My fascination for motorsports skyrocketed since attending my first NASCAR race last summer. So naturally, I discovered Formula 1 (F1), a similar motorsport. F1 is the highest level of open-wheel-single-seater auto racing sport. Most importantly, F1 is known for pushing the boundaries of technology and engineering.

Although F1 generally did not captivate me as much as NASCAR, the F1 intellectual property (“IP”) dramas involving trade secrets got my attention. First, I will explain why there is trade secret drama to begin with, and not a different type of IP drama. Then, I will cover some trade secret fundamentals. And, of course, I will share the trade secret drama that inspired this post: Spygate.

So, hold on to your seats as we go on this ride!

How do F1 teams protect their IP?

One may think F1 teams might pursue patent protection for their engines because of F1’s highly competitive nature and significant financial resources. Patent protection provides its owners with the most exclusive IP rights. In particular, patents permit their owners to prevent others from making, using, or selling their inventions without permission. This is true even if others make the invention on their own, as independent creators. However, the Fédération Internationale de l’Automobile “FIA” (the agent in charge of F1 governance) prohibits teams from enforcing any patent rights. Given this FIA technical regulation, F1 teams protect their edge-giving technology through trade secrets.

What is a trade secret?

Trade secrets are a valuable form of IP. A trade secret is information that has actual or potential value by virtue of being generally unknown, not readily ascertainable to others, and subject to reasonable secrecy measures. Although trade secrets can last indefinitely, if they lose their value or are no longer secret, the trade secretceases to exist. Some famous trade secrets include Google’s search algorithm, Kentucky Fried Chicken Recipes, and even Coca-Cola’s Coke recipe.

Information can have commercial value by virtue of being generally unknown within circles that usually deal with similar information. For example, in F1, information protected in trade secrets may include the team’s budget, engine specifications, and technical reports. Even the most minor innovations can make a critical difference between first and second place because technology evolves rapidly. This difference is crucial because the prize pot in F1 is over $900 million. In F1, trade secrets have direct commercial value, given the high monetary prizes in races. This is particularly true because, without secrecy in F1, all teams would possess the same advanced technology and consequently eradicate F1’s highly competitive nature.

Trade secrets must also be subject to reasonable secrecy measures. These measures focus on implementing the necessary procedures to ensure that the information remains reasonably secret. Without appropriate measures, a trade secret can cease to exist. For example, information can fall into the hands of someone who can use it commercially. In this event, the trade secret is no longer valid; rather, it is just information. Some common measures include restricting access to the information, requiring employees to sign non-disclosure agreements (NDAs), and labeling information with the words “confidential” or “proprietary.” Typically, a single measure alone is insufficient to meet the secrecy requirement. However, trade secret owners aren’t obligated to keep their secrets inside an impenetrable vault as long as they reasonably safeguard the information.

In F1, teams go to great lengths to keep their innovation secret. For example, the Mercedes AMG Petronas F1 Team requires team members to use devices (like smartphones or computers) they provide through a “USB Storage Pen Device Usage Policy.” This policy prohibits employees from using any USB device other than those offered by the team. The team gives employees USB devices that meet the organization’s IT security compliance and encryption requirements to ensure information is secure. Other teams restrict information strictly to necessary members, such as mechanics or engineers, resulting in instances where even drivers do not know the aerodynamic concepts or engine engineering details. Further, teams train the employees on the importance of secrecy. It is also common for some teams to require employees to sign NDAs that promise not to disclose trade secrets. Some teams require employees to sign non-compete provisions prohibiting employees from seeking employment with competitors. Other F1 teams even hide the actual car with the help of physical covers and screens when making any improvements during the race or after a crash. This helps maintain secrecy by preventing other teams from looking inside the cars.

However, even when teams go to great lengths to protect the information, it sometimes gets leaked or stolen, which can lead to trade secret misappropriation.

What is trade secret misappropriation?

Trade secret misappropriation occurs when someone obtains or discloses a trade secret through improper means. Improper means may include theft, bribery, misrepresentation, or espionage. Improper means also includes breaching a duty to maintain secrecy or inducing another to do so.

A trade secret misappropriation claim enables a trade secret owner to seek a remedy. This could include financial compensation for the losses caused by improper information obtainment. If the information is not entirely public, the owner could seek to enjoin (stop) the information from being publicly available. However, once the information is publicly available, it can no longer qualify as a trade secret, even if it was obtained improperly. At that point, only monetary damages are available.

The US and many other countries recognize trade secret misappropriation claims and remedies. In some countries, trade secret misappropriation can be a criminal charge in addition to a civil claim. For example, the Italian Criminal Code Article 623 provides punishment for up to two years for individuals who unlawfully obtain or disclose trade secrets. In fact, the F1 trade secret drama involves criminal charges, too!

