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03/17/06 - the former CEO of Superformance International responds to Factory Five Racing's publicized allegations...

RONNIE KRUGER DRAFTS EXPLANATION TO SHELBY AGREEMENT & LAWSUIT

Former CEO of Superformance International responds to a statement published on Factory Five Racing's Corporate site regarding the recent Shelby vs. Replica lawsuit where Superformance was excluded from the suit since they are now authorized to manufacture licensed replicas by Shelby Licensing. Ronnie Kruger is the drafter of the Superformance/Shelby agreement and explains the facts surrounding the lawsuit and licensing agreement chronologically.

JEFFERYS BAY, SOUTH AFRICA, Mar. 17 2006  -- www.superformance.org/supernews Although I have retired back home, I still have a very close association with both the SPF organization and with Jimmy Price here at Hi-Tech Automotive in South Africa.. As a result, I often browse through forums such as SCOF, Clubcobra, the GT40 forum and sometimes even the sites of SPF's competitors. I must say I become perturbed when I see a speculative, unfair or an outright misleading comment, especially if they involve Jimmy or SPF, and even more so if they refer to an event in which I had been personally involved.

What really irked me, was the posting by an anonymous source on the FFR website recently, speculating and misrepresenting facts concerning the SPF/Shelby legal issues, and actually accusing SPF of conspiring to undermine the interests of their competitors in the US. It should be obvious that this ranting is self-serving, and although I made it a policy to rarely post comments on public forums, I want to place on record the facts in order to expose the agenda of the author and those who allowed the untruths to be posted. I personally directed the SPF/Shelby lawsuit from 2001 to 2005, and no-one but the two excellent legal teams who represented SPF, has a more intimate knowledge of the case/s than I have.

Before disproving the allegations contained in this particularly odious piece of writing, I am going to briefly record the actual sequence of events and the outcome of the lawsuits. Incidentally, the facts are a matter of public record in the District Court in Boston, MA, and can be verified on line..

This is an abridged chronology of the issue:

On February 7, 2001 (three weeks before I arrived in the US to establish a corporate head office for Superformance) Shelby et al served summons on Superformance International Inc, claiming "damages" and "punitive damages" for:

               * Infringement of the Cobra mark
               * Dilution of the Cobra mark
               * Infringement of the Cobra Trade Dress (shape)
               * Infringement of the 427 S/C mark, and
               * Counterfeiting of the Cobra marks

After obtaining legal opinion, we entered motions to defend. In July 2001, Ford Motor Company joined in the lawsuit as Plaintiff Intervener. Ford's interest was as owner of the Cobra mark (Shelby is the sole worldwide licensee of this Cobra mark). The odds (and costs) to Superformance therefore doubled overnight. Superformance had NO insurance to cover or contribute to the costs of the law suit. The considerable costs (it peaked at nearly $3 million) had to come out of the earnings of Superformance, Hi-Tech and Jimmy Price, the sole owner of both entities.

Following upon months of depositions, discovery procedures and gathering of evidence by SPF's lawyers (Knobbe Martin Olsen & Bear of Irvine, CA, and Fish & Richardson of Boston, MA,) they recommended that SPF petition the Boston court for Summary Judgments dismissing the claims by Shelby and Ford.

Judge Zobel ruled in favor of SPF on three of the five motions, but as she was unable to reach a decision on the motions regarding the Cobra mark (Ford) and the 427 S/C mark (Shelby), she referred these two claims for trails by Jury.

I was not only reluctant to spend more money as it was negatively impacting on our marketing budget, but I was concerned that a settlement would be a safer option than to cross swords with an American icon across a courtroom floor.

When Ford started broadening and intensifying their attack on Superformance, and when I accepted that we had no chance of matching Ford's deep legal budget pockets, I approached Ford and negotiated a settlement (the terms of which are confidential). The settlement did not entitle SPF or its dealers to use the Cobra name and marks.

