Team Lotus, Group Lotus and some legal expressions

Tony Fernandes announced, as expected, that he has reached agreement with David Hunt and is now the owner of the Team Lotus name and the celebrated CABC logo. Fernandes says that the team will be known next year as Team Lotus. He did not announce an engine deal for 2011, nor did he announce drivers. The team will still be based in Hingham, will still race in green and yellow and will still employ Mike Gascoyne. The Chapman Family is supporting the agreement.

When asked about Group Lotus trying to get involved in single-seater racing in Europe, Fernandes used some very specific legal terms: notably “goodwill” and “passing off”, which indicated that this is a matter that has clearly been discussed with his legal consultants. The term “goodwill” applies to a value that a business has resulting from a good reputation and past endeavours in a certain field. The act of “passing off” is what is called a tort (a damaging act) and the injured party may sue the wrongdoer for damages. The law is designed to prevent misrepresentation and to protect the goodwill of a company. This is in addition to any registered trademarks, which are protected by the United Kingdom Trade Marks Act 1994.

A Group Lotus press release on Wednesday used the CABC green and yellow badge and claimed that the company had achieved “seven F1 Constructers Championships, six F1 Driver Championships and numerous other considerable accolades”. This is true of Team Lotus, but not Group Lotus.

The main operating subsidiary of Group Lotus plc is Lotus Cars Ltd, which has two operating divisions – Lotus Engineering and Lotus Cars. Lotus Engineering is an automotive engineering consultancy based in Norfolk; Lotus Cars builds production road cars.

It is clear that there is trouble between Lotus Racing and Group Lotus, as I reported a couple of days ago, and it looks like Group Lotus has some idea that it can get into racing, elbowing Team Lotus out of the way. This is not a good idea. Group Lotus is owned by Proton, which is owned by the Malaysian government. This mighjt seem to suggest that Group Lotus has major political support, but Fernandes is very well-connected in Kuala Lumpur, a fact underlined by the appearance of Dr Mahathir Mohamad, the country’s ex-prime minister, at the opening of the Lotus F1 factory in February. He ran the country from 1981 until 2003 and still plays a major role behind-the-scenes role in Malaysian politics. He led the push to remove Abdullah Ahmad Badawi, his successor, in April 2009 and supported Najib Razak as the new premier. Tony Fernandes is close to Mahathir, having impressed the ex-PM by acquiring the near-bankrupt Air Asia in 2001 for one ringgit and turning it into one of the world’s most successful low-cost airlines.

Trying to take on Fernandes might be considered foolhardy given his connections, as the management of Group Lotus still needs to prove that it knows what it is doing. The chief executive Dany Bahar is a newcomer to the production car business. Lotus has never made much money and Bahar hopes to change that with a new range of road cars that will be launched at the forthcoming Paris Salon. The success of these models will probably decide Bahar’s fate as an automobile industry executive. However, it might be wise not to rock the boat in the motorsport world, particularly if your ultimate bosses are friends of Tony Fernandes.

29 thoughts on “Team Lotus, Group Lotus and some legal expressions

  1. Is it completely out of the question Fernandes to use his contacts to buy Group Lotus and merge the two?

    I think that to most people Lotus F1 would be as connected to Lotus road cars as Ferrari f1 is to theirs. Success in F1 would inevitably lead to more road cars being sold so it’s a win-win scenario surely?

  2. This is the most interesting story for a while. It seems to me, and you Joe, that Group Lotus are completely barking up the wrong tree. We all know that the F1 team which came to an end in 1994 had nothing to do with the car business. While the car company may claim credit for the wins and titles win before the team split off, the fact is that their F1 heritage ended during the 1980s. I recall there were various attempts to race factory Esprits and Elises in GT racing in the 1990s – I think Alex Zanardi races one at one point – but apart from that the car company has no recent racing heritage.

    I can’t see anything other than an embarrassing climb down for Behar here although in the world of Asian politics nothing is certain – I suppose it depends whether the argument is pursued through the UK courts or behind the scenes in Malaysia.

    It all begs the question – why? Or more accurately, why not? I can understand why Behar wants to race and be in F1, but given that the team have done by all accounts a decent job in 2010 and look like moving forward in 2011, why not just link with them and let them get on with it. Ego and empire building which will come to naught, I fear!

  3. Joe,
    This looks like a legal shakedown to me. Tony Fernandes has money and is good at taking on bad business and making a success of them. Presumably he could have bought Group Lotus in the past but decided not to. Probably wisely as he has enough of a sink for his cash in Team Lotus that another would be beyond foolhardy UNLESS he succeeds in using the cars as mobile billboards that get the bills paid in a reliable way.