Spygate Scandal

F1 is no stranger to trade secret misappropriation. One of the most recognized examples is the 2007 “Spygate” controversy. In 2007, the Scuderia Ferrari F1 team claimed that a former employee stole confidential information and used it to benefit the McLaren and Renault F1 teams. At the time, this controversy involved the biggest teams in F1.

Now, let’s discuss the basics of Spygate trade secret misappropriation. Nigel Stepney, former Ferrari Chief Mechanic, felt he was overlooked for a promotion. As a result, Stepney stole nearly 800 pages of confidential technical information and gave them to Mike Coughlan, Chief Designer of McLaren, a rival team. Stepney stole Ferrari’s documents and improperly disclosed confidential and proprietary information to a competitor. Stepney’s actions, therefore, gave rise to Ferrari’s trade secret misappropriation claim.

One of the most exciting things about this scandal is how Coughlan and Stepney got caught. Coughlan’s wife, Trudy, tried to make copies of the documents at a shop in Woking, England, which was owned by a Ferrari fan! (GASP) This fan immediately emailed the Ferrari with his suspicions.

Let the legal proceedings and investigations begin!

Ferrari filed civil lawsuits against Stepney and the McLaren team in Italy and the UK. Stepney also faced criminal charges in Italy, and the Federation Internationale de l’Automobile (FIA) opened their own investigation.

Although Ferrari dropped the lawsuits against Coughlan after reaching an agreement, the civil lawsuit proceedings revealed how hurtful this incident was to Ferrari, mostly because the investigations revealed how much critical information was disclosed.

During the criminal lawsuit against Stepney, the police raided Stepney’s home and found that the stolen pages (around 780 pages!) contained technical documents for designing, engineering, building, testing, and running an F1 racing car. Such information allows a team to gain its competitive edge and win races. A court in Sassuolo, Italy, near Ferrari’s Maranello base, sentenced Stepney to 20 months in jail and 600 euros in fines.

The FIA investigation absolved the McLaren team by asserting that Coughlan, McLaren’s Chief Designer, acted alone and the misappropriated information was not shared with any other individuals within the McLaren staff. Although complaints and press releases claimed Coughlan was involved in the theft of the information, McLaren faced no penalties from the FIA. The FIA investigation results mostly exonerated McLaren in the public eye and nothing more.

It would be fair to assume McLaren was in the clear, right? At least in the FIA’s eyes. Well, not so fast!

Here come two McLaren drivers: Fernando Alonso (a two-time World Champion on McLaren’s team) and Lewis Hamilton (a rookie on McLaren’s team). In short, emotions fly very high at these races, and rivalries arise, even among players on the same team.

In the 2007 Australian Grand Prix, a two-time reigning champion (Alonso) and rookie (Hamilton) fought to be the #1 driver. Hamilton, a newbie, beat Alonso in this race, but Alonso was not happy. This feud continued to grow until it exploded in the Hungary qualifying race, where Alonso threatened Ron Dennis, McLaren’s CEO and part-owner, with revealing new information about Spygate to the FIA if they did not ensure Hamilton ran out of fuel in the race and lost. This indicated so much to Dennis. Specifically, this meant that not only did Ferrari’s documents travel outside of McLaren’s Chief Designer, Coughlan, but they traveled so deep that drivers had access to them. Dennis called the FIA president to inform them about Alonso’s alleged claims. This did not go well for the McLaren team. The FIA re-opened the investigation and concluded that the stolen Ferrari information found its way to several McLaren engineers and drivers. After the hearing, McLaren received a $100 million fine, which is known as the biggest fine in the history of F1 and any sport.

As an anonymous Ferrari employee said, “when you are playing poker, it is important that you know you have an ace. But it is even more important that you know the other guy has two aces. Therefore, you know what you have to do. That is why the consequences of this theft will last for years.”

The Danger of Trade Secrets in F1

In F1, relying on trade secrets can be dangerous because remedies are limited to misappropriation, which requires improper means. Individuals may arrive at trade secret information through proper means—in these circumstances, trade secret owners have no remedy they can pursue. Proper means include reverse engineering the product from what is available and independent creation. For example, at the Monaco Grand Prix in 2023, one of the Red Bull cars crashed and had to be craned to the garage. This meant that the car’s undercarriage, which has aerodynamic technology, was exposed and even photographed during the race. This incident allowed other teams to analyze the photographs taken and potentially use them to reverse engineer the aerodynamic technology. Since there was nothing improper about looking at published images of the race, Red Bull would have no claim for trade secret misappropriation—even though the pictures included former trade secret information.

Although F1 did not captivate me as much as NASCAR did, the F1 trade secret drama is so intriguing that I might watch a race or two in the future.  I will stay tuned to see if any more F1 trade secret scandals come to light.

Iris Gomez
Associate Blogger and Senior Editor
Loyola University Chicago School of Law, J.D. 2025