Group Lotus Plc and Another v 1Malaysia Racing Team SDN BHD and Others

JurisdictionEngland & Wales
JudgeMr Justice Peter Smith,Peter Smith J
Judgment Date27 May 2011
Neutral Citation[2011] EWHC 1366 (Ch)
Docket NumberCase No: HC10C03151
CourtChancery Division
Date27 May 2011

[2011] EWHC 1366 (Ch)

IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Peter Smith

Case No: HC10C03151

Between:
(1) Group Lotus Plc
(2) Lotus Cars Ltd
Claimants
and
(1) 1Malaysia Racing Team SDN BHD
(2) Team Lotus Ventures Ltd
(3) Tune Group SDN BHD
(4) Anthony Francis Fernandes
(5) 1Malaysia Racing Team (UK) Ltd
Defendants

Mr M Silverleaf QC & Mr B Kennelly (instructed by SNR Denton) for the Claimants

Mr G Morpuss QC & Ms P Edwards (instructed by Macfarlanes LLP) for the Defendants

Hearing dates: 22, 23, 24, 25, 28, 29 March and 1 April 2011

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Peter Smith

INDEX

PARAGRAPH NO.

INTRODUCTION

1

THE PRESENT DIFFICULTIES

12

PROCEDURAL MATTERS

17

BACKGROUND

19

THE EVIDENCE

22

A BRIEF FACTUAL SURVEY

27

SHARE OFFER IN 1968

37

RACING

41

THE ATTRACTION

47

WHAT'S IN A NAME – GROUP LOTUS

52

COLIN CHAPMAN

55

THE ROUNDEL

59

KEY EVENTS

64

THE 1968 FLOTATION

66

THE 1985 AGREEMENT

73

SUBSEQUENT AGREEMENTS IN 1991

117

INFINITI (TEAM LOTUS LTD) IN ADMINISTRATION

131

GOODWILL

150

THE LEGAL NATURE OF GOODWILL

152

GOODWILL – THE FACTS

163

THE EVIDENCE ON GOODWILL

166

OTHER EVIDENCE

169

CONTEMPORARY WITNESSES

170

THE WRITERS/JOURNALISTS/PRESS

175

CONCLUSION CONCERNING GOODWILL

176

CONFUSION

180

CONFUSION/SIMILARITY

199

THE EVIDENCE ON CONFUSION/SIMILARITY

208

OTHER WITNESSES

224

OBSERVATIONS ON THE EVIDENCE

228

THE JOURNALISTS

229

NON-JOURNALISTS

233

CONCLUSIONS ON CONFUSION

240

EXTENDED INFRINGEMENT

251

LOSS OF MARKS AND/OR GOODWILL BY NON-USE/ABANDONMENT

253

NON USE OF TRADE MARKS

255

CONSEQUENCES OF CANCELLATION OF TRADE MARKS

265

BLACK AND GOLD JPS LIVERY

283

CONCLUSIONS AS REGARDS MAIN ACTION

285

THE LICENSE AGREEMENT

289

BREACHES

296

RESPONSE OF GL

308

GL's ALLEGATIONS OF BREACH

314

NEW PARTNER: CLAIM AND COUNTERCLAIM

325

HAS GL ESTABLISHED ANY BREACHES

336

MEETING OF 29TH JUNE 2010

343

TERMINATION NOTICE 31ST AUGUST 2010

345

BREACHES BY GL

356

MATERIALITY OF BREACHES BY 1MRT

357

OTHER BREACHES BY 1MRT

358

CONCLUSION ON THE BREACHES OF THE LICENCE AGREEMENT

362

RESTRICTIVE COVENANT

364

THE CONTRARY ARGUMENT

370

CONCLUSION ON LEGAL ANALYSIS

371

1MRT IN BREACH?

372

RESTRAINT OF TRADE

374

NATURE OF RELIEF

377

CONCLUSION AS REGARDS LICENSING AGREEMENT

381

RESIDUAL CLAIMS

385

OVERALL OBSERVATIONS

387

ANNEXES

1985 AGREEMENT

SAMPLE ROUNDELS

Peter Smith J

INTRODUCTION

1

This is a trial (on liability only) about three matters.

2

First there is the issue as to whether or not the Claimants and/or the Defendants have the right to race in Formula 1 ("F1") racing in cars which bear the name "Lotus" or "Lotus" in combination with the word "Team".

3

Second (and perhaps less important) is a dispute over a License Agreement ("the License") dated 21st December 2009 granted by the First Claimant Group Lotus ("GL") to the First Defendant 1Malaysia Racing Team ("1MRT") whereby GL granted 1MRT various rights including the right to race in Formula 1 under the name "Lotus Racing".

