F1 team Manor Racing given penalty stop

Manor Racing is currently competing in the 2016 season of the F1 World Championship.

The team previously raced under the name “Marussia” and had in the past received significant investment from Mr Andrey Cheglakov, the owner of the Marussia businesses. By October 2014, however, Marussia had decided to withdraw financial backing and, without that funding, the team company went into administration.

Mr Stephen Fitzpatrick, the businessman behind Ovo Energy, purchased the team from administration and entered into a series of agreements to compete in F1. Unfortunately, in none of those agreements, was the question of the team name addressed and Mr Fitzpatrick soon found himself in the uncomfortable position where (1) Marussia’s licence to the team to use the MARUSSIA trade mark expired at the end of 2014 and (2) under agreements with the F1 authorities, the team could only collect the prize money owing to it (amounting to around 90 million US dollars), if it used the same team name in the 2015 season, or obtained F1’s consent to a name change. (This requirement of the F1 agreements was intended to protect the integrity of the F1 competition by preventing multiple changes of team names.)

The Manor Racing team were unable to obtain F1’s permission for change of name and so proceeded to compete in the 2015 F1 championship under the MARUSSIA name, in the form MANOR MARUSSIA.

Marussia sued Manor Racing for infringement of its trade mark and passing off for use of MARUSSIA in the 2015 season and an application for summary judgment in Marussia’s favour came before the High Court in April of 2016. Manor Racing ran a number of defences to the application including:

  • that Marussia had impliedly consented to Manor Racing’s use of MARUSSIA (on the basis that Marussia were aware of Manor Racing’s plans and the agreements entered into must have included an implied term for consent to be granted); and
  • that Marussia was estopped from asserting rights as owner of the MARUSSIA trade mark under the English law principle of “estoppel by acquiescence” (on the grounds that Marussia was under a duty to raise the trade mark point with Manor Racing in the negotiations between the parties).

The court held that there was no real prospect of Manor Racing succeeding in either of these defences. It held that it would not imply consent into the Manor Racing/Marussia agreement, since such consent was not necessary to achieve business efficacy in the specific agreements relating to ownership of the team (bearing in mind that Manor Racing would not have had to use MARUSSIA, if it had had F1’s permission for change of name) and since there was no certainty as to any term to be implied: e.g. was consent for use of MARUSSIA for the 2015 season or for a longer period or until such time as F1 agreed to a name change?

Secondly, the court held that the English law principle of estoppel by acquiescence could not be relied upon as a defence. The only defence available was that of consent as defined by the European Courts (where consent has been held to mean “unequivocal consent, whether express or implied”). (Under the English law principle, “deemed consent” would be sufficient to provide a defence but that would not meet the threshold of the EU-law concept of consent.)

Whilst the court would have granted summary judgement in favour of Marussia in respect of these purported defences, Manor Racing had raised other possible defences. The court held that these other defences were ones where the court could not say at this stage that there was no prospect at all of success – but even for these it held that it was improbable that they would be successful. Accordingly, whilst the court did not grant summary judgment in Marussia’s favour, it held that if Manor Racing were to proceed to defend the claim to full trial, it would first have to provide security of £1.75 million.

This is a salutary reminder that even sophisticated businesses entering multi-million pound deals can sometimes forget to deal with trade marks with expensive consequences. The case also emphasises the continued dominance of EU law in the field of trade marks– where EU-law concepts, as here, override English law principles.[:]

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Posted on: 9th May 2016