if relevant of weight, in the face of the more concrete and direct type of evidence referred to under 2. But there is no rule of law which prevents the court, even when it has evidence of licensing practice, from taking these more general considerations into account. The ultimate process is one of judicial estimation of the available indications. The true principle, which covers both cases when there have been licences and those where there have not, remains that stated by Fletcher Moulton L.J. in Meters Ltd. v. Metropolitan Gas Meters Ltd. (1911) 28 R.P.C. 157, 164165: though so often referred to it always bears recitation.
'There is one case in which I think the manner of assessing damages in the case of sales of infringing articles has almost become a rule of law, and that is where the patentee grants permission to make the infringing article at a fixed price in other words, where he grants licences at a certain figure. Every one of the infringing articles might then have been rendered a non-infringing article by applying for and getting that permission. The court then takes the number of infringing articles, and multiplies that by the sum that would have had to be paid in order to make the manufacture of that article lawful, and that is the measure of the damage that has been done by the infringement. The existence of such a rule shows that the courts consider that every single one of the infringements was a wrong, and that it is fair where the facts of the case allow the court to get at the damages in that way to allow pecuniary damages in respect of every one of them. I am inclined to think that the court might in some cases, where there did not exist a quoted figure for a licence, estimate the damages in a way closely analogous to this. It is the duty of the defendant to respect the monopoly rights of the plaintiff. The reward to a patentee for his invention is that he shall have the exclusive right to use the invention, and if you want to use it your duty is to obtain his permission. I am inclined to think that it would be right for the court to consider what would have been the price which although no price was actually quoted could have reasonably been charged for that permission, and estimate the damage in that way. Indeed, I think that in many cases that would be the safest and best way to arrive at a sound conclusion as to the proper figure. But I am not going to say a word which will tie down future judges and prevent them from exercising their judgment, as best they can in all the circumstances of the case, so as to arrive at that which the plaintiff has lost by reason of the defendant doing certain acts wrongfully instead of either abstaining from doing them, or getting permission to do them rightfully.'
A proper application of this passage, taken in its entirety, requires the judge assessing damages to take into account any licences actually granted and the rates of royalty fixed by them, to estimate their relevance and comparability, to apply them so far he can to the bargain hypothetically to be made between the patentee and the infringer and to the extent to which they do not provide a figure on which the damage can be measured to consider any other evidence, according to its relevance and weight, upon which he can fix a rate of royalty which would have been agreed."
"The 'willing licensor' and 'willing licensee' to which reference is often made (and I do not object to it so long as we do not import analogies from other fields) is always the actual licensor and the actual licensee who, one assumes, are each willing to negotiate with the other they bargain as they are, with their strengths and weaknesses, in the market as it exists. It is one thing (and legitimate) to say of a particular bargain that it was not comparable or made in comparable circumstances with the bargain which the court is endeavouring to assume, so as, for example, to reject as comparable a bargain made in settlement of litigation. It is quite another thing to reject matters (other than any doubt as to the validity of the patent itself) of which either side, or both sides, would necessarily and relevantly take account when seeking agreement."
Breach of a contractual obligation of confidentiality
Where the obligation of confidentiality that has been breached by the defendant is a contractual one, the obvious starting point is the proposition that the claimant is entitled to damages assessed on the normal contractual measure, that is to say, compensation for the loss of his bargain. Thus the claimant can recover such sum as will put him in the position that he would have been if the contract had been performed. In a breach of confidence case, that means the position the claimant would have been in if the information had not been misused.
One can envisage three main types of case. The first is where the claimant exploits the confidential information by manufacturing and selling products for profit (for example, where the confidential information consists of a formula or recipe for the product or where the confidential information consists of a process for the manufacture of the product). If he can prove that his profits have been diminished as a result of the breach, then he can recover his loss of profit. The second is where the claimant exploits the confidential information by granting licences to others either for a lump sum or a running royalty. If he can prove that he has lost the opportunity of granting a licence, he can recover his lost licence revenue. A variant of the second type of case is where the claimant would have "sold" the confidential information (i.e. assigned the contractual right to the obligation of confidence) rather than granting a licence, and has lost the sale. In such a case, he can recover the market value of the information. The third main type of case is where the claimant cannot prove he has suffered financial loss in any of these ways.
In the third type of case, the user principle is not directly applicable for the reason given above. In recent years, however, the law has come to recognise that the problem posed by situations in which the claimant cannot prove orthodox financial loss as a result of the breach of a negative contractual term (i.e. a term that restricts the defendant's activities in some way) can be addressed by the award of what have variously been referred to "Wrotham Park damages", "gain-based damages" and "negotiating damages". (I prefer the last of these terms. It is not necessarily the case that such damages are based on the defendant's gain from the breach.) These are damages assessed as the price which the defendant could reasonably have demanded as the price for agreeing to relax the contractual restriction in question.
As Lord Nicholls explained in Attorney-General v Blake at 282H-283B and 283H-284A:
"An instance of this nature occurred in Wrotham Park Estate Co Ltd v Parkside Homes Ltd  1 WLR 798. For social and economic reasons the court refused to make a mandatory order for the demolition of houses built on land burdened with a restrictive covenant. Instead, Brightman J made an award of damages under the jurisdiction which originated with Lord Cairns's Act. The existence of the new houses did not diminish the value of the benefited land by one farthing. The judge considered that if the plaintiffs were given a nominal sum, or no sum, justice would manifestly not have been done. He assessed the damages at 5% of the developer's anticipated profit, this being the amount of money which could reasonably have been demanded for a relaxation of the covenant.
In reaching his conclusion the judge applied by analogy the cases mentioned above concerning the assessment of damages when a defendant has invaded another's property rights but without diminishing the value of the property. I consider he was right to do so."
"The Wrotham Park case, therefore, still shines, rather as a solitary beacon, showing that in contract as well as tort damages are not always narrowly confined to recoupment of financial loss. In a suitable case damages for breach of contract may be measured by the benefit gained by the wrongdoer from the breach. The defendant must make a reasonable payment in respect of the benefit he has gained."
In that case, the House of Lords went a step further and made an order for an account of profits in respect of Blake's breach of contract (i.e. a truly restitutionary remedy). Negotiating damages have been awarded in a number of subsequent cases, however, notably Experience Hendrix LLC v PPX Enterprises Inc  EWCA Civ 323,  EMLR 25, WWF-World Wide Fund for Nature v World Wrestling Federation Entertainment Inc  EWCA Civ 286,  1 WLR 445, Lunn Poly Ltd v Liverpool & Lancashire Properties Ltd  EWCA Civ 430,  L&TR 6 and Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd  UKPC 45,  1 WLR 2370.
These cases establish the following principles for the assessment of such damages:
i) The overriding principle is that the damages are compensatory: see Attorney-General v Blake at 298 (Lord Hobhouse of Woodborough, dissenting but not on this point), Hendrix v PPX at  (Mance LJ, as he then was) and WWF v World Wrestling at  (Chadwick LJ).
It was common ground between counsel before me that negotiating damages may be awarded for breach of a contractual obligation of confidence.
ii) The primary basis for the assessment is to consider what sum would have arrived at in negotiations between the parties, had each been making reasonable use of their respective bargaining positions, bearing in mind the information available to the parties and the commercial context at the time that notional negotiation should have taken place: see PPX v Hendrix at , WWF v World Wrestling at , Lunn v Liverpool at  and Pell v Bow at -,  (Lord Walker of Gestingthorpe).
iii) The fact that one or both parties would not in practice have agreed to make a deal is irrelevant: see Pell v Bow at .
iv) As a general rule, the assessment is to be made as at the date of the breach: see Lunn Poly at  and Pell v Bow at .
v) Where there has been nothing like an actual negotiation between the parties, it is reasonable for the court to look at the eventual outcome and to consider whether or not that is a useful guide to what the parties would have thought at the time of their hypothetical bargain: see Pell v Bow at .
vi) The court can take into account other relevant factors, and in particular delay on the part of the claimant in asserting its rights: see Pell v Bow at .
