27/03/2012
FEATURE BY MAT COCH
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The battle for Grand Prix glory is often settled not only by the waving of the chequered flag but the banging of a gavel. Increasingly the battle lines are moving from grid to court rooms as stakes are raised ever higher.
Commercial interests are often at conflict with the best interests of the sport and its participants. There are countless examples such as Flavio Briatore having his ban from Formula One overturned by a European Court.
The Italian was found guilty of race fixing when Nelson Piquet spun out of the 2008 Singapore Grand Prix. It handed Fernando Alonso the win, a point which, in the eyes of some, has never been amended.
Briatore was heavily involved in driver management at the time. A ban from Formula One had commercial impacts on him and so he appealed. The decision was overturned and though Flavio has not reappeared in Formula One he still gets occasional column inches from quote-hungry journalists.
Also settled in court was the curious case of Lotus. It dragged on for two seasons and today we have a team known as Lotus which is unconnected to either of the entities which have previously raced under that banner. Whatever the rights or wrongs of the situation, and they've been well documented by Pitpass, it remains that a ferocious battle ensued in court rather than on the race track. The only winners out of that situation were the lawyers - everyone else has been left constantly clarifying exactly which Lotus we're referring to.
Squabbling of any sort in modern Formula One does little but make the legal minds involved a lot of money. A case in point is Force India which, if it had ignored legal advice, would possibly have ended up better off for it.
Last week the Silverstone-based team won a court settlement from an Italian design company called Aerolab which was previously a contractor to it. The case surrounded the use of Force India's intellectual property with Aerolab's next client, 1 Malaysia - the parent company for what is now the Caterham Formula One Team. Aerolab terminated its contract with Force India after the team failed to settle debts of €846,230 in July 2009.
Almost immediately after Aerolab stopped working for Force India it began working for Caterham. At the time the company was known as Litespeed, before becoming Lotus Racing, Team Lotus and ultimately Caterham - more evidence that there are too many lawyers in Formula One.
Aerolab began legal proceedings against Force India, starting out by trying to have its cars seized at the 2009 Italian Grand Prix. Force India was required to post €1,074,730 worth of security which was held until the recent court proceedings finished, and enabled the team to race.
The situation between Aerolab and Force India muddied when Caterham released a photo of its 2010 car in October 2009, back then known as a Lotus. It showed Force India's wheels and some parts which looked suspiciously like those the team had run earlier in the season on a 50% scale wind tunnel model of the new Lotus.
It caused a great deal of excitement not just within the media (an email from Pitpass editor Chris Balfe to Lotus was cited in the official court documents), but also Force India's legal department which instigated a counter claim against Aerolab citing intellectual property breaches.
What had been a simple matter of Force India failing to pay its bills became a court case involving two teams and a design firm with claims of up to £15,255,583. And one of the teams hadn't even turned a wheel. Claims were also laid against the teams Chief Technical Officer, Mike Gascoyne.
The problem was that since Aerolab started working for Caterham so quickly after terminating its contract with Force India the computer systems weren't completely wiped. It meant some Force India data remained, which was the foundation of its case against Aerolab and Caterham.
It has been suggested that Aerolab, having acknowledged the problem, made an attempt to settle the matter quickly and easily by offering Force India a fee on top of having its debt waived. Given that Force India was not especially successful in 2009 its data was of comparatively low value, yet still the team elected to pursue legal proceedings. One can only imagine why, given the ultimate settlement.
Along with Aerolab, Force India stated that Lotus (now Caterham) was also liable, since it had contracted Aerolab for the work. The court didn't agree, and ruled it was actions by Aerolab staff alone that constituted the breach of intellectual property laws - Lotus was indemnified by a clause in the contract between the two parties.
Still, Lotus' lawyers were forced to remain involved as the case rumbled on for over a year. Force India claimed that it was out of pocket £15.2m but this was reduced during the case to £13.7m. It was a figure, Force India argued, that constituted the cost of development of its car since no part could be developed in isolation of the others, and therefore the total cost of development is the correct figure.
The judge disagreed, mostly because there was little to suggest there had been wholesale copying or use of Force India's intellectual property, but also because only three components - none of which were especially significant (mirrors, part of the brake duct and a component of the front wing) - ultimately ended up on the 2010 Lotus.
Last week, after over a year in court, it was ruled that Force India was entitled to just 25,000 euros. It was a long way shy of the £13.7m it was asking for. Furthermore, Force India was ordered to pay its 846,230 euro debt to Aerolab, leaving the team 821,230 euros out of pocket.
It is widely believed the situation could have been significantly different, and in Force India's favour, should it have accepted the initial offer.
Erstwhile a criminal case before the Italian courts against Mike Gascoyne will now likely collapse. An EU court has ruled against Force India's claims, and in doing so found Gascoyne innocent of any wrong doings. It therefore stands to reason that the Italians will agree with last week's decision and dismiss it, bringing all proceedings to a conclusive.
QED; the only real winners in this case are the lawyers involved.
The team failed to pay its bills and Aerolab was right to take it to court, but was Force India right to file proceedings based on intellectual property against a team that hadn't yet turned a wheel? As far as the lawyers go, absolutely, but who is to say the legal system is the be all and end all?
Force India filed a suit against Aerolab and, while it won a small settlement, it was buried in legal argument for some time. One can only assume that this caused stress and distraction within the team which one could further argue was not ultimately in the best interests of it or the sport.
Then again, such folly is in the Silverstone outfit's DNA, after all, who will ever forget Eddie Jordan's ludicrous legal action against Vodafone and the Irishman's subsequent mauling by the presiding judge.
Force India will be referring Lotus (Caterham) to the FIA, while it's understood Marussia already has. That Aerolab was found guilty of using its intellectual property for the benefit of Caterham, Force India sees the two companies as one and the same. Any other interpretation, the team will likely reason, opens avenues for others to contract out their design and 'legally' steal intellectual property. The FIA must rule in Force India's favour, the team will no doubt argue.
Only there is evidence to suggest that the FIA will do exactly nothing, and with fair precedent.
It has ultimate authority over the sport and while it may not please everyone all the time it gets things right more often than it gets things wrong. It acts with the sport's best interests at heart and should be the body with ultimate say over the Formula One landscape.
McLaren has felt the wrath of the FIA before and took its medicine quietly - one of the biggest controversies in the sport's history was taken on the chin without much in the way of complaint. McLaren won friends for its reaction, or lack of it, having put the interests of the sport ahead of its own. Had it not, an ugly court case would have resulted and there is no clear indication who, aside from the legal brains involved, would have won.
The FIA took no action against the fact that Toyota at one point stole Ferrari's intellectual property - a story broken by Pitpass' own Mike Lawrence - and effectively recreated their car. It is understood arrests were made though no criminal charges were ever brought. All the while the FIA did nothing, the case quietly dropping off the radar.
One has to question whether chasing matters through the courts is the best way to go motor racing. There is a mature set of carefully crafted regulations to govern the sport and punish those outside of them, without the need to escalate matters in to a more public forum.
Perhaps that is the lesson. Leave the sporting matters to the FIA to sort out, and keep Formula One out of the courts. It's a complicated sport with commercial interests to protect but ultimately chasing such matters, at least against competitors, shines a poor light on the sport's name. If the name of the sport is damaged, isn't its commercial value damaged also? And if its commercial value drops, what is the point in going to court anyway? You're just losing money whether you win or not.
To check out previous features from Mat, click here