A pragmatic approach to damages

30 November 2019

A pragmatic approach to damages

In hearing IP disputes, courts in India traditionally have been conservative in granting punitive/ aggravated/exemplary damages, while limiting themselves to imposing actual damages in intellectual property disputes. The Delhi High Court has gradually started building jurisprudence to work towards set norms which can ensure that infringers are burdened with punitive damages apart from actual damages.

In Koninlijke Philips N.V. & Anr. Versus Amazestore & Ors and in Koninlijke Philips N.V. & ANR. Versus Amitkumar Kantilal Jain & Ors., the Delhi High Court, in a decision passed on April 22, 2019, highlighted some of the principles which a court ought to look into while granting punitive damages. The commercial suit was brought by Philips towards infringement of its registered design in respect of its beard trimmers as well as infringement of the copyright in the artistic work on the product packaging of such trimmers.

In the captioned matter, the defendants, amongst which were the brand owner of the infringing product, chose not to appear before the court despite being duly served with a summons, and even refused to accept service of the summons while being in contempt of the injunction order passed in the suit. Furthermore, in order to evade the injunction order, the brand owner also deliberately changed its modus operandi and kept changing the model numbers of its trimmers and routed the impugned products through another entity after the suit was instituted and the order of injunction was passed. The defendants made such efforts solely to escape detection.

The court, while holding that the plaintiffs were entitled to a decree of permanent injunction against the defendants restraining infringement of registered design of the beard trimmer on account of deliberately imitating the shape and configuration of the plaintiff’s beard trimmers, were as well as entitled to a decree of permanent injunction restraining infringement of copyright, passing off and unfair competition on account of unauthorized and brazen reproduction of the plaintiffs’ literary and artistic work in the form of copying the product literature, promotional material and packaging of such beard trimmers, also held that they were entitled to compensatory damages as well as aggravated/exemplary damages.

While the plaintiff computed the compensatory damages that were due on account of such blatant infringements of its copyright in the design as well as copyright in the literary and artistic work as well as common law rights in the trade dress of the trimmers, it also prayed for aggravated/exemplary damages while referring to Hindustan Unilever Limited v. Reckitt Benckiser India Limited which inter alia held that “Furthermore – and perhaps most crucially – the punitive element of the damages should follow the damages assessed otherwise (or general) damages; exemplary damages can be awarded only if the court is satisfied that the punitive or exemplary element is not sufficiently met within the figure which they have arrived at for the plaintiff‘s solatium.”

While awarding compensatory damages as claimed by the plaintiffs, the court also held that the plaintiffs were entitled to aggravated/exemplary damages of a total of Rs10 million (US$139,300) over and above the compensatory damages on account of the degree of mala fide conduct which has a direct impact on the quantum and nature of damages that could be awarded in addition to a claim for actual/compensatory damages. The court again referred to the Hindustan Unilever Limited, which in turn relied upon Rookes v. Barnard, which laid down three categories of cases in which punitive/exemplary damages might be awarded, one amongst which is “(b) Wrongful conduct by the defendant which has been calculated by him to make profit for himself which may well exceed the compensation payable to the claimant.” The court observed that Rookes v. Barnard further goes onto elucidate category (b) as follows:

1. Cases in the second category are those in which the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff

2. Where a defendant with a cynical disregard for a plaintiff’s rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity

3. Exemplary damages can properly be awarded whenever it is necessary to teach a wrongdoer that tort does not pay 

The court further went onto observe that Rookes v. Barnard 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 and proceeded to craft a rule of thumb that should be followed while granting damages, which was summarized in the following chart:

No.  Degree of
mala fide conduct
Proportionate award
1 First-time innocent
infringer
Injunction
2 First-time knowing
infringer
Injunction + partial costs
3 Repeated knowing infringer
which causes minor impact
to the plaintiff
Injunction + costs + partial
damages
4 Repeated knowing infringer
which causes major impact
to the plaintiff
Injunction + costs +
compensatory damages.
5 Infringement which was
deliberate and calculated
(Gangster/scam/mafia) +
wilful contempt of court
Injunction + costs + aggravated
damages (compensatory +
additional damages)

While clarifying that the chart is illustrative and is not to be read as a statutory provision, it was observed that the courts are free to deviate from the same for good reason.

The court held that the mala fide actions of the defendants prove that they fall in the last category in the chart hereinabove, and because compensatory damages are inadequate to punish the defendants for their outrageous conduct and therefore to deter them from repeating it, the court awarded a larger sum, i.e. aggravated/exemplary damages.

This positive and pragmatic approach augurs well for intellectual property owners, as now the courts seem ready and willing to not only grant permanent injunctions but also to burden the defendant’s with actual/compensatory damages as well as exemplary/aggravated damages in fit and deserving cases.

The court thereafter proceeded to hold that the plaintiffs are further held entitled to actual costs of litigation including lawyer’s fees.


About the author

 Debjyoti Sarkar

Debjyoti Sarkar

Debjyoti Sarkar has been practicing for over 10 years. He handles large trademark portfolios for clients in sectors of engineering, healthcare, fast moving consumer goods, food and beverages, clothing and footwear, among others. He advises on all aspects of trademark laws ranging from availability searches the pre-filing stages through trademark clearance phases, applications, prosecution, oppositions, maintenance of registrations to other post registration activities. He also advises on trademark licensing and assignments. Also dealing with contentious matters concerning his clients’ foreign trademark portfolios, Sarkar is actively involved in matters concerning passing off and infringement actions before the courts and domain name disputes before WIPO and the .IN Registry.

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