Breach of an equitable obligation of confidence
What if the equitable obligation which has been breached is not contractual, but equitable? In this situation, the first problem is to identify the basis upon which the court is empowered to award financial compensation at all. Ex hypothesi, no contract has been broken. Nor has any tort been committed, since breach of confidence is not strictly speaking a tort: see in particular Kitechnology BV v Unicor GmbH Plastmachinen  FSR 766 at 777-778, where the Court of Appeal held that claims for breach of an equitable obligation of confidence did not arise in tort as a matter of English law in the context of considering whether they fell within Article 5(3) of the Brussels Convention. (Subsequently, the House of Lords held in Kleinwort Benson Ltd v Glasgow City Council  1 AC 153 that Article 5(3) did not extend to a claim for restitution. The proposition that breach of an equitable obligation of confidence does not constitute a tort at least for private international law purposes is now supported by Article 6 of the Rome II Directive, which contains a specific choice of law rule for "a non-contractual obligation arising out of an act of unfair competition" that differs from the general rule applicable to a tort/delict in Article 4, read together with Article 39 of TRIPS, which requires WTO Member States to protect undisclosed information "in the course of ensuring effective protection against unfair competition". See also Douglas v Hello! (No 3)  QB 125 at .)
It is often said that damages may be awarded by virtue of the jurisdiction originally conferred by section 2 of the Chancery Amendment Act 1858, commonly known as Lord Cairns' Act, and now contained in section 50 of the Senior Courts Act 1981. Lord Cairns' Act provided that "in all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction
against the commission or continuance of any wrongful act
it shall be lawful for the same Court, if it thinks fit, to award damages to the party injured, either in addition or in substitution for such injunction
". There are two problems with this, however.
The first is that it has been argued with some force that Lord Cairns' Act does not apply to a breach of a purely equitable obligation such as a duty of confidence: see Meagher, Gummow & Lehane, Equity: Doctrines and Remedies (4th ed) at 23-010, 23-105 and 41-135. On the other hand, there is a line of authority, including Saltman v Campbell at 219 (unattributed), Nichrotherm v Percy at 213 (Lord Evershed MR), Malone v Metropolitan Police Commissioner  Ch 344 at 360B (Sir Robert Megarry V-C), Talbot v General Television Corporation Pty Ltd  RPC 1 at 19 (Harris J) and 21-22 (Marks J) and Spycatcher at 286E (Lord Goff of Chieveley), in which it has been expressly stated to apply to claims for breach of an equitable duty of confidence.
The second problem is that, as Sir Robert Megarry V-C pointed out in Malone v Metropolitan Police Commissioner at 360B:
"Under Lord Cairns' Act 1858 damages may be granted in substitution for an injunction; yet if there is no case for the grant of an injunction, as when the disclosure has already been made, the unsatisfactory result seems to be that no damages can be awarded under this head: see Proctor v. Bayley (1889) 42 Ch.D. 390. In such a case, where there is no breach of contract or other orthodox foundation for damages at common law, it seems doubtful whether there is any right to damages, as distinct from an account of profits."
On the other hand, the same problem has arisen in relation to negotiating damages for breach of contract, and in that context the balance of authority supports the view that the fact that there would be no case for an injunction does not preclude the award of damages under Lord Cairns' Act at least if the court would have had jurisdiction to grant an injunction at the date of the claim form: see Jaggard v Sawyer  1 WLR 269 at 285 (Millett LJ) and Pell v Bow at  (Lord Walker). (I note, however, that Lord Walker also cited in support of this proposition passages from Lord Nicholls in Attorney-General v Blake at 282 and Chadwick LJ in WWF v World Wrestling at , neither of which appear to me in fact to support it. Indeed, Chadwick LJ expressly said that the power to award such damages did not depend on Lord Cairns' Act, but existed at common law.)
Leaving aside Lord Cairns' Act, it has also been argued that, although damages are not available for breach of a purely equitable obligation such as a duty of confidence, the remedy of equitable compensation is available: see Meagher, Gummow & Lane at 23-010 and 41-135 and Toulson & Phipps, Confidentiality (2nd ed) at 2-083 to 2-088, relying upon cases such as Nocton v Lord Ashburton  AC 932. This was the solution adopted by the Supreme Court of Canada in Cadbury v FBI: see the judgment of Binnie J at -. On the other hand, as discussed below, there are a number of cases in this jurisdiction in which a remedy labelled "damages" has been awarded for breach of an equitable obligation of confidence.
As I said in Vestergaard v Bestnet (No 2) at , I am inclined to the view that Lord Cairns' Act does not apply, but that the remedy of equitable compensation is available. Either way, however, it seems clear that monetary relief can be awarded to a claimant who has suffered financial loss as a result of a defendant's breach of an equitable obligation of confidence. The key issue is whether damages or equitable compensation should be assessed on a different basis if the obligation which has been breached is equitable rather than contractual. In particular, should a different approach be taken in the third main type of case discussed above, where the claimant has suffered no financial loss?
As a matter of principle, it seems to me that there is no reason to apply a different approach and every reason to adopt the same approach. As Sales J observed in Vercoe v Rutland Fund Management Ltd  EWHC 424 (Ch),  BusLR D141 at :
"[The] reasoning [of Lord Nicholls in Attorney-General v Blake] at p. 285C-E, comparing remedies available in contract and for breach of confidence in relation to the same underlying facts, flows in both directions. It both opens up the possibility of an award of an account of profits in relation to breach of contract relating to confidential information and also opens up the possibility for a more principled debate about when an account of profits should be refused in relation to a breach of confidence, and a damages award (typically assessed by reference to a notional reasonable price to buy release from the claimant's rights, similar to the award made in Wrotham Park and Seager v Copydex) made instead. Both in cases of breach of contract and in cases of breach of confidence, the question (at a high level of generality) is, what is the just response to the wrong in question (cf Lord Nicholls at p. 284H, set out above)? In both cases, to adapt Lord Nicholls' formulation at p. 285A, the test is whether the claimant's interest in performance of the obligation in question (whether regarded as an equitable obligation or a contractual obligation) makes it just and equitable that the defendant should retain no benefit from his breach of that obligation. Again, I think that there is a broad parallel with the way in which the courts will, as in Ruxley Electronics and Construction Ltd v Forsyth  AC 344, control the amount of damages to be awarded in a contract case by reference to the strength of the claimant's interest in performance of a contractual obligation, judged on an objective basis and weighing that against countervailing legitimate interests of the defendant, to ensure that the remedy awarded is not oppressive and is properly proportionate to the wrong done to the claimant."
Against this background, I must now turn to consider the principal authorities on damages or equitable compensation for breach of confidence.
In Seager v Copydex the Court of Appeal ordered that "damages be assessed in Chambers on the basis of reasonable compensation for the use of the confidential information given by the Plaintiff to the Defendants": see  RPC 250 at 251. (It is sometimes said that the Court of Appeal refused the plaintiff an account of profits, but this is incorrect. The plaintiff represented himself before the Court of Appeal and did not present any argument as to the appropriate remedy: see  RPC 250 at 254.)
Seager v Copydex Ltd (No 2)  1 WLR 809 (more fully reported at  RPC 250) concerned issues which arose between the parties on the subsequent inquiry as to damages as to the correct basis of assessment. Mr Seager contended that damages should be assessed on the basis that the alternative design had been patented by him and he had licensed Copydex to manufacture for a royalty of 12.5% of net selling price, that being the royalty it had offered him for the Klent. Copydex contended that damages should be assessed as the sum which it would have had to pay as reasonable remuneration to a consultant to provide the information it had obtained from Mr Seager on the basis inter alia that Copydex received no monopoly in the information. The parties applied to the Court of Appeal under a liberty to apply contained in the Court's previous order for a ruling. It emerged during the course of the hearing that Mr Seager was opposing Copydex's patent application on the ground that he was the true inventor, and was also reserving the right to contend that the patent if granted would be invalid (presumably over the Klent patent).
The leading judgment was given by Lord Denning MR. Concurring judgments were given by Salmon and Winn LJJ who essentially agreed with Lord Denning. It is unfortunately necessary to quote the greater part of Lord Denning's judgment at 813-814:
"Now a question has arisen as to the principles on which the damages are to be assessed. They are to be, assessed, as we said, at the value of the information which the defendants took. If I may use an analogy, it is like damages for conversion. Damages for conversion are the value of the goods. Once the damages are paid, the goods become the property of the defendant. A satisfied judgment in trover transfers the property in the goods. So here, once the damages are assessed and paid, the confidential information belongs to the defendants.