I also approached Carroll Shelby personally to seek a settlement of the pending trail by jury, and found him extremely accommodating. Months of negotiations followed, and we eventually agreed upon a mutually acceptable settlement. The Shelby team informed us that they were going to petition Judge Zobel to vacate her Summary Judgment ruling on the Cobra mark and asked SPF to join them in the petition. SPF declined.

Shelby's legal team decided to appeal Judge Zobel's decision. SPF decided not to OPPOSE the appeal. SPF never JOINED Shelby in the appeal. We had no interest in the possibility of being allowed to use the name Cobra, because in 2001 we had changed the name of our product from a Cobra replica to a Mk III, and we believed this name was firmly established in the market.

All the inference of collusion between SPF and Shelby is, to say the least, just so much smoke and competitive opportunism. Yes, we settled with Shelby. As is usual, the terms are confidential, but they are mutually agreeable. We did not pay one penny up front to settle. Yes, we did enter into a licensing agreement with Shelby. It made sense, because we are the largest privately owned specialist auto manufacturer in the world, and at that time, Shelby had ceased to manufacture his own cars. To conclude an agreement to build his cars - still the most sought after Cobras and Coupes in the world - made business sense for us.

The license fees we agreed to: also pure business sense and we believe, fair. Carroll Shelby passionately believes the 427 S/C was his creation, he convinced me, and in order to create a platform for continued mutually beneficial business transaction, we agreed to pay a royalty per unit sold.

I would like to dwell for a moment on specific allegations in the "news" published by FFR.

The First Circuit Court of Appeals denies a request by Shelby and Superformance…." NOT TRUE.. SPF was not party to the appeal... "Shortly thereafter, Shelby and Superformance entered into an agreement and requested that the original decision be vacated". NOT TRUE and chronologically incorrect. Before the appeal, Shelby petitioned the court (SPF was NOT involved) to vacate its decision. When Judge Zobel refused, Shelby (without SPF) appealed the court's decision. …. Shelby and Superformance entered into an agreement …….whereby SPF would be a licensee of the shape and name from Shelby". NOT TRUE. Shelby does not own the name and has no right to license anyone to use the name Cobra. "Why would SPF, a kit car/replica maker, seek to vacate a ruling proving Shelby had no right to the shape? NOT TRUE SPF was NOT a party to the petition to Judge Zobel to vacate her ruling on the shape.

I would also like to make reference to the fact that FFR accused SPF of collusion because SPF settled the Shelby lawsuit. So how come FFR settled with Shelby in 2001?

And as far as the so-called $300,000 consumer survey is concerned, FFR and their lawyers had demonstratively so little faith in the value of the findings of that particular research document that they themselves rather settled than have the survey tested in court. As a matter of fact, I checked with our lawyers today, and confirmed that we had commissioned our own survey (at nearly double the cost of the FFR survey, by the way).

So much for FFR's statement:: "SPF was victorious regarding trade dress, based almost exclusively on the amassed evidence that was provided to by us (FFR) to them (SPF)"

As far as our contractual arrangement with the Shelby organization is concerned, as a private (Inc) company it is nobody's business but our own why we enter into strategic alliances with any company. We use our own resources, not those of other shareholders.

Yet, we value the opinion of stakeholders, as we clearly demonstrate with this communication. That is why I convey to you the facts pertaining to the lawsuits. Superformance and Hi-Tech took the holistic view that the settlement of our differences was an opportunity to mend fences and to build a relationship. The record shows this strategy is succeeding, benefiting all stakeholders equally. Is that not the American way to pursue corporate success?

You now have the facts. You be the judge.

I wish you a safe America - and I miss the Country and All its people.  ~  Ronnie Kruger

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Original Publication from the News section of the Factory Five Corp. Website, Mar. 10 2006  -- 
Appeals Court Ruling Signals End to Shelby Lawsuits Over Cobra Shape.

