Formula 1 car design case highlights difficulties with breach of confidentiality claims
Force India, operator of the Formula 1 racing team, brought a breach of confidence and copyright infringement claim against 1 Malaysia, its chief technical officer Michael Gascoyne, and Italian aerodynamic development companies Aerolab and FondTech. The information in question related to the design of a half-size wind tunnel model of a Formula 1 racing car.
The judge, Mr Justice Arnold, rejected Force India's claims. He found that Mr Gascoyne combined with Aerolab and FondTech to secure the design of a half-sized model F1 racing car. Mr Gascoyne did not however enter into a "common design" with Aeroloab or FondTech to secure the use of Force India CAD files to design the 1 Malaysia car and was not aware that Aerolab had done so to any extent.
The claim against 1 Malaysia was entirely dependent on the claim against Mr Gascoyne and failed for the same reason, but the judge ruled that Aerolab and FondTech had copied from Force India's design drawings and had misused some confidential information.
Mr Justice Arnold assessed that a willing licensor and a willing licensee, acting reasonably, would have negotiated a fee of only €25,000 to use this limited protectable confidential information. This was the amount of damages he awarded to Force India.
In his damages assessment the judge took into account how much it would have cost Aerolab and FondTech to engage additional aerodynamic engineers and draftsmen to design and draw, from scratch, the parts in relation to which misuse had been found:
"If the information could have been readily obtained by the defendant by employing a competent consultant at a fee of £x, then prima facie that would be the sum that would be agreed between a willing licensor and a willing licensee. ... The consultant's fee is the key input into the assessment of a reasonable licence fee. By contrast, if the information was not readily available from another source, then the willing licensor and the willing licensee would negotiate a higher fee or royalty. The more inaccessible the information, and thus the more difficult it would have been for the defendant to obtain it by lawful means, then the higher the fee that will be payable, other things being equal."
As Force India was withholding payment of €846,230 due to Aerolab under an outstanding invoice for services provided, this sum of €25,000 was set off against the debt. Force India was effectively ordered to pay Aerolab over €820,000.
Points to remember
Businesses often hand over confidential information when engaging third party contractors. If any of this information becomes part of the skill, knowledge and experience of the individuals working on the project, you can't necessarily prevent them from using the information afterwards, even if your contract with the contractor contains an express confidentiality clause to the contrary. You can stop them from using trade secrets (and other information which is highly confidential; requiring the same protection as a trade secret). The contractors can therefore only be restrained as much as a former employee.
Since Faccenda Chicken Ltd v Fowler  Ch 177, it has been accepted as law that an employer can't prevent the use of lower level information by former employees. In this case the judge held that Aerolab's and FondTech's draftsmen had, as a short cut, misused trade secrets. In respect of the details of the modularity of the relevant parts (i.e. the way in which they related to other parts) and their spatial relationships (which were claimed to be confidential) the judge concluded that where the information was not in the public domain it fell within the skill, knowledge and experience of the employees and could not be protected, despite the confidentiality clauses. The court should use the same approach to assessing damages whether the obligation of confidentiality breached is contractual or equitable. As Arnold J sets out:
- Where the claimant exploits the confidential information by manufacturing and selling products for profit, and his profits have been diminished as a result of the breach, then he can recover his loss of profit.
- Where the claimant exploits the confidential information by granting licences to others, and his licence revenue has been diminished as a result of the breach, he can recover the lost [licensing] revenue.
- Where the claimant would have "sold" the confidential information but for the breach, he can recover the market value of the information as between a willing seller and a willing buyer.
- Where the claimant cannot prove he has suffered financial loss in any of these ways, he can recover such sum as would be negotiated between a willing licensor and a willing licensee acting reasonably as at the date of the breach for permission to use the confidential information which has been misused in the manner in which the defendant has used it.
Before bringing a claim businesses should try to ascertain whether what they consider to be their confidential information is publicly accessible. Features such as the shape and configuration of an article, readily ascertained from a publicly available article, are unlikely to be confidential. Other features such as detailed dimensions, tolerances and manufacturing information that can only be discovered by a process of reverse engineering are more likely to be considered confidential. If a competitor has, for example, used a rival's drawings to copy detailed information as a short cut, then a claim for breach of confidential information is likely to succeed.
This analysis may contain information of general interest about current legal issues, but does not give legal advice.