The difficulty is to assess the value of the information taken by the defendants. We have had a most helpful discussion about it. The value of the confidential information depends on the nature of it. If there was nothing very special about it, that is, if it involved no particular inventive step, but was the sort of information which could be obtained by employing any competent consultant, then the value of it was the fee which a consultant would charge for it: because in that case the defendants, by taking the information, would only have saved themselves the time and trouble of employing a consultant. But, on the other hand, if the information was something special, as, for instance, if it involved an inventive step or something so unusual that it could not be obtained by just going to a consultant, then the value of it is much higher. It is not merely a consultant's fee, but the price which a willing buyer desirous of obtaining it would pay for it. It is the value as between a willing seller and a willing buyer. In this case Mr. Seager says the information was very special. People had been trying for years to get a carpet grip and then he hit upon this idea of a dome-shaped prong. It was, he said, an inventive step. And he is supported in this issue by the fact that the defendants themselves have applied for a patent for it. Furthermore, if he is to be regarded as a seller, it must be remembered that he had a patent for another carpet grip called Klent: and, if he was selling the confidential information (which I will call the Invisigrip information), then the sales of Klent might be adversely affected. The sales of the Klent would be reduced owing to the competition of the Invisigrip. So he would ask for a higher price for the confidential information in order to compensate him for the reduction in the Klent.
In these circumstances, if Mr. Seager is right in saying that the confidential information was very special indeed, then it may well be right for the value to be assessed on the footing that in the usual way it would be remunerated by a royalty. The court, of course, cannot give a royalty by way of damages. But it could give an equivalent by a calculation based on a capitalisation of a royalty. Thus it could arrive at a lump sum. Once a lump sum is assessed and paid, then the confidential information would belong to the defendants in the same way as if they had bought and paid for it by an agreement of sale. The property, so far as there is property in it, would vest in them. They would have the right to use that confidential information for the manufacture of carpet grips and selling of them. If it is patentable, they would be entitled to the benefit of the patent as if they had bought it. In other words, it would be regarded as a real outright purchase of the confidential information. The value should, therefore, be assessed on that basis: and damages awarded accordingly."
Lord Denning went on to say that the damages should be assessed by a patent judge who should hear the patent proceedings at the same time.
As a number of commentators have pointed out (see e.g. Meagher, Gummow & Lehane at 41-090 and Cornish, Llewelyn & Aplin, Intellectual Property; Patents, Copyright, Trade Marks and Allied Rights (7th ed) at 8-48), this reasoning is problematic. First, it assumes that damages can be awarded for breach of an equitable obligation of confidence. Secondly, as discussed above, confidential information is not property. Thirdly, there is no real analogy with conversion. If one must draw an analogy with torts to chattels, the correct analogy would be with detinue, as explained by Lord Nicholls in Attorney-General v Blake. Fourthly, it was not Mr Seager's case that he should be treated as having sold the confidential information to Copydex. On the contrary, it was his case that he should be entitled to the patent filed by Copydex and should be treated as having granted Copydex a licence. Fifthly, and most importantly for present purposes, although one can readily understand that "the value of the confidential information depends on the nature of it", it is not entirely clear why Lord Denning thought that this altered the basis of the assessment, depending on whether the information had "nothing very special about it" or was "something special, as for instance if it involved an inventive step". In the former case he says that damages should be assessed as "the fee a consultant would charge for it", whereas in the latter case he says it should be assessed as "the value as between a willing seller and willing buyer". Leaving aside the point that Mr Seager was not selling the information, why should not damages be assessed as the sum which would be negotiated between a willing licensor and a willing licensee in both cases?
In Dowson & Mason Ltd v Potter  1 WLR 1419 the plaintiff developed a new type of landing leg for articulated lorries. In breach of his duty of confidence as the plaintiff's employee, the first defendant disclosed to the second defendant information consisting of the names and addresses of the suppliers of the leg's component parts and the price which the plaintiffs had paid for them. The second defendant then started to compete with the plaintiff as manufacturers of the leg. The plaintiff brought proceedings for breach of confidence. By a consent order an inquiry was ordered as to the damages the plaintiff had sustained by reason of the first defendant's disclosure and the second defendant's use of the confidential information. Thus the case concerned breach of both a contractual obligation of confidence and an equitable obligation.
The defendants issued a summons seeking the court's determination of the proper basis for assessing the damages. The district registrar held that the proper basis for the assessment was the plaintiff's loss of profits resulting from the wrongful disclosure and use of the confidential information. The judge affirmed the district registrar's order. On appeal to the Court of Appeal, the defendants argued that the proper basis for the assessment of damages should be the value of the confidential information, assessed as between a willing buyer and a willing seller. In support of this argument, counsel for the defendants relied upon Seager v Copydex (No 2). The Court of Appeal unanimously rejected the argument.
All three members of the Court treated the principles laid down by Lord Wilberforce in General Tire v Firestone as applicable, in the words of Slade LJ at 1427, "mutatis mutandis, in cases where the complaint relates to a misuse of confidential information". They distinguished Seager v Copydex (No 2) from the instant case on grounds which were articulated by Slade LJ at 1426-1427 as follows:
"However, with all respect to [counsel for the defendants'] argument, it seems to me to overlook an essential difference between two different types of case. The first type of case, of which Seager v. Copydex Ltd. (No. 2) is a good example, is where the plaintiff would have had no intention of manufacturing the relevant articles himself, but would in any event at most merely have sought to exploit the relevant invention or information by licensing or otherwise permitting other people to use it in return for royalties. In such a case, as I see the position, no question of loss of manufacturing profit to the plaintiff would really arise. He would not have made any profits from the manufacture of the relevant articles, because he would not have manufactured them. In such a case, clearly the sensible, and perhaps the only, basis on which to compensate him for the defendant's wrongful activities is to do so by reference to the value of what the defendant took from him, as indeed was done in Seager v. Copydex Ltd. (No. 2) itself. The second class of case, however, is where the plaintiff is a manufacturer in a competing line of business. There, as I see it, different principles apply. In such a case, inevitably, if the defendant obtains and uses the confidential information in question, he will deprive the plaintiff by competition of manufacturing profits. Those profits will be a real item of loss which the plaintiff will have suffered."
The Court of Appeal also addressed obiter the last point raised in paragraph 399 above. Sir Edward Eveleigh said at 1423:
"The passage [in Lord Denning's judgment in Seager v Copydex (No 2)], when it refers to a higher price being obtainable when there is something special about the invention, is not, as I read it, drawing a distinction between the basis for assessment of damages in the case where the information is special and where the information is obtainable generally by the defendant's own efforts. What he was doing was showing the two different approaches to arriving at the actual value of the article. He was not differentiating between two different bases for the assessment of damages but, having decided that the base should be the value of the article, he was indicating that there were two possible values of that article and that where it was something special the result would lead to a higher value. That was not laying down any proposition of law; it was simply stating a matter of fact."
Both Stocker LJ (at 1425) and Slade LJ (at 1428) appear to have agreed with this.
In Universal Thermosensors Ltd v Hibben  1 WLR 840 at 846 the then Sir Donald Nicholls V-C suggested en passant that damages for breach of confidence could be awarded on the basis of the user principle which he had explained in Stoke-on-Trent v Wass even if the claimant had suffered no loss of profits. This suggestion is consistent with the approach of the Court of Appeal in Dowson & Mason v Potter, although the latter case was not cited.
In Indata Equipment Supplies Ltd v ACL Ltd  FSR 248 the plaintiff was an independent broker in the field of arranging finance for its clients, in particular for the acquisition of motor vehicles and computers. The defendant provided fleet vehicle management services including finance and a range of allied services. In a normal financing arrangement, the plaintiff would acquire equipment which it then sold on to a finance house which in turn would lease the equipment to the plaintiff's client. The plaintiff's commission on the transaction was the difference between the price at which it purchased the equipment from the supplier and the price at which it sold it on to the finance house. The plaintiff quoted for the provision of a fleet of Toyota cars to one of its clients, and at the same time contacted the defendant with a view to its financing the transaction. The plaintiff revealed to the defendant important information concerning its client, including its fleet car requirements and the price at which it was invoicing the cars to its client, thereby revealing what its commission on the deal was. At a meeting arranged between the plaintiff, its client and the defendant to finalise the deal, the defendant produced for the first time a new set of figures and schedules for repayment and revealed the size of the plaintiff's commission to its client. The purpose and result of this was to undermine the plaintiff's position with its client and to cut it out of the deal so that the defendant itself dealt directly with the plaintiff's client.
