Force India faces the (untrained) eye of the storm

Back in 2002, at the height of his serial court appearances, Arrows team principal Tom Walkinshaw opined that his company had lost its latest case (a debt in favour of Cosworth) due to "the judge not understanding Formula 1..."

The comment drew guffaws of laughter from the media, but in retrospect the Scot had a point: most non-F1 folk have little understanding of the paddock's nuances. How, then, can a judge, any judge - likely schooled in Oxbridge and residing in some leafy suburb - be expected to grasp every twist and turn of this high-octane sporting business?

Having read last week's verdict of the High Court of Justice Chancery Division in the Force India/Aerolab matter, it seems that Mr Justice Arnold failed to fully appreciate the subtleties of F1, thus handing down a judgment that, at first reading, failed to fully address claimant Force India's grievances, namely that its intellectual property had been breached by Aerolab to the benefit of its subsequent client, 1 Malaysia Racing (previously Lotus F1, now Caterham F1).

Aerolab admitted that a portion of Force India IP had erroneously remained embedded in its systems as a result of the hasty transition between the termination of Force India as a client (at the end of July 2009, six months ahead of time due to various non-payments by Force India) and taking on 1 Malaysia Racing (coincidentally also subject to legal proceedings over use of the Lotus moniker) as a client virtually overnight.

Not surprisingly Force India went ballistic, and instituted action against Aerolab Srl, associate company/contractor Fondmetal Technologies, former Force India technical director Mike Gascoyne, 1 Malaysia Racing Team Sdn Bhd (the Malaysian operation) and 1 Malaysia Racing Team (UK) Ltd for relief, at the same time deferring its (already late) payments for services previously rendered by Aerolab/Fondtech.

Force India's 2009 car was on pole at Spa - and finished second © LAT

The matter was initiated by Aerolab's publication of photographs of the front end of a Lotus Formula 1 car wind-tunnel model, one that resembled that season's Force India - a car that, at that point in time, had taken pole and second place overall in the Belgian GP at Spa and a front-row starting slot and fourth in the Italian GP at Monza - down to the fitment of Force India's uniquely-marked windtunnel tyres... used expediently as newcomer 1 Malaysia Racing at that stage held no tyre contract with sole supplier Bridgestone, which, of course, supplied said scale tyres.

This notwithstanding, Justice Arnold ordered Force India to settle all outstanding monies owing to Aerolab (€846,230/£705,000) minus a derisory damages award of €25,000/£20,800 for breach of IP. Justice Arnold explained in his judgement how he had calculated the amount, and 10 years on the observations made by the now-deceased Walkinshaw are surely more founded than ever. It is no surprise that Force India has announced its intention to appeal the full judgement, and the word in the paddock during the Malaysian Grand Prix weekend was that Force India stood every chance of winning on appeal. That said, the law can be asinine.

While the (interim) fiscal aspects of the case are important to Aerolab - and here Force India must be regretting having earned itself a reputation for being among the poorest payers in the business - the bottom line is that the debt is good for headlines and little else, for hidden deep within the judgement are extremely serious implications. A case could be made that Lotus gained a competitive advantage through use of a competitor's IP, particularly given that the original car (VJM-02), had just set fastest lap at Monza.

While it is impossible to quantify the exact advantage gleaned by 1 Malaysia Racing via this 'shortcut' - referred to by Justice Arnold as 'opportunistic copying of CAD files by CAD draftsmen' - the bottom line is that, at that stage, F1's new teams, of which 1 Malaysia Racing was last to be accepted, were each under enormous pressure to design and produce their new cars within a time frame of around six months.

1 Malaysia Racing entered grand prix racing under the Lotus F1 name in 2010 © LAT

The record shows that USF1 failed dismally, Virgin/Manor got it all wrong despite bypassing windtunnels entirely, while Campos/HRT sub-contracted the entire effort to Dallara, the world's largest producer of proprietary racing cars. Only Lotus followed the traditional route, yet managed to make 2010's opener in Bahrain...

According to sources, the 2010-12 Concorde Agreement, the document signed by all parties during the 2009 season that sets out the obligations of the commercial rights holder (CRH), the governing body (FIA) and all teams, defines a constructor as 'a person (including any corporate or unincorporated body) who designs the Listed Parts for its cars and further demands that the constructor shall use only Listed Parts which are designed by it, to which it retains exclusive use'.

Outsourcing is permitted, but in such cases the third party may not be another team, nor shall the third party directly or indirectly design parts for another team. The Listed Parts classification is extensive, and includes monocoques and survival cells, fuel cells, front and side-impact structures, pedal assemblies, front and rear suspension and geometry as defined, bodywork, wings and brake ducts, plus underbodies and diffusers. An enormous number of aero parts, then...

Thus it is clear that, by definition, teams that do not design their Listed Parts (or at the very least exclusively own the IP thereto) are not classified as a 'constructor' in the Formula 1 sense, and therefore have no right to compete.

In Para 196 of his judgment, Justice Arnold found: "It is common ground, however, that certain of the initial parts which are the subject of complaint survived with either no or few changes, and that full sized equivalents of those parts were incorporated into the Lotus car which raced in at least the first few races of the F1 2010 season. These are the front part of the front wing turning vane, the front wing mainplane and flap profiles, the vortex generator, the rear wing central section and assembly, rear brake duct lower element and the rear view mirror".

