Group Lotus Plc & Anor v 1 Malaysia Racing Team SDN BHD & Ors [2011] EWHC 1366 (Ch) (27 May 2011)

Neutral Citation Number: [2011] EWHC 1366 (Ch

The judgment is available here.

After weeks of deliberation, the High Court in London ruled yesterday that two apparently different ‘Lotus’ teams could continue to race in the sport.

In a detailed judgment, Mr Justice Peter Smith ruled that Team Lotus had the right to race in F1 as “Team Lotus” – and that the car manufacturer “Group Lotus” had the right to use the Lotus name in association with another racing team. That meant they could continue to run in their classic black-and-gold livery with Renault, as they have done so far this year, in the Lotus Renault GP team. The court ruled also that Team Lotus, a ‘new’ Anglo-Malaysian outfit created to enter F1 in 2010 as Lotus Racing, had breached a licensing agreement with Group Lotus last year.

Under this ruling, “Team Lotus” has the right to continue to race in Formula One under the name Team Lotus, but the effect of the judgment is that only “Group Lotus” can use the name ‘Lotus’ on its own in F1. “Group Lotus” is concerned that this aspect of the judgment will cause confusion in the eyes of spectators and the wider public. Accordingly, “Group Lotus” is seeking leave to appeal so that the right to use the Lotus brand in Formula 1 is clarified once and for all in the interests of the sport and the fans.

The issue over the racing colours arises from the decision of “Group Lotus” 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 two sets (four in total) of cars entered into F1 proposing to or already racing with the name Lotus incorporated in their name. The major issue therefore is whether or not two 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.

Central to the case is the perceived goodwill, by fans and customers, towards the brand of “Lotus”, as it is popularly understood.

Para 156

GL was formed to manufacture and sell sports cars in 1958. It directly has done nothing else. Colin Chapman started life racing cars. He also manufactured racing cars and sold them to Privateers. In the early to mid 1950s he started racing under the name “Team Lotus”. By 1961 and with the incorporation of TLL a decision was made clearly to compete in F1. Thereafter the Team Lotus raced cars; it did not manufacture them. It is clear that the goods and services that TLL sold when it went into the F1 business were the benefits that might accrue to being associated with a successful team. GL appreciated those benefits and paid for them []. Sponsors appreciated them and will have paid for them. Success breeds spin offs. The racing public likes to buy goods and memorabilia associated with successful F1 cars. This has over the years become a significant part of the income for F1 racers. “The public” thereby identified is not the same as the public at large nor is it necessarily in my view the same as the public who might like to watch F1 racing on television. Equally the public from the point of view of GL’s sales of Lotus sports cars is the public who primarily wish to buy its products i.e. Lotus sports cars. Some members of the public will undoubtedly be attracted because of the association with Team Lotus. It will be thought that if GL is associated with successful racing cars they might be expected to produce successful sports cars. There will be people who buy Lotus sports cars who have no interest in F1 racing. They simply buy Lotus sports cars in preference to other sports cars.

Mr Justice Peter Smith ruled that “Team Lotus” had to pay damages to “Group Lotus” for the breach of their licensing agreement. According to the judgment, it appears that the common practice of referring to “Team Lotus” as “Lotus”, in a second reference, and “Lotus Renault”, as Renault, may have to end. Finally, “Group Lotus” announced yesterday that they are seeking leave to appeal because they believe the judgment will cause confusion in the eyes of spectators and television viewers.