At the trial, the judge found that the defendant had acted in breach of a fiduciary duty to the plaintiff, that the defendant's disclosure of the plaintiff's profit margins to its client was in breach of an equitable obligation of confidence and that the defendant had unlawfully interfered with the contract between the plaintiff and its client. The judge ordered the defendant to pay the plaintiff £53,320 in damages. The defendant appealed. The Court of Appeal dismissed the appeal on liability, but allowed the appeal with respect to quantum for reasons which Otton LJ (with whom Simon Brown LJ agreed) encapsulated at 261 as follows:
"The judge appears to have awarded damages on a contractual basis, i.e. what Indata would have earned had ACL purchased the vehicles from it rather than from Toyota directly. In my view the correct measure of damages was undoubtedly on a tortious basis, i.e. such sum as would have put the plaintiff into the position it would have been had it not been for the tort, or breach of confidence."
He went on to hold that the correct measure of damages was that for loss of a chance, because it was not certain that the plaintiff would have successfully closed the deal.
No authorities on damages for breach of confidence are referred to in any of the judgments, and the decision of the Court of Appeal in Kitetechnology that breach of confidence was not a tort does not appear to have been drawn to the Court's attention. One way of rationalising the decision is to say that the plaintiff was entitled to damages for the tort of unlawful interference, and that the claim for breach of confidence did not entitle it to a greater measure of damages. But if one concentrates on the claim for breach of confidence, another way of looking at the case is that it was a variant of the first type of case discussed above, in that the plaintiff exploited the confidential information for profit, albeit not by manufacturing, and in the circumstances the correct measure of its loss of profit was that for loss of a chance. Similarly, in claims for patent infringement, it is legitimate to apply the estimate of a chance principle when deciding how many of the defendant's sales the patentee would have made but for the infringement: see Gerber Garment Technology Inc v Lectra Systems Ltd  RPC 443 at 459-460 (Staughton LJ).
The facts in Cadbury v FBI were a little complicated, but in essence the defendant's predecessor in business Caesar Canning was found to have misused confidential information relating to formulation and processing techniques for the production of a beverage comprising tomato juice and clam broth sold under the name Clamato by using the information to formulate a competitive tomato-juice drink called Ceasar Cocktail. Although the misuse occurred during the 12-month termination period of a contractual licence, there was no relevant contractual obligation of confidence and the defendant was held to have acted in breach of an equitable obligation. The trial judge found that as result of the misuse Caesar Canning had wrongfully obtained a 12 month "springboard" into the juice market. She also found that the information was "nothing very special", and accordingly awarded the claimant "head start damages" assessed as the amount it would have cost Caesar Canning to hire a consultant to assist with development of a new tomato-juice drink, applying Seager v Copydex (No 2). This was later quantified as just under C$30,000.
The Supreme Court upheld the findings that the misused information was "nothing very special" and had provided no more than a 12-month head start, but disagreed with the trial judge as to the correct measure of damages. As Binnie J explained:
I think, as stated, the Court of Appeal was correct to reject the trial judge's 'consulting fee' approach in this case. The award would not restore the respondents to the position they would have been in but for the breach. The respondents did not lose a consulting fee. They were not in that business.
91. This case is closer to Dowson & Mason Ltd v. Potter, above, where the plaintiff, as here, was a manufacturer, not a seller of information. In that case, the court affirmed the trial judge's view (at page 424) that:
the proper basis for the assessment of damages is the loss suffered by the plaintiffs according to their loss of profits resulting from the assumed wrongful disclosure and use of the confidential information
92. In my view, however, the British Columbia Court of Appeal erred in being prepared to assume, for purposes of achieving an equitable result, that if Caesar Cocktail had been kept off the market because of its unconscionable origins, the respondents would have filled the void with sales of Clamato juice. The respondents' damages, on this assumption, would be their lost profit on the assumed sales of Clamato juice. While this approach puts the focus where it belongs, on the financial position of the respondents, it makes a number of unjustified assumptions. There is as yet no precise evidence that the sales of Clamato juice were affected by the marketing of Caesar Cocktail, and if so to what extent.
Accordingly, the Court directed an assessment of the claimant's lost profits during the period of 12 months beginning with the end of the licence.
The background to Gorne v Scales  EWCA Civ 311 was the dissolution in May 1993 of a partnership at will between the claimant and the first two defendants called Seeds Direct which provided seed cleaning and dressing services and the formation of a new partnership between those defendants and the third defendant called TGS Seeds to carry on a similar business. One of the assets of Seeds Direct was a card index containing over 12 years' records of its and its predecessor in business' customers' names and addresses, the types and quantities of seeds that had been processed for them and the amounts charged to them. Shortly after terminating the Seeds Direct partnership, the first two defendants took the card index for use in the new business. They also acquired a computer containing some of Seeds Direct's business records. The trial judge held that the first and second defendants were liable for wrongful interference with the card index and misuse of the confidential information contained in the card index and computer, and directed an inquiry as to the damages suffered by the claimant.
On the inquiry it was common ground that the cards themselves and the information in the computer were of minimal value and that the claimant's loss was to be measured by reference to the value of her one third interest in the confidential information contained in the card index at the time when it was wrongfully removed from Seeds Direct. As Arden LJ explained in her dissenting judgment:
"39. The judge (Kevin Garnett QC) had found that the defendants had wrongfully interfered with confidential information belonging to Seeds Direct. In such a case, the usual measure of damages is that the defendant should compensate the claimant for the loss which he (the defendant) has caused him. So, if the claimant would have used the information himself to earn profits, the correct measure of damages is that the claimant should receive fair compensation for what he has lost (see for example Universal Thermosensors Ltd v Hibben  1 WLR 840). If, on the other hand, he would have licensed or sold the information to others, the correct measure of damages is the amount that he would have received if he had licensed or sold the information (Dowson & Mason v Potter  1 WLR 1419).
42. Because Seeds Direct was a partnership and the partnership was dissolved on 17 May 1993, the effect of section 39 [of the Partnership Act 1890] is that what Mrs Gorne lost by the wrongful acts of the other partners in taking the card index for themselves was the right to have that card index sold and the proceeds applied in accordance with that section. The court must proceed on the basis that if the wrongful interference had not occurred the other partners (if they wanted to continue using the index) would have had to purchase the share of Mrs Gorne at fair value and that if a sale to a third party had taken place this too would (unless the contrary had been shown) have been at fair value. In the instant case, the fair value would be the value as between a willing buyer and a willing seller.
The master assessed the damages in accordance with the methodology adopted by the claimant's expert witness Mr Land. Mr Land proceeded on the basis that the information in the card index represented the bulk of Seeds Direct's goodwill. He therefore calculated the value of the goodwill by valuing the business of Seeds Direct as a whole, and then deducting the value of its other assets. Since he did not regard Seeds Direct's accounts for the period to May 1993 as representative, he used TGS Seeds' accounts for the period to July 1994 on the footing that it was a continuation of the same business.
The Court of Appeal by a majority allowed the defendants' appeal on the ground that the master had been wrong to accept the method of valuing the card index put forward by Mr Land. Ward LJ identified the fundamental error made by the master as follows:
"74. It was
an assessment of damages not an account of the profits wrongfully made by the defendants through their misuse of the confidential information. The claimant could have claimed the latter relief but chose not to do so. This is important because there is a distinction between the two remedies and the focus here should have been on the damage suffered by the claimant as at May 1993, not on the profits made thereafter. The correct measure of damages in a case like this is the market value of the confidential information on a sale between a willing seller and a willing buyer: see Seager v Copydex (No. 2)  1 W.L.R. 809, 813 per Lord Denning M.R.
75. I regret to say that in my judgment the Master failed to heed this distinction and so he misdirected himself. He held in paragraph 4 of his judgment, with emphasis added by me:
'Essentially, as I assess it, I must on this inquiry direct myself as to the extent of the use of the confidential information (the index and the computer) and the consequence of the interference with the physical property in the index and against that assess any loss and damage suffered by Mrs Gorne."
Moore-Bick LJ and Ward LJ also held that Mr Land's methodology was flawed for two reasons. First, Mr Land had proceeded on the business that Seeds Direct was a stable business capable of being valued as a going concern by reference to TGS Seeds' figures, whereas in fact Seeds Direct's business had collapsed and TGS Seeds was a new business in a different position to Seeds Direct. Secondly and more fundamentally, Mr Land's method had wrongly involved hindsight. As Moore-Bick LJ explained:
This was wrong. The inquiry was not into the extent of the use of the information but as to what price that information would have realised if offered for sale in May 1993."
