By Kerri Cebula
For a majority of the 2022 season, IndyCar drive Alex Palou was involved in a contract dispute. Chip Ganassi Racing (CGR), the team Palou was driving for in 2022, claimed that Palou was under contract to drive for them for the 2023 IndyCar season. Palou and Arrow McLaren SP (ASMP) claimed he had signed a contract with AMSP for the 2023 season and beyond. AMSP is a sister team to McLaren, the Formula One team. The dispute was eventually settled with Palou agreeing to drive for CGR for the 2023 IndyCar season and CGR would allow him to test McLaren’s Formula One car (Cleeran, 2022).
In December 2022, Palou was named McLaren’s Formula 1 reserve driver for the 2023 season for the races that do not conflict with his IndyCar responsibilities (Medland, 2022). The role of the reserve driver in Formula 1 is to fill in when one of the team’s regular drivers is ill or injured and to occasionally drive in a free practice session on race weekend. While this role with McLaren will potentially help Palou move into Formula One, it could also lead to trade secret issues for Honda and CGR.
A trade secret is defined by the Uniform Trade Secrets Act as information that (a) has independent economic value from not being generally known or easily obtained by others and (b) is subject to reasonable efforts to maintain secrecy (Cebula, 2022). Both Indiana, home to CGR and AMSP, and California, home to Honda Racing, have adopted the UTSA (Cebula, 2022). There are many potential trade secret issues as anything under the body work could be considered a trade secret. The main trade secret issue for Honda and CGR is the engine design. Under this definition, a race engine qualifies as a trade secret.
IndyCar rules require that teams run a 2.2 litre turbo charged V6 engine supplied by either Honda or Chevrolet. These are the only specifications that IndyCar makes public, but it is understood that Honda and Chevrolet have some room to be creative with their engine designs under the IndyCar rules (Pruitt, 2021). This is where trade secrets come into play. CGR runs Honda engines and AMSP runs Chevrolet engines. Honda and CGR will want to ensure that their confidential engine information does not fall into the hands of Chevrolet.
The second trade secret issue involves McLaren’s Formula One team. IndyCar and Formula One are two different racing series, but the engine specifications are similar. Both series run a V-6 engine; IndyCar’s is a 2.2 litre while Formula One’s is a 1.6 litre. IndyCar runs a turbo charged engine while Formula One runes a turbo hybrid engine. These specifications may seem different enough, but a V-6 engine is a V-6 engine. In addition, the Formula One regulations allow teams much more freedom in their engine designs. This is a potential trade secret issue because McLaren runs Mercedes engines while Honda supplies engine to McLaren rivals Red Bull and Alpha Tauri. Honda will want to ensure that their engine secrets stay out of Mercedes hands. Trade secrets are believed to be one of the reasons Honda refused to supply engines to McLaren and Fernando Alonso’s 2019 Indianapolis 500 entry. They are also believed to be the reason that when Arrow SMP merged with McLaren to form what is now Arrow McLaren SP, Arrow SMP gave up their contract with Honda (Ayello, 2019).
CGR and Honda will need to take steps to ensure that Honda’s trade secrets remain a secret. One way is to require Palou sign a confidentiality agreement forbidding him from passing the information on to McLaren and AMSP. A second way is to ensure that Palou does not have access to the engine information at all. Once a driver announces he is leaving a team, the team typically stops the flow of confidential information. One issue in this case is that it is unknown if Palou is leaving CGR for the 2024 season. It is believed he has a contract with AMSP that begins with the 2024 season, but nothing has been announced (Medland, 2022). Either way, Honda and CGR need to take steps to protect their trade secrets.
Ayello, J. (2019, August 9). Arrow SPM splits with Honda, partners with McLaren, Chevrolet. The Indianapolis Star. https://www.indystar.com/story/sports/motor/2019/08/09/mclaren-arrives-indycar-arrow-schmidt-peterson-motorsports-partnership/1958555001/
Cebula, K. (2022). “We Don’t Want Our Competitors to See It”: Protecting Race Car Engines as a Trade Secret. Marquette Sports Law Review, 32(1), 79-96.
Cleeren, F (2022, September 14). Palou stays with Ganassi in IndyCar for 2023, Rosenqvist remains at McLaren. Motorsport. https://www.motorsport.com/indycar/news/palou-ganassi-2023-rosenqvist-mclaren/10369254/
Medland, C. (2022, December 1). Palou named a McLaren F1 reserve for 2023. Racer. https://racer.com/2022/12/01/palou-named-a-mclaren-f1-reserve-for-2023/
Pruett, M. (2021, April 13). Insight: IndyCar’s behind-the-scenes engine war. Racer. https://racer.com/2021/04/13/insight-indycars-behind-the-scenes-engine-war/
