TRADE SECRETS AND INDUSTRIAL ESPIONAGE IN FORMULA ONE MOTORSPORTS.

Author:Lakhani, Shirin
 
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INTRODUCTION

From lights out to the waving of the checkered flag, and every turn and chicane in between, Formula One (Fl) is an exhilarating and glamorous international sport for car enthusiasts and adrenaline junkies alike. This high-tech motorsports formula has the biggest car manufacturers (Mercedes, Honda, McLaren, Ferrari, the list goes on) (1) competing at the cutting edge of engineering and design. Coinciding with this world of vanguard innovation is the inescapable world of patents, trademarks, trade secrets, and copyrights. Needless to say, most intellectual property (IP) attorneys would keel at the opportunity to be knee-deep in these waters.

In a realm where fractions of a second can determine who wins the race and who unceremoniously collides into a barrier of stacked Pirelli tires, every team wants to have the best car on the track. This entails having the better engine, the superior gearbox, the perfect amount of downforce and grip, the preferred tire strategy, and the team of engineers and drivers that is a cut above the rest. IP's place in this thrilling ride is ubiquitous--from the trade secrets that each team covetously hides, to the sponsors whose trademarks adorn both uniform and chassis, to the engineering and design elements ultimately patented for commercial production to the masses and the licensing revenues generated through television broadcasting.

This Comment will focus on the importance of trade secrets in Fl, the ways they are misappropriated through industrial espionage, and how teams can reduce the leaking of classified information. This Comment is divided into five parts. Part I gives a brief overview of the sport of F1 and how it is regulated. Part II provides a justification for the superiority of trade secrets over patents in the industry of motorsports. Part III takes a step back to explain the legal framework for international trade secret litigation, while Part IV applies that framework to Fl. Finally, Part V and VI concludes the analysis with recommendations for mitigating trade secret misappropriation risks.

  1. Fl-A Brief History

    1. The Sport

      "[Fl] is a deafeningly loud, extraordinarily expensive, rock-star-meets-the-road spectacle." (2) The first F1 races were held in 1946, following on the coattails of World War II. (3) The first world championship took place in 1950, in Silverstone, England. (4) From its outset, F1 was perceived as a sport full of both adrenaline and danger. Thirteen drivers died at the wheel in just the first decade. (5) In response, a constructors' championship was introduced in 1958 to encourage safer design and technological advancement. (6) (It was not until 1994, however, when the iconic Brazilian driver Ayrton Senna died, that F1's ultimate governing body, the Federation Internationale de L'Automobile (FIA), turbocharged its safety standards. (7) Not a single F1 driver has died at the wheel since then.) By the 1970s, F1 cars were faster, with much greater downforce, superior aerodynamics, and, of course, more power. (8)

      Another major change, this time to the business of F1, came in the 1970s when Bernie Ecclestone, a British business tycoon, rearranged the sport's commercial rights, turning it into a multi-billion dollar empire. (9) He became president of the Fl Constructors' Association (FOCA) in 1978, through which he greatly pushed for team coordination as a means to achieve more favorable licensing and commercial deals. (10) Soon enough, another regulating body rose up in 1979, the Federation Internationale du Sport Automobile (FISA), creating disputes over which organization supersedes. (11) It wasn't until 1981, when the Concorde Agreement was signed, that the power struggle began to ease. (12) After several years of contentious disputes about television rights and a number of mergers and acquisitions later, the F1 Group was formed to manage the promotion of the FIA Formula One World Championship and the majority of Fl-related licensing deals. (13) Ecclestone was the CEO of the F1 Group from its inception until earlier this year when he forfeited his seat to Chase Carey, an American business and media magnate. (14)

      Today, F1 is a multinational sport and a multi-billion-dollar industry. (15) Despite ticket prices hovering around $1000 a pop, fans from all over the world join together to watch 22 drivers drive around complex race tracks at over 200 miles per hour. Each race has a set number of laps averaging 190 miles of tar, with the infamous Monaco street race being the exception. (16) A novice to the sport will wonder what the "formula" in F1 stands for. The formula is a set of car design standards set by the FIA. As of the 2014 race season, "all cars use hybrid powertrains with 1.4-liter turbocharged V6 engines and Energy Recovery Systems (ERS) that harvest heat energy from the brakes and exhaust." (17) The engine and ERS combine to produce over 700 horsepower. (18)