    As you say Group Lotus has never made much money and is now in the hole having designed new cars. So what is the end game for them…. Shake Tony down for money to secure absolute rights without having to go to court and the risk that involves. Right may be on his side but courts involve a certain amount of risk ALWAYS! Is a deal cheaper than accepting the risk of going to court and loosing? Secondly shake Tony down to get him to agree to buy the whole of Group Lotus. He gets a shiny car company to sell cars with off the back of the team Lotus success. That requires two big gambles, one that Team Lotus can win Championships, ask Red Bull about that one and the cash it sucks up. The second gamble that Group Lotus can build a decent car or two to make a product line! If your name is McLaren and you have the success already then that gamble on road cars is worthwhile.

    I don’t see Tony getting shaken down and he will fight it in court. He bought Air Asia in 2001 for one ringgit. I think this would be a bad deal for him, to take Group Lotus for nothing on the risk he can turn it around and the F1 team. Group Lotus appears to be making a desperate attempt to get him to throw cash at them and it is unlikely to work!

    But he does and can make deals so it will be interesting to see how he can resolve it. My suggestion is a motion having the courts throw out any legal action as without merit right of the bat! (Which it is) and leave Group Lotus feeling very exposed! Then he can decide what deal he may want to do with them, if any!

  4. Joe what do you think instigated all these moves? Did Fernandes make moves to take over Group Lotus behind the scenes like you suggested and this is self defence from Bahar? Or is Bahar’s move just the tip of the iceberg of something even bigger going on behind the scenes?

  5. Weren’t Chapman’s financial mis-dealings to do with (allegedly) abusing the relationship (or lack of one) between Lotus Cars and Team Lotus – namely, using Lotus Cars PLC money for Team Lotus?

    While no money is involved this time, it does seem to be a bit of a throwback to that incident in terms of confusion over which Lotus is which.

  6. Formula 1 is about getting there first.

    Tony Fernandes got there first. Gold medal for Lotus Racing, Yamamoto for Group Lotus.

    Perhaps ART could enter Forumla 1 using a name similarly steeped in tradition and prestige like Brabham, Tyrrell or Briatore? 😛

    Btw, I hear (read) that the letters are actually ACBC.

  7. The power struggle is very odd.

    Maybe Bahar feels that Fernandes’ ultimate goal is to take control of the Lotus brand as a whole and therefore feels threatened?

  8. This whole Lotus-Proton comedy really makes your head spin.

    Group Lotus road cars have Toyota engines.

    Team Lotus want Renault engines.

    But recently Proton was rumoured to be after a merger with VW.

    Will there really be rival Group Lotus and Team Lotus racing teams in many categories?

    Are there any categories left that Group Lotus is not rumoured to be entering?

    Will the Group Lotus big bang strategy go bang big time like many of the big bang merchants before them?

  9. Dr Mahathir loves automobiles and the creation of Proton was one of his pet projects. It is known that he is still involved in advising Proton and has significant influence there.

    Group Lotus / Proton and Lotus Racing were cooperating on several levels – F1 drivers test driving production Lotus cars, a Proton production car inspired by the F1 car, Proton an official sponsor of the Lotus Racing team. One wonders where the conversations broke down to this level?

  10. Great insight as always but ”the celebrated CABC logo” should be ”the celebrated ACBC logo”! A typo I’m sure!

  11. Rolls Royce plc, constituent of the FTSE 100, market capitalisation of almost £11bn, does not make cars. Fine world leading aero engines yes, but not a single car.

    The cars division was sold many decades back to Vickers plc, and since then has found it’s way to be part of BMW. BMW has the right to use the double R logo and name, but there it ends. It’s an example of many brands that have split over the years. If RR plc started making cars then BMW’s lawyers would be on the case sharpish as would RR’s should BMW try to make aero engines under that name.

    In the mid 70s I went on a school trip to Lotus. I was hoping to see the F1 team, but I had not read the small print. We were visiting Group Lotus, and fun though it was and despite Team Lotus being tantalisingly close on the same campus, we were not allowed to go and see any of the black and gold JPS cars.

    Bahar should also have read the small print. I’ve known for decades that Team Lotus and Group Lotus are two separate companies. The companies have traded separately, filed separate accounts with tax authorities and filed their own records at Companies House. They are two uniquely legally different entities.

    David Hunt had acquired the ownership of Team Lotus and Group Lotus could have purchased it at any time over the last 15 years. They didn’t. Hunt has now sold Team Lotus to Fernandez and so he has the sole right to use that name and heritage in F1. Group Lotus does not.

    Rolls Royce plc did not buy the car company back when on many occassions it has come up for sale and so one must say that they clearly had no interest. Group Lotus showed no interest in buying Team Lotus up until now. A court would question that, though really it would be a side issue, as the main case is that there are clearly two different companies with differing ownership of assets. You’ll never see an advert showing the latest Rolls Royce car alongside a RR equipped Boeing Dreamliner, say, with a tagline implying an association between the two.

    So if Group Lotus want to be in F1 they’ll have to find a different name, as the right and the heritage rest with Team Lotus. Otherwise a clear open and shut case of passing off. Fernandez would win.

