UK: The Sport Lawyer - The Lotus v Lotus Case: An Empty Victory?

Last Updated: 12 August 2011
Article by Andrew Nixon and Ashley Wootton

The High Court handed down its ruling in the case of Group Lotus Plc and Lotus Cars Ltd v Team Lotus Ventures Limited, Tony Fernandes and others at the end of last month. The key issues that were tried related to the rights of the parties to race in Formula One using the Lotus name, a dispute over a Licence Agreement entered into between 1 Malaysian Racing and Group Lotus in December 2009 and t he goodwill attached to the Lotus Brand.

The headline ruling was as follows:

  • Group Lotus has the right to use the Lotus marque on road cars and on its own within Formula 1;
  • Group Lotus entitled to race in the historic black and gold livery;
  • 1Malaysia Racing Team (1MRT) ruled to be in breach of the licence agreement;
  • Team Lotus Ventures Limited trademarks revoked for non-use;
  • Group Lotus trade marks unaffected;
  • Group Lotus has the right to use the Lotus marque on cars for road use.

On the face of it, it appears to be a victory for Group Lotus; indeed, it was entitled to terminate the licence agreement with 1 Malaysian Racing Team, as well as to damages flowing from the breach of that licence agreement. However, the ruling still entitles Tony Fernandes to use the Team Lotus name in Formula One. When Fernandes entered Formula One, the licence (which the Court determined he subsequently breached) stated that he did not own the rights to the Team Lotus name. Despite this, the Judge was satisfied that as a result of an agreement dating back to 1985 Group Lotus never actually owned the Team Lotus brand.

That agreement, it was ruled, separated the manufacturing of road cars as being operated through Group Lotus and the participation in Formula One as being operated through Team Lotus International. It was held that although Group Lotus had the goodwill in the Lotus sports car, Team Lotus had acquired the rights of goodwill through the use of the name Team Lotus by Team Lotus Limited and Team Lotus International from 1961 to 1994. Group Lotus had effectively acquiesced to the use of the Lotus logo, name and other trademarks by not challenging the use of the logo by Team Lotus International for a period of more than five years. Although the Court accepted that Team Lotus has lost its right to the Team Lotus trademark through a period of non use (2003-2008), the rights of goodwill remained intact.

As the principle purpose of the claim was to prevent Team Lotus using the Lotus name at all, the umbrella conclusion is that notwithstanding the ruling on the trademarks and the damages awarded for breach of the licensing agreement, Group Lotus has not been successful. Indeed, this is underlined by Group Lotus' confirmation that it intends to appeal the Court's ruling that there is no confusing similarity between Team Lotus and Lotus (decided on the basis that there are two separate pools of goodwill).

Comment

The case brought to the fore a number of interesting (and complicated) intellectual property issues created over a period of several years and linked back to branding agreements more than 25 years old. It remains to be seen if Group Lotus is successful in any appeal on the basis that two Lotus racing teams will cause confusion amongst fans; however, on the face of it, it will be difficult to overturn this ruling.

Leaving aside the logical approach the Court applied when separating the goodwill, practically speaking there should be no problems with two teams racing under the same "name" and indeed there are many examples within motor sport of manufacturers and sponsors entering two teams, even though there are often attempts (see the Toro Rosso and Red Bull example) to at least create separate identities. Furthermore, the governing body has also indicated that it has no problem with the situation, especially as both teams will be clearly identifiable, with Team Lotus retaining the green colour scheme and Group Lotus using the historic John Player Special Black and Gold livery.

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