the Lotus position
Uncomfortable contortions from two F1 teams
10 February 2011
Sporting brands compete, and fight, and win and lose – and in
doing so they can develop a gloriousness that many other brand
owners envy. In Formula 1, few names have a pedigree to equal Team
Lotus, but the marque is currently subject to litigation in the
High Court, and four cars will start the season wearing the name
Lotus.
Famed for the innovative brilliance of its founder, Colin
Chapman, Team Lotus dominated F1 in the 1960s and 1970s, winning
sixty five races and seven constructors’ championships – at the
time, a record. Chapman pioneered many engineering advances,
including the monocoque chassis, but his innovation did not stop
there.
Team Lotus, like all English teams, originally raced in British
Racing Green, personalised in the 1960’s with a yellow stripe. But
in 1968 Lotus was the first F1 team to paint their car in a
sponsor’s colours; in this case, the red, cream and gold of Gold
Leaf. After three years, Team Lotus changed to race in the colours
of another of Imperial Tobacco’s brands, and the gold and black
John Player Special Lotuses became famous throughout the 1970s and
1980s.
Team Lotus declined following Chapman's death in 1982, won their
last race in 1987, and in 1994 ceased racing. David Hunt bought
what was left of the team, but was not able to continue competing
the following year. Meanwhile, the road car business, Group Lotus
(which had long been run as a separate business) was sold to
General Motors in 1986 and is currently owned by Proton.
Team Lotus and Group Lotus have been wrangling about trade marks
for years. Group Lotus successfully opposed one of Team Lotus’
application for the Team Lotus badge for class 35 in 1998, and last
year managed to have TEAM LOTUS in class 41 revoked.
However, in 2003, Group Lotus sought revocation of Team Lotus
Ventures Limited’s word mark TEAM LOTUS in class 35, and its device
mark for the Team Lotus logo, also in class 35. David Hunt
explained the difficulties he had encountered entering F1 because
of the Concorde Agreement, which limited the amount of teams that
could participate. The hearing officer was sympathetic and held
that these constituted a proper reason for non-use of the trade
marks under to section 41 of the TMA. The trade mark was not
revoked.
In 2010, the FIA allowed more teams into F1 and a Lotus team
returned to the grid when 1Malaysia F1 entered into a licence with
Group Lotus, who sponsored the team. This team went under the name
Lotus Racing, as no deal had been done with David Hunt. Group Lotus
then underwent a radical management reshuffle and terminated the
five year licence in its first year, citing breaches of the licence
in relation to merchandising.
Not to be deterred, 1Malaysia acquired David Hunt's rights in
the Team Lotus name. Subsequently, Group Lotus entered into a
sponsorship with Renault F1, now rebranded Lotus Renault.
So, on 13 March in Bahrain, two teams will line up as Lotus –
Team Lotus, in green and yellow, and Lotus Renault in gold and
black. The peculiarity is exacerbated by both cars having Renault
engines.
Not surprisingly, this has resulted in much acrimony, about
whether or not the licence was validly terminated, and also about
whether or not 1Malaysia has any rights to the name Team Lotus.
The dispute is not just about rights to a legacy – if Team Lotus
changes its name, F1 rules mean that it risks losing a substantial
amount of TV rights money. The same rule meant Sauber raced last
season as BMW Sauber Ferrari, despite having no ongoing connection
to BMW.
Group Lotus applied for summary judgment about the licence
termination, and this was heard on 24 January by Mr Justice Peter
Smith. The transcript, publicly available on paultan.org, makes for
fascinating reading. Smith J is famed for an idiosyncratic
approach, and demonstrated this by ignoring the application and
corralling both parties into agreeing to a speedy trial, which has
now been listed for ten days from 21 March. He was enthusiastic
about helping the case proceed, and said that the parties could
apply to him on short notice if necessary: “My experience over the
years has been that that stops people taking silly stances because
they come in front of me and I shout at them.”
This seems sage, for the sake of the brand at issue; allowing
trial to wait until the autumn could have been a Judgment of
Solomon for the Lotus marque. It’s an encouraging approach for
litigants; too often, the courts are thought to be inflexible and
archaic – not so in this case.
Indeed, both parties will have to work flat out to be ready in
time for trial. If it does not settle, it is going to be an
interesting case, and we can expect much pondering of old licences,
and complex arguments about reputation; to what extent is the
goodwill in Team Lotus and Group Lotus divisible?
This case shows how important it is that brand licensing
agreements are drafted with clear provisions, and how difficult
brand co-ownership is in practice.
For the good of the brand and the sport, the parties (with the
assistance, if necessary, of the governing bodies) should find a
way to resolve this and concentrate on battling on the track.
This article was first published in Intellectual
Property Magazine