Anyone who was considering a purchase of the index [in May 1993] would have had to assess its value to him on the basis of the profits he expected to make from its use. To do that he would have had to look carefully at his existing business in order to decide to what extent access to the information it contained would enable him to increase his earnings. That would depend in part on whether he was already engaged in a similar business, whether he already held some of the information and whether he already had, or could acquire, the capacity to exploit it. An existing competitor might be prepared to buy the index to prevent its falling into other hands. A potential purchaser might well have wanted access to Seeds Direct's accounts in order to see what profits the business had generated in the past, but at that stage final accounts only existed for the first year's trading. At all events, the one thing he could not have known was how TGS or anyone else would actually be able to exploit the index in the future.
although the information contained in the index was undoubtedly an asset, it was an asset with a limited life since its value would be progressively eroded as more recent information became available over the course of a few seasons. That is something that might reduce its value to any potential purchaser, although if it enabled him to capture a significant share of the market at the outset, he might regard it as providing a longer term benefit.
21. In my view the exercise that a potential purchaser would have had to carry out in order to decide how much to pay for the card index in May 1993 is an exercise of a fundamentally different kind from that undertaken by Mr. Land who set out to value it as an asset forming part of a business that was a going concern. It would have been based on different information and would necessarily have involved a large element of judgment, even an element of speculation. Moreover, the inherent uncertainties would be likely to make him err on the side of caution. In my view it is an exercise that would have been likely to lead to a significantly different conclusion."
In Douglas v Hello! (No 3) Michael Douglas and Catherine Zeta-Jones granted the publisher of OK! magazine the exclusive right to publish photographs of their wedding and reception for a consideration of £1 million. Despite tight security, a paparazzo photographer managed to infiltrate the wedding and surreptitiously take a number of photographs. Some of the unauthorised photographs were published in Hello! magazine, which had unsuccessfully bid for the right to publish the official photographs. The Douglases and the publisher of OK! succeeded in a claim for breach of an equitable duty of confidence against the publisher of Hello!. On an inquiry as to damages Lindsay J awarded the Douglases £3,750 each for distress and £7,000 for the cost and inconvenience of having to rush the selection of the official photographs. He declined to award them a notional licence fee, but assessed the appropriate fee at £125,000 in case he was overturned on this point. He also awarded the publisher of OK! £1,026,706 for its loss of profit.
The Court of Appeal upheld the Douglases' claim for breach of confidence, but not that of the publisher of OK!. It dismissed the challenge to the judge's refusal to award the Douglases a notional licence fee for reasons which Lord Phillips expressed as follows:
"244. It is well established that damages in a case involving unauthorised use of, or unauthorised benefiting from, intellectual property and similar rights can be assessed in a number of different ways. In General Tire & Rubber Co v Firestone Tyre and Rubber Co Ltd  1 WLR 819, 824-827, Lord Wilberforce identified the normal categories at least in patent cases. They are the profit, or the royalty, which was or would have been achieved (e g where the defendant manufactures, or licences the manufacture of, goods covered by the patent), and the licence fee which would reasonably have been charged (e g where it is not possible to assess the level of profit). The present case is far from normal, and in our view none of these normal methods of assessment would be appropriate.
245. This is not a case where a profit was made by the defendant: bearing in mind the payment they made, £125,000, for the unauthorised photographs, Hello! actually made a loss on the whole exercise. This is not a case where a royalty, or its equivalent, would be appropriate, partly for the same reason, and partly because Hello! effected no licensing, or its equivalent, in relation to the use of the unauthorised photographs.
246. There are obvious problems with assessing the Douglases' damages on a notional licence fee basis. First, the whole basis of their (as opposed to OK!'s) complaint about Hello!'s publication of the unauthorised photographs is upset and affront at invasion of privacy, not loss of the opportunity to earn money. Indeed, they have already claimed and been paid, damages assessed on that former basis. That factor alone would not prevent an assessment on a notional licence fee basis, but it is not a good start. Secondly, the Douglases would never have agreed to any of the unauthorised photographs being published. The licence fee approach will normally involve a fictional negotiation, but the unreality of the fictional negotiation in this case is palpable.
247. Thirdly, and most importantly, having sold the exclusive right to publish photographs of the reception to OK!, the Douglases would not have been in a position to grant a licence to Hello!. In this connection, we do not consider that, in light of the terms of the OK! contract, especially clause 10, the Douglases could claim to be required to account for the notional licence fee to OK!. Accordingly, an award of a notional licence fee would involve the Douglases being unjustly enriched: they have already been paid £1m for the exclusive right to publish photographs of the reception. As was said in argument, they have thereby exhausted their relevant commercial interest."
This reasoning has been criticised by some commentators (see e.g. Employee Competition at 11.121 11.127). The fact that the defendant made no profit is irrelevant to a claim for damages or equitable compensation. Moreover, a notional licence would be assessed at the date of the misuse in the light of the profit or other advantage which might then reasonably have been expected to accrue to the defendant. The fact that the claim was, viewed from one perspective, for invasion of privacy is rather beside the point. Lindsay J approached the case as a claim for commercial breach of confidence, and he was surely right to do so given that the Douglases had sold the right to publish photographs of the wedding and that there was a claim (subsequently upheld by the House of Lords) by the publisher of OK! for loss of profits. To the extent that there was an inconsistency, the better approach would have been to award the notional licence fee instead of damages for distress. The fact that the Douglases would have refused to grant a licence would appear to be irrelevant. This is the position in many intellectual property cases, and claims for breach of contract, but it does not stop the courts awarding damages on the user principle or negotiating damages. (In this regard, it may be noted that neither Attorney-General v Blake nor Hendrix v PPX was cited in argument, although Wrotham Park v Parkside and Stoke-on-Trent v Wass were cited.) The same is true of the fact that the Douglases had granted OK! an exclusive licence. In patent cases both the patentee and his exclusive licensee can claim damages assessed on the user principle: see Morton-Norwich Products Ltd v Intercen Ltd  FSR 337. Furthermore, the Court of Appeal had already held (at -) that the exclusive licence did not cover the unauthorised photographs. In these circumstances it seems to me that the decision must be regarded as one on its own facts.
In Pell v Bow an oil company invited pre-qualification tenders for an oilfield development project. The claimant engineering company invested considerable time and money in formulating first stage proposals for the field and successfully achieved pre-qualification status. To take the project further it needed a partner with expertise in drilling oil wells and a source of finance. Consequently, it entered into negotiations with the defendants, a group of companies engaged in the oil industry and a company which was to provide the finance. The parties signed agreements by which the defendants agreed, inter alia, to work exclusively with the claimant on the oilfield, to keep all data and information received from the claimant confidential and not to approach the oil company directly about the oilfield without the express written consent of the claimant. In March 1997 the claimant entered into a conditional contract with the oil company. As time went on and delays occurred, however, the oil company became increasingly dissatisfied with the claimant and the defendants began to have doubts about the joint venture. The defendants, therefore, began discussions with the claimant about a possible buy-out of the claimant's interest in the project. As negotiations continued the defendants made direct contact with the oil company. By 1 July 1997 the defendants were offering the claimant US$7.5m together with a further US$2.5m if the project was extended to include a submarine pipeline. That was less than the claimant was willing to accept so no buy-out agreement was ever concluded. On 28 July 1997 the oil company lost patience with the claimant and entered into a contract with the defendants for development of the oilfield on essentially the same terms as those of the conditional contract of March 1997, with essentially the same master development plan annexed to it. The contract proved much less profitable than the defendants had hoped when they entered into it and they ultimately made only between US$1m and US$1.8m profit. The claimant brought proceedings against the defendants in Jersey in 2004 alleging conspiracy, deceit, inducing breach of contract and breach of confidence.
The Royal Court rejected all the claims save for breach of confidence, and awarded the claimant £500,000 damages. The Court of Appeal of Jersey held that the defendants had acted in breach of the express terms of the agreements as well as being in breach of an equitable obligation of confidence, but did not alter the award of £500,000 damages. The Privy Council allowed the claimant's appeal to extent of increasing the damages to $2.5 million, applying the principles I have summarised above. This was based very largely on the sums under discussion between the parties in July 1997, moderated in view of the claimant's delay in bringing proceedings. It should be noted that this award primarily reflected the defendants' breach of the exclusivity provisions of the agreements. In any event, to the extent that it was awarded for breach of confidence, it was based on breach of a contractual obligation of confidentiality.