      Beyond engineering and design, race strategy plays a significant role in crossing the finish line. There are nine tire options for each car: hyper-soft, ultrasoft, super-soft, soft, medium, hard, super-hard, intermediate, and wet. (19) Each tire is suited for a different set of track, temperature, and weather elements. (20) Teams can switch out tires (and conduct other necessary minor fixes) during pit stops, which average at 2.5 seconds. (21) When the teams decide to pit (or "box" in technical language) each driver can completely alter the dynamics of the race. Fuel consumption is another factor weighed in race strategy--having too much fuel can increase the weight of the car and reduce speeds, while too little fuel may require additional pit stops, putting the driver further behind on the track. Clearly, F1 is an extremely complex sport, but that is precisely what makes it so thrilling for teams, drivers, and fans alike.

      Each race is preceded by a qualifying session to determine the order in which the drivers will line up on the grid on race day. (22) Qualifying takes place in three consecutive sessions of about 15 minutes each. (23) At the end of the first two sessions, known as Q1 and Q2, the slowest drivers are eliminated from the grid, leaving only the top 10 fastest-driving cars to compete for the coveted top 10 grid positions in Q3. On race day, points are awarded to drivers finishing first through tenth. First place receives 25 points; the number of points awarded subsequently decreases until the tenth place driver receives one point. Points are also given to the teams based on the same point structure. Since each team has two drivers, constructors' point-garnering ability is double that of individual drivers. The points ultimately determine which driver will win the F1 Drivers' Championship and which team will win the F1 Constructors' Championship. Any contentions that may arise related to points, the race itself, or technical design, are settled by the stewards of the FIA. (24)

    2. The Federation Internationale de L'Automobile (FIA)

      The FIA was founded in 1904 as the premier governing body for global motor sports, including F1. (25) The organization is committed to "safe, sustainable and accessible mobility," with the specific goal "to keep you moving, safely and dynamically." (26) When the F1 World Championship was inaugurated in 1950, (27) the FIA turned into a truly global regulatory body. (Until then, its reach extended mainly throughout Europe.)

      As a governing organization, the FIA makes a clear separation between its three primary objectives: (1) to make and amend sporting rules; (2) to make and review "executive decisions regarding the management of financial resources and organization of sporting competitions"; and (3) to "resolv[e] disputes between members, sporting participants and other relevant parties." (28) The first objective is achieved through the World Motor Sports Council (WMSC); the second through the Generally Assembly (GA); and the third through the FIA's International Tribunal (IT) and International Court of Appeals (ICA). (29)

      The GA established the IT and ICA branches of the FIA in 2010. (30) Both judiciaries are composed of 36 judges elected by the GA. (31) The IT "exercises the FIA's disciplinary powers in the first instance." (32) IT's decisions can be appealed to the ICA, which serves as an independent body detached from the FIA. (33) The WMSC, however, is the most active of the three branches. It meets several times each year "to decide on rules, regulations, safety and development of motor sport at every level from karting to [F1]." (34) Council members include:

      the FIA President, the Deputy President for Sport, 7 Vice-Presidents, 14 titular members and 5 members by right. All, with the exception of the FIA President and members by right, must represent a National Sporting Authority (ASN) with at least one event entered on the International Sporting Calendar, and be of different nationalities. (35) Among the regulations determined by the WMSC are those pertaining to IP, more specifically to the fraudulent transfer of confidential information, also known as trade secrets.

  2. THE ROLE OF INTELLECTUAL PROPERTY IN F1

    In NASCAR, teams are substantially evenly matched because they are restricted on what they can do to their cars. The entire purpose of F1, on the other hand, is to constantly fine-tune the cars to lead the automotive industry all the way to the cutting edge of engineering and design. Except for the comparatively few formula requirements, everything is up for grabs. Just how much tweaking are the teams allowed? The highest performing teams have budgets of over $400 million to spend on making their cars go just a few milliseconds faster than their competitors.' (36) As one might imagine, $400 million can buy a lot of tweaks.

    Conventional thinking would lead one to expect that an F1 team's advantage lies in its ability to patent technology to prevent other teams from implementing the same advancements. In...

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