Aerolab is a subsidury of Fondtech, owned by Jean-Claude Migeot and Luca Gasparini

He further found (Para 291):"[ Aerolab CAD draftsman] admitted, however, he had used a Force India master surface file as a means of realising the rear wing geometry...In my judgment this was a misuse of confidential information by [employee]", and in Para 370: "Force India claims that each of its CAD files is a copyright work, that Aerolab and FondTech created CAD files which reproduced substantial parts of its CAD files and that 1 Malaysia UK made electronic copies of the Aerolab/FondTech CAD files in the UK, thereby infringing Force India's UK copyrights".

Para 373 states: "In my judgment the Aerolab/FondTech CAD files do reproduce a substantial part of the corresponding Force India CAD files for the following parts: the vortex generator, rear brake duct lower element and rear view mirror. It follows that the copyright claim succeeds to that extent".

All that said, any wonder that the paddock was agog upon hearing the damages sum of €25,000, or that suggestions that Justice Arnold has no inkling of the true value of Listed Parts and their design and development, soon did the rounds? In a single sweep the good judge has chronically devalued the best endeavours of highly qualified F1 engineers, and little wonder Force India is appealing, particularly given the admissions of Aerolab and its co-defendants.

Now for the ramifications: In both 2010 and 2011 Lotus (now Caterham F1) finished 10th in the Constructors' Championship (albeit without scoring a single point), which gained the team promotion to Column 2 from Column 3 as outlined in the Concorde.

Essentially, as an incentive for teams to join the championship at a time when manufacturers were exiting like lemmings, the CRH (Bernie Ecclestone) agreed to contribute $30m per annum for the three years of the agreement, with the sum shared equally between the newcomers (then including USF1), collectively known at Column 3 teams. USF1's demise resulted in each of the three minnows receiving $10m per annum.

Does the ruling mean that Lotus was not a full constructor in 2010? © XPB

In addition, Concorde allows for any team that finishes in the top 10 twice in three years to be classified as Column 2 team, resulting in additional fiscal benefits worth around $10m per annum, and thus 1 Malaysia Racing scored at least $20m in terms of Column 3 and $10m for 2010/11 respectively as per Column 2, yet could be deemed to not have qualified as a constructor in the first place. Ecclestone is known to claw back what is not due...

However, worse could follow: in 2007 the FIA fined McLaren a record-setting $100m and stripped it of all points scored in that season for copyright breaches after the British team was found to have had unauthorised access to Ferrari data after the Scuderia invited the governing body to launch an investigation into the matter.

Although subsequent proceedings were contaminated by further dishonesty on the part of McLaren employees and officers, the gist of the matter is that McLaren was charged with (and subsequently found guilty of): "having unauthorised access to one or more technical documents which could be used for or more of the following purposes: designing, engineering, building, checking, testing, developing and running a 2007 Ferrari Formula One car, including drawings, lay-out and digital mock-up schemes, technical documents and reports and procedures relating to, amongst other things, weight distribution, aerodynamics, component designs, suspension, gearbox, hydraulic, water, oil, fuel system designs, assembly and building technology designs".

Although McLaren argued that none of the information enhanced the performance of its car, the FIA rejected this, stating it did not need to show "any information improperly held led to any specific sporting advantage, or indeed any advantage at all".

During the Force India/Aerolab hearing Justice Arnold heard that Gascoyne - a former Force India technical director who acrimoniously left the company after it agreed to pay a confidential settlement - requested Force India's head of aerodynamic design (whom Gascoyne intended recruiting) to comment on Aerolab's aero-balance figure, but the judge for some reason decided this was simply a "rough figure". By the same token, Justice Arnold found Gascoyne's request to his former PA for a spreadsheet showing Force India staffing levels (which included salary figures) was not improper. Another reason for Force India to feel hard done by...

HRT and Marussia (then Virgin) could be set for a big cash injection from 2010 © LAT

Were 1 Malaysia Racing to be retrospectively stripped of its 2010/11 results, HRT would have placed 10th in both years, with Marussia (then Virgin) 11th on each occasion. Thus, if HRT were to place 10th this season, it stands to qualify for Column 2.

Interestingly 151(g) goes onto state: Any natural or legal person who takes part in an offence or infringement, whether as instigator or as accomplice, is also punishable, and The statutory limitation on the prosecution of infringements is five years.

However, the FIA is in an invidious position, one riddled with inconsistent precedents: while current FIA president Jean Todt invited the FIA to investigate McLaren in his then-position of managing director of Ferrari, he also laid charges of IP theft against former Scuderia contractors who provided Toyota with Ferrari data. In that case no FIA action was taken, although two engineers received suspended sentences.

Similarly, in 2007, a former McLaren employee who had moved to the Renault F1 team was found to be in possession of McLaren data. Similarly, no action was taken.

A case of IP theft has been laid in Italy against Gascoyne and Aerolab (both have been formally warned they are under investigation by the Italian authorities) and it could be that the FIA will await the outcome of that case before proceeding, but that could take years, and in the interim sends out a message that incorporating illegally-gained (no matter the circumstances) information is permitted in a sport that in quick succession gave us the three 'gates': Spy, Spank and Crash.

What next? Aerogate?