A Trend Toward Higher Damages in IP Litigation in India

Judicial decisions in trademark cases in India in recent years have shown a trend toward increased punitive damages, in addition to actual damages when the latter are not deemed sufficient or to act as a deterrent to the infringer and others. This article takes a closer look at Indian courts’ criteria and reasoning for granting punitive damages over the past few years.

Time Inc. Decision of 2005

While the award of damages by Indian courts is not new, the celebrated case of Time Incorporated v. Lokesh Srivastava and Anr., 2005 (30) PTC 3 (Del), bears special mention since it opened the floodgates for a stream of similar decisions with awards of monetary damages. The decision was pronounced by a single judge of the High Court of Delhi in 2005 in an ex parte trademark infringement suit.

Notably, this decision, which concerned an infringement suit brought on the basis of trademark rights in the American news magazine titled Time, discussed in detail the function of punitive damages, which the judge held to be founded on the principle of corrective justice. Further, the judge observed that one of the functions of such damages is to relieve the burden on an overloaded criminal system by providing a civil alternative to criminal prosecution. The judge also found that actual damages may not be calculated properly, since infringers may not be maintaining proper accounts, and they may not always be caught and sued.

The court noted, “If a tortfeasor is caught only half the time he commits torts, then when he is caught he should be punished twice as heavily in order to make up for the times he gets away.” The court accordingly awarded punitive damages of INR 5 lakhs (US $6,500) to the plaintiff.

Decisions Following Time Inc.

Until about 2014-15, the courts relied on the reasoning in the Time Inc. decision to award damages in an increasing number of cases. In particular, the courts granted punitive damages as a means of corrective justice.

There are also additional factors the courts have looked to when assessing the grant of damages.

In Hero Honda Motors Ltd. v. Shree Assuramji Scooters, 2006 (32) PTC 117 (Del), the court considered an approach toward granting damages in cases where defendants chose not to appear before the court. The reasoning of the court was as follows:

[A] defendant, who chooses to stay away from the proceedings of the Court, should not be permitted to enjoy the benefits of evasion of court proceedings. Any view to the contrary would result in a situation where the defendant who appears in Court and submits its account books would be liable for damages, while a party which chooses to stay away from court proceedings would escape the liability on account failure of the availability of account books. A party who chooses to not participate in court proceedings and stay away must, thus, suffer the consequences of damages as stated and set out by the plaintiff.

The court, however, indicated that simply because the defendant does not appear does not in turn mean the plaintiff would be free to claim whatever damages it thought fit. Instead, the court set criteria to be considered, including:

• Direct financial loss to the plaintiff;
• Loss of reputation;
• Larger public purpose in discouraging such acts; and
• Likelihood of confusion owing to similarity of marks.

The court granted damages of INR 5 lakhs (US $6,500) to the plaintiff.

In Microsoft Corporation v. Rajendra Pawar and Ors, 2008 (36) PTC 697 (Del), the court noted that,

Punitive damages are a manifestation of equitable relief granted to an aggrieved party, which, owing to its inability to prove actual damages, etc., could not be adequately compensated by the Court. Theoretically as well as practically, the practice of awarding of punitive damages may be rationalized as preventing under-compensation of the aggrieved party, allowing redress for undetectable torts and taking some strain away from the criminal justice system.

As the court could not pass a decree of rendition of accounts, owing to the absence of the defendants from the proceedings, it granted INR 20 lakhs (US $27,000) in punitive damages.

Interestingly, the courts have granted higher damages in cases where the defendants do not make an appearance at the proceedings, as compared to cases in which the infringers mount a defense.

One possible factor in such decisions is Section 135(3) of the Indian Trade Marks Act, 1999. This permits a defendant to avoid damages (other than nominal damages) if the defendant can prove that it was unaware of the infringement and ceased infringement after becoming aware of the plaintiff’s rights.