4

Third the Claimants claim the Defendants are infringing in various ways 10 trademarks registered in their name, in particular by commencing to use the name "Team Lotus" and/or the word "Lotus" and/or the Lotus Roundel (being a special badge created by Colin Chapman, the founder of Lotus Cars; "The Lotus Roundel") in relation to a F1 motor racing team which has no connection with the Claimants and was neither authorised nor endorsed by it. It is claimed that the name Team Lotus is or includes Lotus and is thus identical to the word Lotus registered in the name of the Claimants, and the goods and services in relation to which the Defendants are using Team Lotus includes goods and services which are identical or similar to those within the specifications of the Claimants' trade mark registrations ("the Marks").

5

In this judgment when I refer to Team Lotus I intend to refer to the activity of racing Lotus cars in Formula 1 without thereby indicating who has the right to race Formula 1 cars under that expression. I am merely echoing under what actual name Lotus cars were raced in Formula 1 until 1994. The only other occasion when Lotus cars raced in Formula 1 was in 2010 under the License and under the name Lotus Racing.

6

In addition the Claimants assert that they have for many years developed the Lotus business of sports car development and manufacture and vehicle engineering and in particular promoting its "Lotus" brand. They assert that the Defendants' actions by using the name Team Lotus and/or Lotus and/or the Lotus Roundel in relation to Formula 1 motor racing which has no connection with the Claimants and was neither authorised or endorsed by them are wrongful passing off.

7

Ancillary to those various claims the Claimants seek relief in respect of trade mark registrations effectively registered in the name of the Second Defendant Team Lotus Ventures Ltd ("TLVL") as set out in the schedule to the Re-Re Amended Particulars of Claim, where it is contended they are held upon trust for the Claimants. In addition in the alternative they assert they were invalid, or the assignment to TLVL was void, or alternatively the marks ought to be revoked for non use.

8

Separate revocation proceedings were commenced by GL at the UK Intellectual Property Office (proceedings no. 83660, 83661 and 83780) but were transferred to be determined by me at the same time.

9

Not to be outdone, 1MRT claims that GL has committed repudiatory breaches of the License which entitled it to be absolved from further performance upon its acceptance of those breaches on 23rd September 2010.

10

The Defendants seek injunctions against the Claimants from passing off an F1 racing team as being connected with Team Lotus and/or the Lotus Roundel and in what is called the "JPS livery". That relates to the historically significant colouring of F1 Lotus racing cars in the 1970s when Team Lotus cars raced with the sponsorship of John Player. At that time the racing cars were coloured black and gold. It became an iconic colour and was in fact replicated in some of the sports cars manufactured at that time by GL such as the Europa and later the Esprit.

11

In addition the Defendants claim the revocation of the Claimants' trade marks in so far as they relate to any aspect of racing business and that as between TLVL and the Claimants the latter have no right to obtain any trade mark registrations in respect of Team Lotus or the Lotus Roundel or the livery or the JPS livery or any mark containing the word Lotus in relation to the racing business.

THE PRESENT DIFFICULTIES

12

Without ascribing any significance to the word in this context no Lotus cars raced in Formula 1 after 1995 until the 2010 season. In that season as I have said 1MRT entered into Formula 1 pursuant to the License from GL. That relationship was short lived and dissolved in acrimony in September 2010. Both sides accept that the License has come to an end but both assert that it came to an end by reason of their respective acceptances of the other party's alleged repudiatory breaches.

13

Thereafter (or possibly in anticipation of the fallout) GL entered into a fresh relationship with Renault to enter a car in F1 with the name Lotus or Lotus Racing or possibly Lotus Renault. That entry has been accepted.

14

Not to be outdone 1MRT has entered a car in F1 to race under the name Team Lotus. Last year of course it raced under the name of Lotus Racing. It purports to do so by reason of its acquisition of the Team Lotus trade marks from TLVL. That registration has also been accepted.

15

The issue over the racing colours arises from the decision of GL to paint its cars in the "iconic" black and gold. Last year the Lotus Racing cars were what might be called "traditional" Lotus colours of green and yellow. There are thus currently 2 sets (4 in total) of cars entered into F1 proposing to or already racing with the name Lotus incorporated in their name.

16

The major issue therefore is whether or not 2 sets of Lotus cars can legitimately race in F1 under a name incorporating Lotus in some way and use the Lotus Roundel. The organisers of F1 do not apparently regard it as a problem.

PROCEDURAL MATTERS

17

The Claim Form in this matter was issued on 5th October 2010. The Claimants issued an application for summary judgment of part of the claims and that came before me on 24th January 2011. Then I directed that there be a speedy trial of all issues on liability. The urgency was plain enough to see. If the continued presence of 2 sets of Lotus cars in Formula 1 was contrary to one or other party's rights it was clearly in the interest of the parties and the public as a whole that it should be determined as soon as possible and should not be allowed to sit throughout the Formula 1 season. That season was due to start in March in Bahrain but for reasons unconnected to motor racing the race was cancelled. Later races have taken place. However the other alternative was that the Claimants contemplated a trial before the 2012 season. That would mean there would at least be a full season (depending on the result of this case) where one team might be racing when it ought not to be.

18

The timetable was tight and the parties are to be commended both as regards their witnesses and more particularly...

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