In Vercoe v Rutland the claimants brought proceedings in respect of a management buy-in transaction in relation to a company ("H&T"), which carried on business as a pawnbroker. They identified an attractive opportunity to purchase H&T and originally proposed that they should be part of the new management of H&T after its acquisition by a venture capital company. They also realised that, if H&T could be acquired, it might be possible to acquire another company ("SP") at the same time. They marketed the management buy-in opportunity to a range of venture capital companies, and chose the first defendant as their preferred potential acquirer of H&T and SP. Although the first defendant, together with the second to sixth defendants, did go on to acquire H&T and SP, and to make substantial profits when they later floated H&T and sold SP on, the claimants did not participate in that transaction. The claimants contended that the first defendant had proceeded unlawfully without including them and that the second to sixth defendants had wrongfully profited from the first defendant's exploitation of the business opportunity which the claimants had identified, and should account to the claimants for such profits. The claims were put forward on three bases: (i) breach of written confidentiality agreements; (ii) breach of an equitable obligation of confidence in relation to confidential information regarding both the identification of H&T and SP as an attractive acquisition target and how their business might be developed after acquisition to increase their profitability and the value of shares in them; and (iii) breach of fiduciary duty.
Sales J held that the first defendant had acted in breach of two agreements and that the defendants had acted in breach of equitable obligations of confidence, but dismissed the claim for breach of fiduciary duty. He declined to exercise his discretion to order an account of profits whether for breach of contract or equitable breach of confidence. Instead, applying Pell v Bow, he awarded damages assessed by reference to the notional reasonable price which the defendants should have paid to buy release from the rights of each of the first two claimants under the contracts and in respect of the relevant confidential information, so as to enable the defendants to proceed with the acquisition of H & T without involving the claimants. He also found that the information was "something special", and not information which a consultant could have provided, and so a quantum meruit assessed by reference to the fee that a consultant might have charged was not appropriate. He concluded that the damages were to be assessed on the basis that the second claimant's rights would have been bought out in return for a grant of rights equivalent to 2.5% of the equity in the target companies and that the first claimant's rights would have been bought out in return for a grant of rights equivalent to 5% of the equity in the target companies.
In JN Dairies Ltd v Johal Dairies Ltd  EWHC 1689 (Ch) the claimant and the first defendant were competing dairy companies. The claimant had established that the defendant were liable for breach of confidence. The second defendant, a former employee of the claimant, had stolen confidential information in the form of invoices showing customer names and addresses, and the first defendant had used the information to compete with the claimant. The claimant claimed damages assessed on the basis of the market value of the information that had been taken as between a willing seller and a willing buyer. The defendants applied to strike out the particulars of loss and damage or for summary judgment. The defendants argued that a calculation of loss based on the market value of the information was available only where a claimant would have sold or licensed the information rather than used it itself, relying on Dowson & Mason v Potter and Gorne v Scales, and that that was not the position in the instant case. The claimant argued that damages could be assessed on the basis of the market value of the information, or at least a notional royalty or lump sum for the use of the information, in any case where the extent of the claimant's loss could not be fairly measured by such direct loss as he could prove, relying on General Tire v Firestone and Universal Thermosensors v Hibben. HHJ Cooke sitting as High Court Judge held that the claimant's case was arguable and declined to strike it out or grant summary judgment.
Jones v IOS (RUK) Ltd  EWHC 348 (Ch) concerned a claim for breach of a written confidentiality agreement between a supplier of multifunctional photocopying, printing and scanning devices and an intermediary between the supplier and ultimate customers. HHJ Judge Hodge QC sitting as a High Court Judge rejected the claimant's claim that the defendant has misused the claimant's confidential information (strictly speaking, the confidential information of his predecessor in title), although he found that there had been a couple of disclosures which were technically in breach of the agreement. He nevertheless went on to consider the claimant's claim for damages on the hypothesis that there had been misuse. In this context he considered the claimant for Wrotham Park or negotiating damages at -. In the result he concluded that no damages should be awarded. The only point which I consider it necessary to note for present purposes is the point the judge made at :
"Mr Vanhegan submits that it is immaterial whether RIA in fact used all of the confidential information which was disclosed to it; what is material is the nature and extent of the wrongful disclosure. I prefer Mr Hollander's competing submission that the court must assess the appropriate fee for a licence (1) to use that part of the information which the party subject to the restraint wishes to use, and (2) for the purposes for which he wishes to use it. The touchstone of an award of Wrotham Park damages is justice. Mr Vanhegan's submission is potentially unjust because it might over-compensate the claimant, resulting in a windfall award of damages. In any event, an appropriate licence fee should fall to be determined by reference to the use which is sought to be made of the confidential information, since therein lies its value."
I conclude there is nothing in the authorities which prevents me from adopting the approach which, as a matter of principle, I consider to be correct. The same approach is to be adopted to the assessment of damages or equitable compensation whether the obligation of confidentiality which has been breached is contractual or equitable. Where the claimant exploits the confidential information by manufacturing and selling products for profit, and his profits have been diminished as a result of the breach, then he can recover his loss of profit. Where the claimant exploits the confidential information by granting licences to others, and his licence revenue has been diminished as a result of the breach, he can recover the lost revenue. Where the claimant would have "sold" the confidential information but for the breach, he can recover the market value of the information as between a willing seller and a willing buyer. Where the claimant cannot prove he has suffered financial loss in any of these ways, he can recover such sum as would be negotiated between a willing licensor and a willing licensee acting reasonably as at the date of the breach for permission to use the confidential information which has been misused in the manner in which the defendant has used it. Finally, I should add that in my judgment this approach is consistent with Article 13 of the Enforcement Directive.
This leaves two specific issues to be resolved. Counsel for Force India relied upon the principle stated by Lord Macnaghten in the context of patent infringement in United Horse Shoe & Nail Co Ltd v Stewart (1888) 5 RPC 260 at 268:
"The decision in the patent action and the minute of admission in the present case establish beyond question that in selling the 'Shoe' brand nails, the respondents infringed the appellants' rights. The sale of each and all of those nails was unlawful. It appears to be beside the mark to say that the respondents might have arrived at the same result by lawful means, and that, without infringing the appellants' rights, they might have produced a nail which would have proved an equally dangerous rival of the 'Globe' nail. The sole question is, what was the loss sustained by the appellants by reason of the unlawful sale of the respondents' nails? The loss must be the natural and direct consequence of the respondents' acts."
This principle has been regularly applied in patent cases since then.
Counsel for the Corporate Defendants argued that this principle only applied to the first type of case identified by Lord Wilberforce in General Tire v Firestone, and not to the third type of case. More importantly, he submitted that, whatever might be the position with respect to patent infringement, the principle certainly did not apply to the third type of case in a breach of confidence claim. He argued that, as a matter of logic, in assessing the licence fee or royalty that would be negotiated between a willing licensor and willing licensee each making reasonable use of their respective bargaining positions, the availability or otherwise of the information from an alternative, lawful source was a highly material consideration. He further argued that, as a matter of authority, this analysis was supported by Seager v Copydex (No 2) and Dowson & Mason v Potter. Counsel for Force India had no convincing answer to this submission, and I accept it.
Counsel for the Corporate Defendants also submitted that, where the information is "nothing very special", then compensation should be assessed by reference to a consultant's fee as opposed to a reasonable licence fee or royalty. I do not accept this submission, which appears to me to be inconsistent with the submission I have just accepted and with Dowson & Mason v Potter. If the information could have been readily obtained by the defendant by employing a competent consultant at a fee of £x, then prima facie that would be the sum that would be agreed between a willing licensor and willing licensee. In other words, these are not two different measures. Rather, the consultant's fee is the key input into the assessment of a reasonable licence fee. By contrast, if the information was not readily available from another source, then the willing licensor and willing licensee would negotiate a higher fee or royalty. The more inaccessible the information, and thus the more difficult it would have been for the defendant to obtain it by lawful means, then the higher the fee that will be payable, other things being equal.
Quantum: the present case
Summary of the parties' positions
Force India originally claimed compensation of £15,255,583. After various amendments, the final figure claimed was £13,771,419. This figure was said to represent the cost to Force India of the design and development of Force India's model car for the 2009 F1 Championship from January 2008 to the end of July 2009, less 50% of the costs for April to July 2009 inclusive. The explanation for the deduction is that this represents an estimate of the costs of developing the front wing from the state in which it existed on the model at Aerolab (i.e. the design the CAD files for which Aerolab had access to) to the state in which it existed on the race car at the end of July 2009 (i.e. a design in respect of which Aerolab did not have access to the CAD files, because Force India had not sent them to Aerolab). This claim is based, of course, on the assumption that Force India succeeds in the entirety of its claim for breach of confidence.
