May The Courts Be With You – Exemplary Damages In IP Suits

Author: Manavi Jain

The world is more connected than ever now – credit to globalization. Information is readily available and accessible to everyone and anyone, with the (literal) click of a button. It is redundant to enumerate the various boons of globalization, but it is definitely worth mentioning one bane in particular – the proportional increase in the volume of infringing activities. The readily available information on brands has made it easier to produce better copies than ever before – and the ‘force’ of greed has pushed many to the ‘dark side’ of the law.

With the ball of infringing activities gaining momentum, are injunctions – the most commonly granted relief in IP disputes – enough? If not, then what is?

There are different kinds of reliefs available to an IP holder in cases of infringement and/or passing off in India. While the most commonly granted relief continues to be by way of injunctions, precedents stand witness to Courts also awarding damages proactively in cases involving infringement or passing off. Post 2017, there have been several instances where Courts in India have granted not just compensatory, but even exemplary damages to wrongdoers – provided the facts of the case check certain boxes.

Provisions for Damages under various IP Statutes

Section 135 of the Trade Marks Act, 1999 [Relief in suits for infringement or for passing off], Section 108 of the Patents Act, 1970 [Reliefs in suit for infringement], and Section 55 of the Copyright Act, 1957 [Civil remedies for infringement of copyright] contain the provision for reliefs available in a suit for infringement of trade marks, patents and copyrights respectively. One of the reliefs contained in this provision is that of ‘damages’. Exemplary damages are one type of remedy claimed and is awarded by the judiciary. This is punitive in nature.  

Exemplary Damages in IP Disputes: The Foundation

The most widely discussed cases when it comes to punitive/exemplary damages in IP suits are:

Delhi High Court’s 2005 Order in Time Incorporated v. Lokesh Srivastava and Ors.[1]

The Defendant in this case had commenced the circulation of a magazine under the title “TIME ASIAN SANSKARAN”, which was a slavish imitation of the Plaintiff’s reputed magazines TIME and TIME ASIA. While granting exemplary damages amounting to Rs. 5 lacs against the Defendant, the Court observed that “…This Court has no hesitation in saying that the time has come when the Courts dealing actions for infringement of trade marks, copyrights, patents etc. should not only grant compensatory damages but award punitive damages also with a view to discourage end dishearten law breakers who indulge in violations with impunity out of lust for money so that they realize that in case they are caught, they would be liable not only to reimburse the aggrieved party but would be liable to pay punitive damages also, which may spell financial disaster for them…This Court is of the view that the punitive damages should be really punitive and not flee bite and quantum thereof should depend upon the flagrancy of infringement.”

Division Bench of the Delhi High Court’s 2014 Order in Hindustan Unilever Limited v. Reckitt Benckiser India Limited[2]

The Division Bench overruled the observation in the Time case and observed“…With due respect, this Court is unable to subscribe to that reasoning, which flies on the face of the circumstances spelt out in Rookes and later affirmed in Cassel. Both those judgments have received approval by the Supreme Court and are the law of the land…”.

The reasoning spelt out vis-à-vis exemplary damages in the Rookes case [3] was also discussed by the Division Bench – “…The House defined three categories of case in which such damages might be awarded. These are:

a. Oppressive, arbitrary or unconstitutional action any the servants of the government;

b. Wrongful conduct by the defendant which has been calculated by him for himself which may well exceed the compensation payable to the claimant; and

c. Any case where exemplary damages are authorised by the statute…”

Observing the Trend in Recent Cases

August 2018

The Bombay High Court awarded exemplary damages amounting to Rs. 1.5 Crore in the case of Glenmark Pharmaceuticals Ltd. V. Curetech Skincare and Ors.[4] whilst observing “…It is clear that the Defendant No. 2 is not only indulging in infringing activities by repeatedly copying brands of other companies but also appears to be in complete violation of the FDA regulations. The conduct of the Defendant No. 2 shows that this Defendant has no regard or respect to the rule of law. The consumers and general public are being repeatedly cheated by the Defendant No. 2. I am of the opinion that had this Defendant been imposed with exemplary costs at the very beginning of their infringing activities, this Defendant would not have been audacious in repeating its infringing activities… Though the wrong done by the activities of the Defendant No. 2 cannot be quantified in terms of money, I feel that in the facts and circumstances of the present case, an amount of Rs. 1,50,00,000/- (Rupees One Crore Fifty Lakhs Only) is an appropriate amount of costs which should be paid by the Defendant No. 2.”