  12. Naive I know, but I would dearly love to see Fernandes totally dissociate himself with Proton/Group Lotus and re-register Team Lotus next year as a British entrant. I think that would have a far larger global appeal, as well as becoming the de-facto UK team.

    As I say, it’s pure naivety (and a heavy dose of romanticism), but until then it stops me fully getting behind Team Lotus.

  13. Somehow i dont think Fernandes can claim ‘passing off’ against Group Lotus. To prove ‘passing off’ Fernandes needs to show that Group Lotus is having a negative effect on his team, and that their use of the Lotus whatever name is inferior and damaging to the Lotus Racing reputation.

    Which of course it isnt.

  14. Re Fernandes not announcing drivers for next year: I noticed the other day that Heikki referred to Lotus as “they.”

  15. stoozie: it gets more complicated when it’s not simply the Lotus brand on an F1 car vs Lotus on a road car.

    The obvious grey area is merchandising but, given Tony’s penchant for innovating, he could take the brand to all sorts of new directions and this is something Group Lotus can’t be enthused about.

  16. Joe,

    Forgive me if I’ve missed something, but does this hearing in January 2010 at the IPO not mean that Team Lotus Ventures (D Hunt) lost the rights to use the mark TEAM LOTUS in F1:

    Click to access o02610.pdf

    Having already lost the right to use it in everything other than F1 at an earlier hearing back in 2002:

    Click to access o14703.pdf

    So what has Tony F actually bought? Furthermore, following the revocation of Team Lotus Ventures right to use the mark, Group Lotus applied for the right to use that mark in motorsport (class 41) on 15th July this year (presumably as part of the Lotus/ART 2011 F1 entry???) which was earlier than Team Lotus Ventures application to use it (August 2010).

    http://www.ipo.gov.uk/ohim?ohimnum=E9251497
    http://www.ipo.gov.uk/ohim?ohimnum=E9289737

    So who actually owns the rights to use “Team Lotus” in motorsport?

    1. The Classes are wrong. Team Lotus lost the rights in various classes, notably Class 41, but not the important Class 35

  17. If Group Lotus are behind Sato’s KV Racing Technologies sponsorship in the Indy Racing League, they’re not being very successful; check youtube for “KV Racing Crashes 2010” video of all the IndyCar team’s nearly 30 crashes this season set to circus music (note: some of the comments left are offensive, but, heck, that’s youtube for you folks!).

  18. Ironic that Fernandes talks of “passing off”. Surely slapping a Lotus badge on a 1Malaysia F1 car and talking of past glories is as ridiculous as British American Racing’s “a tradition of excellence” slogan prior to their debut?

    Lotus’ involvment with the Delorean fraud means there’s not much worth fighting over IMHO.

  19. Stoozie

    I think your argument using Rolls Royce as an analogy is excellent.

    However, is there an alternative argument that Group Lotus might use? I am not in the legal profession, by the way.

    Group Lotus might argue that it is they who have kept the Lotus name alive and kicking these last 15-16 years. The great days of Team Lotus were in the sixties and seventies with a bit of a revival during the mid-eighties, so twenty five years ago. That was when the goodwill was generated by Team Lotus, it all stopped at the end of 1993, I think, and there wasn’t much goodwill being generated by then.

    Group Lotus might also argue that what’s important here, legally, is the name Lotus. The difference between Team and Group is less important, except to we race fans who care.

    What might also be relevant is that David Hunt has done nothing with the Lotus that he owns whereas they, Group Lotus that is, have continued to use the name. (I understand that there was a licensing deal between David Hunt and Pacific Racing but that must have been fifteen years ago).

    Could it also be relevant, legally, that when Tony Fernandes wanted to call his team Lotus, it was Group Lotus that he went to, not David Hunt?

    Final point, I hope that, legally, your argument prevails over mine, the fact that the Chapman family approve the deal with Fernandes is good from an historical and, dare I say, sentimental point of view, it might not count for much in court though.

  20. Wouldn’t it be fantastic to see Team Lotus (Fernandes’ Team) vs Group Lotus (Proton Owned) fighting against each other in F1. I for one think Group Lotus trying to steal Team Lotus heritage is wrong. That would be similar situation if ( providing Team Lotus are called Team Lotus next year ) the F1 team claimed to having produced road cars. They are two separate entities and that is how it will stay. Hopefully he says 🙂

  21. Joe,

    You wrote: “This mighjt seem to suggest that Group Lotus has major political support, but Fernandes is very well-connected in Kuala Lumpur, a fact underlined by the appearance of Dr Mahathir Mohamad, the country’s ex-prime minister, at the opening of the Lotus F1 factory in February”.

    Autosport quote Dr Mahatir as saying that “Lotus (Group Lotus) is the rightful owner of the name Lotus,”

    Source: http://www.autosport.com/news/report.php/id/88676

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