Formula 1 is an intensive technology sport, and the latest engine and chassis rule changes have imposed a whole new set of challenges on the teams. Surely these new ideas are protected? Yes, but strategies of protection must be matched to their commercial effectiveness.
Although the 2014 Formula 1 is without the affable Queanbeyan Mark Webber, we can now concentrate on following the smiling Western Australian Daniel Riccardo. However we will still follow Mark Webber in his Porsche phase as we also follow Tasmanian Marcus Ambrose in Nascar, the Aussie import Russell Ingall in V8, the Hollywood Aussie export Eric Bana in sports endurance and Toowoomba born Will Power in IndyCar.
However let’s get back to Formula 1 and IP protection.
IP protection is protection of the Intellectual Property of a venture or product. Formula 1 is an 80 billion dollar enterprise so surely its IP is protected? Yes it is – but in a way that is suitable for F1.
The most obvious way for protecting new technology is by use of patents. This covers the concept of the idea and generally the way that concept is implemented.
However patents are not the prime way of protection for Formula 1 teams such as the above Kinetic Energy Recovery System (KERS). The new rules this year mean KERS are out and ERS is in. ERS (Energy Recovery System) comprise two energy recovery systems (Motor Generator Unit – Kinetic [MGU-K] and Motor Generator Unit – Heat [MGU-H]), plus an Energy Store (ES) and control electronics.
In an article a number of years ago by the well-known UK Formula 1 journalist James Allen, the following reason was given for Patents not being prevalent in protecting ideas in Formula 1:
The lack of patents in F1 is quite simple. It’s because if a team takes out a patent on a design, that then locks in an advantage the other teams cannot access. Therefore the other teams will simply vote it out through the FIA Technical Working Group process by the end of the season in question.
By keeping a new design in the game, a team can gamble that they can do a better job on a design than another team. Examples like seamless shift gearbox & inertia dampers are good ones. If these were patented by F1 teams, then they would have been wiped out.
Other reasons can be seen for the patent approach not being suitable for Formula 1 including that the concept is still being developed, there is not a great market for Formula 1 cars, and the development of the concept for normal usage might not yet have been drilled down. Clearly though, Formula 1 stimulates new ideas, which can be used generally.
That does not mean that the teams involved do not believe in patents as teams such as Renault and Mercedes have hundreds of patents. These patents protect their ideas for use in production cars which can have a particular model of car in production for five or so years and have a lead time to reach production of 3 to 5 years. Therefore the 20 year monopoly protection of patents is important in that part of the business.
In the Formula 1 part of the business they rely on protecting the invention and the related know-how by controlling secrecy as far as possible. This includes protection of trade secrets, protection of copyright of design drawings and then controlling people’s access and use of the secret information by confidentiality agreements, employment contracts, manufacturing or supply contracts. In this way in the lead-up to developing a car for the new season, the ideas are protected. During the season, time is on their side and the other teams must catch-up.
A prime way of protecting your commercial interests is to ensure everyone is able to identify the source of the great technology or the great spectacle or the great commercial idea or the great quality product. The most obvious way for identifying the source is by use of trade marks. This covers the name or logo used in the commercial exploitation of your concept or product or service or event.
The organisation of Formula 1 and host cities take advantage of the marketing by ensuring their trade marks are protected around the world and are prominently on display and included in merchandise. However they also vigorously defend against any infringement by unauthorised users. They will also have event sponsors such as Rolex watches.
The teams also find trade marks are a valuable asset.
In a Forbes magazine article it was stated:
Red Bull Racing is now worth $400 million, up 67% since our last valuation project in 2010, easily the largest growth of any F1 team.
One source of income for teams is their prize money which is generally determined by their position on the drivers’ championship table and the teams’ championship table at the end of the season. However sponsorship is a substantial secondary source.
Red Bull Racing collected nearly $98 million in prize money in 2011, and added another $62 million in technical support, merchandise sales and sponsorships with brands like Casio, Infiniti and Pepe Jeans. And in a move that would be outrageous to most F1 teams, Red Bull reserves the majority of its cars’ sponsorship space for advertising its own world-famous energy drink.
Yet despite all of Red Bull Racing’s recent success, the bull-branded team is still far from the top. Ferrari, the sport’s oldest and most storied team, holds the number one spot on our list with a valuation of $1.15 billion, good for the 15th-most valuable sports team in the world.
A third main category of income is merchandising. Although often incorporated in sponsorship income it is a different category as it is not their brand on your product but your brand on their product. Sometimes like for Ferrari the product of the flag, or hat or clothing merely becomes the medium on which your brand is displayed. It has been estimated that about 20 per cent of Ferrari’s whole world business revenue comes from merchandise generated largely from the Formula One team. Clearly trade marks are important.
Strategy of IP protection
It can be seen that it is not merely considering the technical aspects of the new idea or project that is required to determine the best strategy for your IP protection. It is important to consider development of project, timing, size of market, costs, control of market and many other issues
Baxter IP look at a full range of IP protection means and can undertake a limited review or a comprehensive IP audit to determine a strategy of IP protection to suit your project.