The Court directed the Defendant to pay damages to the Kerala Chief Minister’s Distress Relief Fund.

October 2018

The Bombay High Court relied on its reasoning in the Glenmark Case and awarded exemplary damages amounting to Rs. 1.5 Crore in the case of Shalina Laboratories Pvt. Ltd. And Ors. v. Twin Impex and Ors. [5]. The Court further observed “…Considering the dishonest conduct of the Defendants and considering the fact that the parties have left it to this Court to decide the amount of costs, even in the present case, I direct that an amount of Rs. 1,50,00,000/- (Rupees One Crore Fifty Lakhs Only) shall be jointly and/or severally paid towards costs…”

The Court directed the Defendant to pay the damages to the Tata Memorial Hospital, Mumbai.

March 2019

The Delhi High Court in Koninlijke Philips N. V. and Ors. v. Amazestore and Ors.[6] discussed and re-affirmed the ratio in the cases of Rookes and Cassel [7],  while making its observations on “aggravated or exemplary damages”. The Court observed – “Rookes v. Barnard (supra) specifically states that the award of aggravated damages is justified when the Court finds the conduct of the Defendant to be extremely mala fide and wanton…” While quoting from the Cassel case on the “terminology” of damages (inter alia, “at large”, “punitive”, “aggravated”, “retributory”, “vindictive” and “exemplary”), the Court further observed “… Speaking for myself, I prefer “exemplary”, not because “punitive” is necessarily inaccurate, but “exemplary” better expresses the policy of the law as expressed in the cases…”.

Finally, the Court held that “The mala fide actions of the Defendants prove that they fall in the last category in the chart hereinabove, and that compensatory damage is inadequate to punish the Defendants for their outrageous conduct and therefore to deter them from repeating it, the Court awards some larger sum, i.e. aggravated/exemplary damages... Accordingly, this Court is of the view that the actions of the Defendants merit an award of aggravated damages.”

The Court also came up with an illustrative chart (below) for calculating quantum of damages:

The Court directed the Defendant to pay the damages to the Plaintiff.

April 2019

The Bombay High Court in Nippon Steel & Sumitomo Metal Corporation v. Kishor D Jain & Anr.[8], while awarding damages amounting to Rs. 5 Crores against the Defendant, held that “…While the parties are willing to settle the matter here, I am of the view that an example must be made of the present Defendants, to deter such entities / persons from conducting such fraudulent activities. They must know that the Courts are no longer willing to let such activities slide by and shall deal with the same with an iron hand… hough no amount of costs can justify the acts of the Defendants, I think costs of Rs. Rs.5,00,00,000/- (Rupees Five Crores Only) shall certainly act as a deterrent factor not only to these Defendants but also to the other unscrupulous parties/entities.”

The Court directed the Defendant to pay the damages to the Tata Memorial Hospital, Mumbai.

Conclusion

Law evolves to cater to the needs of the evolving society. As can be seen from the above cases, the Courts in India are adopting a rather liberal, pro-brand owners’ approach in granting exemplary damages against wrongdoers. To prevent exploitation and misuse of exemplary damages, the Courts have ensured uniformity in the factors leading to the grant of  exemplary damages, after a thorough evaluation of the factual matrix. While the principles laid down in the cases of Rookes and Cassel still lead the way in determining whether an award for exemplary damages is warranted, other factors that seem to play a role are inter alia the history of the wrongdoer (i.e., whether she/he is a habitual offender), public policy aspect and consequences of the infringing activity, etc. Further, it is interesting to observe that damages are, in certain cases as directed by the Courts, payable to various “funds”, hospitals or charitable organizations and not the Plaintiff.

[1] 2005 (30) PTC 3 (Del)

[2] 2014 (57) PTC 495(Del)

[3]Rookes v. Barnard, [1964] 1 All ER 367

[4] 2018 (76) PTC 114 (Bom)

[5] MIPR 2018 (3) 282

[6] 2019 (78) PTC 618 (Del)

[7] Broome v. Cassel and Co., 1972 AC 1027

[8] COMIP (L) No. 283 of 2019

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

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