In Force India Formula One Team Ltd v 1 Malaysia Racing Team SDN BHD and others  EWHC 616 (Ch), the High Court of England and Wales ruled on claims for contractual and equitable breach of confidence and copyright infringement brought by one Formula One (F1) race team operator against another. The judgment deals with quantum as well as liability.
The case involved a claim for contractual and equitable breach of confidence and copyright infringement arising from the use of computer-aided design (CAD) files for a wind tunnel, a structure used to test the aerodynamic efficiency of designs for F1 racing cars. Force India had entered into an F1 cardevelopment agreement with two of the Defendants, which are companies that specialise in the aerodynamic design of such cars. Under the agreement, the Defendants created confidential CAD files. After termination of the agreement, the Defendants immediately started work for a rival team and used Force India’s CAD files as a starting point for formulating the rival design.
BREACH OF CONFIDENCE
Arnold J held that the two defendant companies operating the rival team had infringed Force India’s copyright by downloading electronic copies of the new designs, which incorporated a substantial part of Force India’s designs. The initial copying by the design company was done in Italy and therefore outside the Court’s jurisdiction.
The judge also found that employees of the two defendant companies had misused the confidential CAD files only by using them as a shortcut as they had not reproduced the information in their new designs.
It was common ground that the Defendants had not made a profit from the use of the Force India CAD files.
Where a claimant is unable to prove orthodox financial loss as a result of the breach of a contractual term restricting the defendants’ activities, a different type of damages can be awarded, known as Wrotham Park damages, gain-based damages or negotiating damages. These damages are assessed on the basis of an amount the claimant could have demanded as the price for agreeing to relax the contractual restriction in question. When assessing such damages, one should consider what price the parties would have arrived at through negotiation, bearing in mind their respective bargaining positions, the information available to them and the commercial context at the time of the notional negotiation.
Arnold J considered that a reasonable licence fee for use of Force India’s CAD files agreed between a willing licensor and a willing licensee would have been €25,000. This sum was towards the top end of the range calculated by experts, as the judge found that a premium would be negotiated to reflect the fact that Force India would not want to assist a potential new competitor.
The judgment provides a useful summary of the law on compensation for breach of confidence. It is also a reminder that the outcome of proceedings for breach of confidence can be difficult to predict as it always turns on the facts. It additionally acts as a reminder that when pleading a case for breach of confidence, it is vital to particularise the information alleged to be confidential as precisely and detailed as possible.