Before proceeding further, I should record straightaway that Force India's evidence in support of the figure claimed was not satisfactory. Mrs Sweeney was aware that during 2008 Force India had two models under development, namely the 2008 model and the 2009 model. Correctly, she distinguished between individual costs of components and the like which were already broken down in the general ledger by season code, taking only the 2009 ones. When it came to general costs, however, she failed to take any account of the fact that there were two models in development throughout 2008. Although she accepted that this was a fundamental point, her only excuse seemed to be that it would have been difficult to allocate the costs between models. But she then accepted that she had done precisely that in the case of Mr Gascoyne's salary, splitting it 50/50 between each model.
Her approach to Mr Gascoyne's salary was equally unsatisfactory. It turned out that she had assumed that 100% of the time of the CTO (a substantial proportion of the overall claim) was spent on aerodynamics. Thus, she said, she had allocated 50% of his salary. This was unsupportable. Mr Gascoyne's evidence was that the true figure for his time on aerodynamics was likely to be something around 10-15% (so only 5-7.5% of his salary should have been taken). Even more concerningly, when Mr Clements came to give evidence, he said that in fact Mrs Sweeney had taken 75% of Gascoyne's total salary.
The Defendants contend that compensation should be assessed by calculating what it would have cost Aerolab and FondTech to engage additional aerodynamic engineers and draftsmen to design and draw the parts in respect of which misuse has been found. This figure may be calculated by multiplying the estimated number of man hours required by the hourly rates of suitable freelance engineers and draftsmen. The Defendants suggest a range of figures from 1,250 to 36,300 based on a number of different assumptions.
The date of the hypothetical negotiation
The Defendants contend that the date of the hypothetical negotiation is the beginning of August 2009, that being the date when any misuse of confidential information started. Force India contends that the parties would not have concluded a deal at that point, but rather would have postponed finalising the negotiation until 14 September 2009 when Lotus obtained its F1 entry. In support of this contention counsel for Force India argued that the value of the licence would only be clear once the parties knew whether or not Lotus had gained entry into F1.
In my judgment the Defendants are correct on this point. Prima facie the date of the negotiation is when the misuse of confidential information started. The parties are to be taken to know at that point what use the defendant is going to make of the confidential information. The misuse I have found largely took place in August 2009. Although some of that misuse continued after 14 September 2009, there was very little new misuse after 14 September 2009. Thus the majority of the misuse took place before Lotus had gained entry into F1, and would have to be paid for either way. Furthermore, as I shall discuss in more detail below, the purpose and effect of the misuse was to enable Aerolab and FondTech to arrive an initial model more quickly. It was always intended that the initial model would be the subject of extensive aerodynamic development from October 2009 to March 2010, and thus the design of the initial model was relatively unimportant. Still further, relatively little of the misused confidential information found its way into full-sized parts on the actual racing car. It follows that the value of the licence was not going to be significantly affected by whether or not Lotus achieved entry into F1.
The parties to the negotiation
The Defendants contend that the parties to the hypothetical negotiation would be Force India and Aerolab/FondTech, whereas Force India contends that the parties would be Force India and Lotus. In support of the latter contention, counsel for Force India argued that Aerolab and FondTech were designing and building the model on behalf of Lotus. As Mr Anderson put it, "I look at Aerolab as an extension of Lotus". Counsel also argued that, from Force India's point of view, it would be significant that one of its competitors would benefit from the licence.
In my judgment the parties to the hypothetical negotiation would be Force India and Aerolab/FondTech, since it is the latter that misused the confidential information. Lotus did not misuse the confidential information. Lotus neither instigated the misuse nor was it was aware of it at the time. Furthermore, the nature of the misuse was primarily Aerolab/FondTech CAD draftsmen taking a short cut. Still further, as I have pointed out, relatively little of the confidential information found its way into parts for the actual Lotus racing car. Thus the main beneficiaries of the misuse were Aerolab and FondTech rather than Lotus. On the other hand, I consider that, even on the footing that the negotiation was between Force India and Aerolab/FondTech, the fact that Aerolab/FondTech's client was a prospective competitor to Force India would be a relevant factor to take into account.
The subject matter of the negotiation
The Defendants contend that the subject matter of the negotiation would be the actual confidential information found to have been misused by Aerolab/FondTech. Force India contends that the subject matter would be the entire aerodynamic design of the Force India car. The basis for the latter contention is that Aerolab and FondTech had (almost) all of the aerodynamic design of the Force India car available to them to use as a reference, even if they only used a small proportion. I reject that contention, since it would mean that Aerolab/FondTech would pay the same licence fee regardless of the extent of the misuse. This is contrary to principle, authority and basic fairness.
The value of the confidential information
The key issue on quantum is the value of the confidential information misused by Aerolab and FondTech. Force India contends that information was of enormous value, whereas the Defendants contend that it was of slight value. Force India advanced three main arguments at trial in support of its contention that the information was of great value, which I shall consider in turn.
Aerodynamic system. Force India's first argument was that Aerolab/FondTech had reproduced the "aerodynamic system" of the Force India car. The suggestion was that Aerolab/FondTech had taken the designs of some key Force India parts and arranged them so as to take advantage of the same complex air flows as were experienced in the Force India model, and by extension in the Force India car itself. These air flows were said to be critical to the "success" of the Force India car. Particular attention was drawn to the front wing, the relationship between front wing and mid-section (bargeboard, chin fence and vortex generator) and the relationship between the components of the rear section (diffuser and rear wing).
Even leaving aside the fact that the Force India car was notably unsuccessful at the time, the evidence did not begin to support this argument. Mr Phillips' own evidence was that "the aerodynamic system of a car works as a whole, so it is unlikely that a part from one car will be aerodynamically compatible with another car". The evidence of Dr Hurst and Mr Dernie showed that, if anything, this was an understatement. As the experts agreed, the complex airflows achieved beneath, above and around a F1 car are dependent on the precise arrangement of the components in relation to each other and in relation to the road surface. They may also be affected by very small design changes, particularly of aerodynamic surfaces. When one compares the critical components in the initial Aerolab wind tunnel model with the Force India components relied on, Dr Hurst accepted that the aerodynamic system was quite different. Mr Dernie's evidence was very clear on this point.
Track validation. Force India's second argument was that part of the value of the confidential information lay in the fact that Force India's design had been demonstrated to be effective on the track under real racing conditions. This argument must fall with the previous one, since what is being tested on the track can only be the way the combination of parts work together as an aerodynamic system. If the aerodynamic system is not taken, then what has been taken has not been track validated. This is not the only flaw in the argument, however.
By definition, a track-validated design must be a design which has actually been raced on a track. In the present case, the combination of designs relied on by Force India had not been raced on a track at all. In particular, the mid-section parts (bargeboard, chin fence, vortex generator) had not been raced. Yet, as Mr Phillips said "for true track validation, it is important to get the configuration of the car on the track matching the configuration of the car in the tunnel." Furthermore, Mr Phillips also made it clear that "track validation" was not about simply racing a car round a track, but about the detailed data which was obtained from taking measurements from the car on the track. This data provides direction for future development of the car. But it is not alleged that Aerolab had access to such data, let alone misused it.
Stable baseline. Force India's third argument was that, by reproducing a design which was known to perform to a good level, Aerolab and FondTech started with a stable baseline, that is to say, a model to which they could confidently make changes, knowing that they could fall back on the initial model if those changes failed. Once again, this argument is entirely dependent on the taking of the "aerodynamic system". Given Dr Hurst's acceptance that the aerodynamic system of the Aerolab model was not merely different, but also unpredictably different from that of the Force India, it cannot be suggested that the information taken provided a "stable baseline". Indeed, Dr Hurst accepted that the initial wind tunnel model did not provide a "stable baseline". The "stable baseline" argument is also belied by the facts that the actual performance of the initial model was very poor, giving a level of downforce well below the target set by Mr Migeot, and that its performance was subsequently substantially improved by the extensive changes made during the wind tunnel programme.
For their part the Defendants rely upon four main arguments as showing the information taken was of little value. Again, I shall consider these in turn.
The poor aerodynamic performance of the Force India car. As discussed above, Force India was the least successful team in F1 in 2009. In the early part of the season the overall aerodynamic performance of the Force India car with the old front wing was notoriously bad. Even its own drivers were highly critical of the aerodynamics in public in the early part of the season. The Force India CAD data to which Aerolab had access did not include any of the changes made to the front wing since April 2009, and the front wing design was radically changed after that. The only success enjoyed by Force India came at the Spa Grand Prix, a low downforce circuit, at the end of August 2009 after Force India had introduced the new front wing design and a new double diffuser design. Neither of these are alleged to have been misused by Aerolab or FondTech. It also came after the date of the misuse of the confidential information in this case, and thus the date of the notional licence.