In Société des Products Nestlé S.A. and Anr. v. Satya Prakash Maheshwari and Ors., 2009 (39) PTC 129 (Del), the decision in the first instance denied any damages to the plaintiff, noting that the defendants were small-scale infringers. Upon appeal, the appellate court found the defendants had made admissions that they would immediately cease infringement, and had also requested that an injunction be granted if damages were waived. The appellate court also reiterated that the defendants were small-scale operators, and ruled against the grant of any damages owing to the provisions of the above-mentioned Section 135(3) of the Indian Trade Marks Act, 1999. Again, in J & P Coats Ltd. v. Rahul Gupta, 2009 (39) PTC 129 (Del), after the defendant appeared at the hearing and accepted the case for the injunction as pleaded by the plaintiff, the court ordered the defendant to pay only nominal damages.

One notable exception to the trend of increasing damages occurred in the case Ardath Tobacco Company Ltd. v. Mr. Munna Bhai and Ors., 2009 (39) PTC 208 (Del). In this action for trademark infringement involving cigarettes, the court took a lenient view on small-scale infringers, noting their inability to pay a large amount in damages, and awarded INR 25,000 (US $300) as nominal damages from each of the defendants.

Time Inc. Case Overruled in 2014

The landmark Time Inc. decision has since been overruled by the courts. Hindustan Unilever Limited v. Reckitt Benckiser India Limited, 2014 (57) PTC 495 (Del), pertained to a disparaging 30-second advertisement which was telecast widely across the country. Noting how frequently the advertisement was telecast and the advertisement expenses by both the plaintiff and the defendant, the court granted INR 20 lakhs (US $27,000) as actual damages.

The court relied on the reasoning in the English cases of Rookes v. Barnard, [1964] 1 All ER 367, and Cassell & Co. Ltd. v. Broome, 1972 AC 1027, to establish when punitive damages can be awarded. Further, in overruling the Time Inc. case, the court held that punitive damages cannot be treated as a civil alternative to criminal justice. The court instead held that punitive or exemplary damages may be awarded under a limited set of circumstances. This includes “wrongful conduct by the defendant which has been calculated by him for himself which may well exceed the compensation payable to the claimant.” Even in such cases, it was held that punitive damages should only be granted if the award of actual damages did not adequately compensate a plaintiff. The court thus awarded additional punitive damages of INR 5 lakhs (US $6,500) to the plaintiff.

Recent Developments

In Whatman International Limited v. P. Mehta and Ors., 2019 (78) PTC 51 (Del), the defendants were found to be habitually infringing the plaintiff’s registered trademark WHATMAN and related marks for filter papers. The defendants provided various undertakings to the plaintiff, yet still continued to infringe the plaintiff’s marks, despite an interim injunction.

The court found that the defendants had a history of repeatedly using the WHATMAN trademark and related color scheme. It also found their conduct had been repeatedly dishonest over the course of many years and they had even made false statements under oath before the court. In addition, the court joined the criticism of the reasoning in the Time Inc. case regarding punitive damages as relief on an overburdened criminal system. Instead, it found that the award of punitive damages was necessary owing to the defendants’ repeated, unremorseful, and wrongful conduct. The court awarded damages of INR 3.85 crore (US $550,000).

In another 2019 case, Koninlijke Philips N.V. and Ors. v. Amazestore and Ors., 2019 (78) PTC 618 (Del), the court discussed damages in detail and provided guidelines for awarding proportionate damages depending on the extent of bad faith on the part of the infringer. The plaintiffs filed multiple suits for infringement of trade dress, design, and copyright rights, which were being infringed by the defendants, a nexus of multinational companies involved in manufacturing, import and export, and sales of hair care products such as trimmers.

The plaintiffs were able to demonstrate a pattern of habitual infringement and contempt of court proceedings by the defendants, and the court accordingly awarded damages of INR 3.15 crores (US $450,000). The court held that the degree of mala fide conduct has a direct impact on the amount and nature of punitive damages that can be awarded in addition to actual damages.

The court gave the following guidelines for assessment of damages to be paid to plaintiffs:

Conclusion

The courts’ approach to the grant of damages has changed over the years. Where in the past the courts were granting actual and punitive damages on the basis of corrective justice and as a civil alternative to criminal action, recently, courts have moved to an approach that assesses the conduct of the defendant as a primary factor in calculating damages.

We can now expect decisions with a large amount of damages in a limited set of cases, depending on the nature of the defendant’s conduct and the plaintiff’s actions prior to and during litigation proceedings.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest.

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