In Force India Formula One Team Ltd v Aerolab SRL and another [2013] EWCA Civ 780, the Court of Appeal of England and Wales dismissed an appeal against a High Court judgment that found the defendants connected with the Lotus Formula One team misused confidential information and infringed the copyright in car designs owned by rival team Force India.

BACKGROUND

Force India entered into a development agreement with Aerolab, a company specialising in aerodynamic design, for a test model of a car. In line with the agreement, Aerolab created confidential computer-aided designs (CAD). Any use of confidential information, which was defined broadly, had to be used exclusively for work carried out under the agreement.

Following the inability of Force India to pay its contractual fees, the agreement was terminated for repudiatory breach. Aerolab and the other defendants started working for the Lotus Formula One team and used Force India’s pre-existing CAD files as a basis for creating the rival design. Force India brought a claim for contractual breach of confidence and copyright infringement.

Whilst the High Court found that Aerolab had misused confidential information and infringed Force India’s copyright, it assessed damages on the basis of a notional licence fee and awarded Force India the modest sum of €25,000. Force India appealed the quantum based only on the confidentiality claim, seeking damages for misuse of the entirety of its confidential designs, arguing that Aerolab’s employees had "treated them as their own."

DECISION

Lewison LJ found the CAD files were highly confidential, akin to a trade secret. Under the terms of the agreement, any confidential information had to be used exclusively for the work conducted on behalf of Force India. Any use of such information for other customers constituted a breach of confidence.

In considering the quantum of damages, Lewison LJ observed that Force India had not claimed damages or compensation for breach of the exclusivity clause or for any loss resulting from the misuse of confidential information. Instead, Force India’s pleaded case on quantum was aimed at the benefit alleged to have been derived by Team Lotus from the use of the confidential information. There was no separate plea about the benefit that had been derived by Aerolab. Accordingly, given its finding that Team Lotus was not liable, the Court was placed in a

difficult position when determining the level of compensation that Aerolab should pay, as this had to be assessed by reference to the benefit Aerolab had derived from the misuse of the confidential information. This benefit consisted of the time and staffing costs Aerolab had saved by exploiting Force India’s CAD designs and was measured by reference to the costs Aerolab would have incurred in commissioning a consultant to produce equivalent designs.

COMMENT

The modest level of damages may be attributed to Force India’s failure to plead that Aerolab had breached the exclusivity clause in the agreement. Lewison LJ also noted that if there had been any evidence that Aerolab’s employees had in fact regarded the confidential CAD files as free to use, then compensation should have been assessed on the basis of the value to Aerolab of the whole corpus of information obtained from Force India on the basis that "if A wrongfully retains B’s dictionary, it does not matter that he only looked up a few definitions."