F1 IP demonstrates value of trade secrets

trade secretsWhile ‘trade secrets’ can deliver significant value for F1 teams and other innovators, they are also a high-risk strategy, says patent attorney, Diego Black.

A recent legal dispute over intellectual property (IP) rights dominated the headlines during this year’s F1 season, which could have led to a dramatic, late-stage change of position near the top of the driver and team leaderboards. The issue centred on F1’s prolific use of ‘trade secrets’ as a form of IP protection, according to European intellectual property firm, Withers & Rogers.

The dispute centred on Racing Point’s RP20 car, which the team admitted was closely modelled on last year’s winning Mercedes W10. Under FIA rules it is not illegal to ‘reverse engineer’ car parts based on their exterior appearance, which can be easily photographed of course. However, certain parts that are deemed to have a powerful aerodynamic effect are ‘listed’, which means the car maker must prove they have designed and developed them for their own exclusive use, and are unable to purchase these from rivals or third parties. In contrast it is possible to buy ‘unlisted’ parts from rivals and indeed Mercedes had legitimately sold CAD data to Racing Point relating to their front brakes.

Keeping secrets: how to protect confidential information and IP

Following the Styrian Grand Prix, Renault challenged Racing Point over the use of rear brake ducts, which were made a ‘listed’ part for the start of 2020 and yet appeared to be very similar to those used on the Mercedes 2019 car. The limited visibility of these parts and the supply relationship between Racing Point and Mercedes prompted a series of complaints from other F1 teams amid allegations that Racing Point were not the principal designers. The FIA decided that the Racing Point team was in breach of the rules and issued a 15 point deduction and a 400,000 euros fine. The team was also ‘reprimanded’ by the FIA for using their car at subsequent Grand Prix events.

Following this, Racing Point announced that it intended to appeal the FIA’s decision, claiming that it had acted within the rules. However, Renault has since dropped the challenge, stating that progress has been made to restrict teams from copying parts from rivals. The FIA has also confirmed that it intends to change the rules ahead of next year’s season to prevent teams from copying a competitor’s car design.

The fact that other F1 teams had also been queuing up to make complaints about Racing Point’s car underlines both the strengths and the potential weaknesses of an IP strategy that is based on keeping trade secrets.

Under FIA rules it is not illegal to ‘reverse engineer’ car parts based on their exterior appearance

Trade secrets are often used in very fast-paced fields of innovation because they allow the owner to capitalise on the competitive edge that the technology gives them as quickly as possible. Crucially, there is also scope to share this IP selectively with other organisations in the future, through exclusive or non-exclusive licence agreements.

In this instance, the allegation was that the Mercedes F1 team, which has stringent rules in place to protect its IP, had chosen to share some of its innovations with Racing Point prior to the start of the 2020 season. Their motive for this may well have been commercial gain, but the performance of Racing Point’s car has also given them additional kudos due to the association between the two teams.

There is a long list of innovations that can be traced back to F1 trade secrets, which have since been applied widely in the design of road vehicles. For example, paddle-shift gearboxes, adaptive suspension and traction control are now widely available in the automotive industry. Carbon-fibre chassis are also widely used in modern car production due to their lightness and enhanced fuel efficiency benefits. Kinetic energy recovery system (KERS) technology also started out as an F1 development and has since been widely used to enhance the performance of cars and passenger vehicles by converting kinetic energy to electrical energy to help drive their motors.

The problem with ‘trade secrets’ is that they can be lost or stolen, particularly when employees involved in R&D activities move from one organisation to another. Furthermore, trade secrets would not protect the owner from reverse engineering. Thought should also be given to how to commercialise them in the longer term.

Diego Black, partner and patent attorney at European intellectual property firm, Withers & Rogers