Mr Dernie's opinion, which he explained very clearly and cogently, was that, in aerodynamic terms, the information available to Aerolab at the end of July 2009 - let alone the lesser quantity of information that I have found Aerolab and FondTech actually misused - was quite simply worthless. Counsel for Force India submitted that Mr Dernie had wrongly viewed the matter from the perspective of Toyota, but I do not agree with this.
The nature and extent of the misuse. The Defendants contend that the breaches by Aerolab and FondTech were: (i) limited in number they used the precise dimensions of a few parts only; (ii) limited in time the shape and dimensions of most of the parts were rapidly changed in the course of testing to ones which are not complained of; and (iii) limited in purpose they were simply taking short-cuts in order to get something into the wind tunnel as soon as possible.
In my judgment these points are fully supported by the evidence and the findings I have made above. Although I have touched on it already, it is worth elaborating a little on the third point. As I have said, it is common ground that Aerolab and FondTech were under time pressure to produce the initial model. It is clear that the reason why short cuts were taken was to save time. But it is important to emphasise that in my judgment the evidence shows very clearly that Aerolab and FondTech's objective in saving time was simply to produce a model which could be subject to aerodynamic development in the Aerolab and FondTech wind tunnels. Thus what was important was to produce a starting configuration as quickly as possible, and not the precise design of the starting configuration.
The aerodynamic performance of the initial Lotus model. As I have already explained, the aerodynamic performance of the initial Lotus model was very poor. Dr Hurst accepted that the downforce figures Aerolab and FondTech obtained were no better that one would expect a competent aerodynamic team starting from scratch to obtain in October 2009. It follows that Aerolab and FondTech obtained no benefit from the misuse so far as the aerodynamic performance of the initial Lotus model is concerned.
The FMCG story. The Defendants contend that the FMCG story (see paragraphs 261-264 above) shows that even Force India placed little value upon the confidential information. As I have indicated, I think there is some force in this point; but I have not given it great weight.
The position of Force India as licensor
Force India contends that in the hypothetical negotiation a willing licensor in the position of Force India acting would reasonably seek a licence fee reflecting the development cost of its 2009 model, as explained above. Force India relies upon the evidence of Mr Anderson in support of this contention.
I have no hesitation in rejecting this approach, for a number of reasons. First, it depends on Force India's arguments as to aerodynamic system, track validation and stable baseline, all of which I have rejected.
Secondly, it emerged in cross-examination that Mr Anderson based his assessment on the assumption that Aerolab and FondTech were paying for a licence to use all the Force India CAD data, all the wind tunnel testing data from testing Force India parts and all the feedback from track testing, regardless of whether they actually used it or not. Force India has never suggested that any more than a small fraction of this data was misused. He also assumed that the negotiation was between Force India and Lotus. Thus Mr Anderson's evidence does not support Force India's case if the correct approach is taken to these matters.
Thirdly and most fundamentally, there is no justification for quantifying the fee which Aerolab and FondTech should pay for misuse of confidential information as the cost to Force India of creating the asset which Aerolab and FondTech misused (still less a small part of that asset). As Mr Bezant said in an unchallenged passage in his report:
"I do not consider the sunk costs incurred by Force India to be a particularly relevant consideration in determining an appropriate licence fee. From an economic perspective, the sunk costs would have no bearing on the licensee or licensor's incentives to licence the design."
Looking more generally at Force India's position, I accept that a licensor in the position of Force India would be reluctant to do anything to assist a new competitor such as Lotus.
The position of Aerolab and FondTech as licensee
The Defendants contend that the information which was misused was "nothing very special" and that the only benefit to Aerolab and FondTech from the misuse was a saving in the time of their employees in designing the initial Lotus model. The Defendants rely upon Mr Dernie's and Mr Bezant's evidence in support of this. As Mr Bezant put it in his report:
"If the link between the use of FI's design and Team Lotus' financial performance in the 2010 Championship season (and potentially beyond) cannot be established, then it is unlikely that any licence fee negotiated would have incorporated these economic benefits, and the upper bound that could have been negotiated by two willing parties would have been the costs that Team Lotus could have avoided by licensing the design rather than creating one from scratch."
The Defendants also rely upon Mr Migeot's unchallenged evidence that there was no knock-on benefit from this time saving, for two reasons. First, FondTech had additional engineering and design staff available in August and September. So the extra time needed for the design work would not have delayed the project. Secondly, Aerolab had 10 days per month unused wind tunnel capacity. So even if the initial model had been delayed, this delay could have been made up by using the spare capacity available in the wind tunnel before the end of the year.
It follows that, on one view, the extra time it would have taken to design the initial model if there had been no misuse would not have cost Aerolab and FondTech anything. As counsel for the Corporate Defendants accepted, however, in principle FondTech's employees were available to do other work in August and September 2009. Thus there would have been an opportunity cost as a result of the misuse.
In order to quantify this, Mr Migeot asked a very experienced manager of F1 draftsmen, Stephane Chosse, for estimates for the time which would have been required by CAD draftsmen based on the parts then in issue. Mr Chosse was head of aerodynamic design at Sauber and later Toyota. The number of parts complained of was subsequently expanded, but in Mr Migeot's opinion the new parts were only about 20 hours' worth of work, so it was not worth getting Mr Chosse's opinion on them. Mr Migeot's experience is that aero engineers spend about 50% of the time taken by CAD draftsmen, so this figure needs to be added to the calculation. Mr Chosse used German rates of pay, but Mr Migeot also provided Italian rates. Based on this information Mr Bezant calculated the range of figures set out in paragraph 431 above. No challenge was made to the evidence of Mr Migeot and Mr Bezant concerning these figures.
Other relevant factors
Force India relied upon two other factors in support of its claim. The first was the general size of team budgets in F1. These are undoubtedly large, but I do not see the relevance of this.
In opening Force India also relied on an agreement between Force India and McLaren under which a fee of £10 million per annum was payable as constituting a comparable. This was not much relied on closing, and rightly so. It was a contract with the number 1 or 2 team in F1 for the provision of multiple vital aspects of engineering, including hydraulics, electronics, gearbox and the use of the Mercedes engine. It also included ongoing consultancy on key aspects of aerodynamic development, race strategy, software and many other things. It was designed to raise Force India from last place in the Constructors' Championship to fourth place in five years. A single place advance in the Championship was calculated by Mr Fernley as worth some £57 million. This does not take into account the extra revenue from other sources which such advances would bring. In short, this agreement is nowhere near to a comparable licence.
What is much more relevant than either of these factors, as counsel for the Corporate Defendants submitted, is the fact that (as noted in paragraph 158 above) Aerolab and FondTech charged Lotus a total of 132,144 for all their work on designing the initial Lotus model.
Looking at matters in the round, I consider that a willing licensor and a willing licensee acting reasonably would have negotiated a fee of 25,000. Although this is at the top end of the range calculated by Mr Bezant using Italian rates, and I have found less misuse than that calculation is predicated upon, it seems to me that a modest premium would be negotiated to reflect the fact that Force India would not want to assist a potential new competitor, however slightly and indirectly. I consider that this figure is fair, equitable, effective, proportionate and dissuasive, as required by Article 3 of the Enforcement Directive.
Summary of conclusions
For the reasons given above, I conclude that:
i) Force India's claim for breach of confidence succeeds against Aerolab and FondTech to the extent indicated in paragraphs 272-337 above, but not otherwise.
I will hear counsel as to interest, costs and any other matters arising out of this judgment.
ii) Neither Mr Gascoyne nor Lotus are liable for breach of confidence.
iii) Force India's claim for infringement of copyright succeeds against 1 Malaysia UK to the extent indicated in paragraph 373 above, but not otherwise.
iv) Force India is entitled to damages/equitable compensation from Aerolab/FondTech in the sum of 25,000.
v) Force India owes Aerolab 846,230 under the Development Contract. The sum of 25,000 should be set off against this.
Note 1 This judgment was written prior to the publication of Gurry on Breach of Confidence (second edition by Aplin, Bently, Johnson and Malynicz, OUP, 2012), although at a late stage I received a proof copy of Chapter 12 on Post-Employment Obligations. [Back]
Copyright Policy |
Donate to BAILII