An important ruling that affects the Cobra Replica industry was recently handed down from the United States Court of Appeals for the First Circuit, January 18, 2006.  The decision is great news for the custom car/replica industry in that it eliminates any possible future lawsuits over the reproduction of the shape (trade-dress) of the famous and often copied 1965 427 AC and Shelby Cobra.   

The ruling and its impact are easier to understand with a brief summary of the history the legal wranglings between Shelby, Factory Five Racing, and other replica makers.  These legal fights have been primarily focused on two things.  First at issue has been the use of the word COBRA and related badges (COBRA is a registered trademark of the Ford Motor company).  The second dispute has been over the shape (trade-dress) of the car and the accompanying rights to manufacture modern day versions of it.   

The recent ruling by the First Circuit Court of Appeals denies a request by Shelby and Superformance International, Inc. (a manufacturer of a Cobra replica kit cars) to vacate a previous ruling (Superformance v Shelby 2002) whereby Superformance won a partial summary judgement victory against Shelby with respect to the shape (trade dress) of the Cobra. The summary judgement addressed the shape issues but left several other trademark issues open.  The relevant part of the 2002 ruling by Judge Rya Zobel, of the U.S. First District court, was that the shape of the 427 Cobra was not the protected trade dress of Carroll Shelby.

Shortly thereafter, Shelby and Superformance entered into an agreement and requested the remaining issues be closed and the original decision regarding trade-dress, or shape, be vacated.  The agreement with Superformance whereby Superformance would be a licensee of the shape and name from Shelby among other things was enacted, but the court declined to vacate the original judgement which established that Shelby had no trade dress rights to the car.

Shelby and Superformance then appealed the decision of the court NOT to vacate the trade-dress ruling.  It is this denial of appeal that was recently (Jan 18, 2006) ruled on.  Had the appeal succeeded, it would have vacated the standing ruling that determined the shape of the car was not protected. This may have enabled Shelby to potentially seek damages against still other replica companies.

A small group of replica makers filed what is called an "Amicus Brief".  This is a brief filed on behalf of affected parties.  It was successfully argued that the outcome of the pending appeal could have a direct bearing on replica makers.  Based on the evidence in the amicus brief, the Shelby-Superformance petition was denied, leaving stand the original ruling that the 427 Cobra shape is not Shelby's intellectual property.

Why would Superformance, a kit car/replica maker seek to vacate a ruling that proved Shelby had no rights to the shape?  Reasonable people could assume that Superformance was seeking a competitive advantage against its replica competitors, in contradiction to its previous legal contention that the shape was not protected.

The denial of the appeal sets in stone the final ruling that the shape of the 427 Cobra is not protectable and eliminates the possibility that Shelby can seek further action against other replica makers based on the shape of the car.  The final ruling also makes it unlikely in the extreme that Shelby will be granted a patent on the shape of the car from the US Patent and Trademark office (something he is at last check, still attempting to do). 

Without a doubt, this is the end of litigation with respect to the shape of the car.  It is now a matter of settled law that the shape of the famous 427 Cobra has passed into the public domain and become a true genre of car.

Note:  The Superformance-Shelby agreement was difficult for us here at Factory Five to understand. Following a three year battle between Factory Five Racing, Inc. and Shelby, in 2001 we reached an agreement whereby Factory Five agreed to not use the word "COBRA" but was free to make the shape of the car without prosecution.  Following the agreement, we made our complete volume of evidence freely available to other kit car companies in an effort to protect the industry from further legal action.  Soon afterwards, Superformance was victorious against Shelby regarding trade dress, based almost exclusively on the amassed evidence that was provided by us at no cost to them.  This evidence and consumer survey data provided to at no charge to Superformance by Factory Five Racing, Inc. cost more than $300,000!

After winning in court with this evidence, it was hard for us to understand why Superformance would proceed to form an alliance with Shelby (to the apparent detriment of the rest of the industry) when they had received help in their time of need. Today's ruling means that the Superformance license with Shelby is an agreement to license something that is public domain.  Karma indeed.