Trend towards punitive damages for trademark infringement

The Trade Marks Act, 1999, which was passed in order to bring Indian trademark law into line with international laws, recognizes and provides for relief for infringement and passing off. Under the Act, the Indian courts can grant the following reliefs:

1. permanent and temporary injunctions;
2. rendition of accounts;
3. compensatory and punitive damages;
4. delivery of the infringing goods, labels or marks for destruction or erasure.

Until recently, granting of injunctions was the usual practice of Indian courts, however this has gradually been changing to a system in which the courts (particularly the high courts) have been awarding both compensatory and punitive damages for trademark infringement.

This change can be attributed to an increase in piracy and the need for deterrence. Damages are compensation paid by an infringer to the person whose rights have been infringed.

Punitive damages are usually awarded in addition to compensatory damages in cases of wilful infringements. They can also be granted in cases of repeated violations of the rights of an intellectual property rights holder.

The determination of the amount of damages is generally at the discretion of the court, which might consider factors such as the loss suffered by the plaintiff, the profits made by the defendant by infringing the plaintiff’s rights, and the damage to the reputation and goodwill associated with the plaintiff’s goods and services.

Compensatory or punitive?

The practice of awarding punitive damages was first started by the Delhi High Court, in the case of Time Incorporated v Lokesh Srivastava & Another, in which the court, in addition to Rs500,000 (US$11,000) for loss of reputation, awarded the plaintiff another Rs500,000 in punitive damages.

In drawing a distinction between compensatory and punitive damages, the court stated that compensatory damages are awarded in order to compensate the aggrieved party for losses incurred, whereas punitive damages are awarded with the intention of deterring the wrongdoer from indulging in unlawful activities in the future.

In Toyota Jidosha Kabushiki Kaisha v Biju & Another, the High Court of Delhi recently awarded Toyota (the plaintiff) punitive damages of Rs50,000 in addition to restraining the defendant from manufacturing, selling, storing for sale or advertising auto components under the trademark Toyota or any other mark identical or similar to the plaintiff’s registered trademark. The plaintiff’s trademark, Toyota, has been in use in India since 1957, is well recognized and enjoys an enviable reputation.

The first defendant, Mr Biju, is the proprietor of the second defendant, Benz Auto Spares. Biju and Benz Auto Spares deal in automobile spare parts. Upon receiving information that the defendants were selling fake spare parts under the name Toyota, the plaintiff filed a suit for a permanent injunction, rendition of accounts and damages and the delivering up of infringing material.

The third defendant compromised with the plaintiff while the suit was pending, and the other defendants proceeded to trial.

After a close perusal of the evidence, the court observed that the defendants had been found using not only the corporate name but also the registered trademark of the plaintiff company, without even trying to camouflage their infringement by making minor changes. The court found the infringement to be blatant and unequivocal.

The court further observed that selling goods of inferior quality under the plaintiff’s name may adversely affect the financial interests of the plaintiff, besides giving the defendant unwarranted enrichment.

With regard to punitive damages, the court referred to previous cases. Besides the case of Time Incorporated, mentioned above, it also referred to Hero Honda Motors Ltd v Shree Assuramji Scooters, in which the Delhi High Court noted that the defendant had chosen to stay away from the proceedings and said that in such cases punitive damages should be awarded, since otherwise a defendant who appears in court and produces

his account books would be liable for damages whereas a party who chooses to stay away from the court proceedings may escape liability.

In Microsoft Corporation v Deepak Raval, the Delhi High Court observed that Indian courts are taking an increasingly hard line on piracy and are awarding punitive damages even in cases where, due to the absence of the defendant, the exact figures of sales made using an infringing copyright and/or trademark are not available.

In Larsen and Toubro Limited v Chagan Bhai Patel, the Delhi High Court observed that if the defendant, irrespective of not having contested the suit, were not burdened with punitive damages it would amount to encouragement of the violators of intellectual property.

Finally, the court noted that a lot of energy and resources go into litigating against infringers of trademarks and copyrights and those who try to free-ride upon the reputation and goodwill of well known marks. If the violators of intellectual property rights are allowed to go without paying punitive damages, it would mean that dishonest practices are condoned and would thus give an unfair advantage to a deceitful infringer over those who have a bona fide defence to bring before the court.

Moving in the right direction

To conclude, although the practice of awarding punitive damages in India is still at an evolving stage, nonetheless, cases like the Toyota case and many before it are creating a strong basis upon which the principle may develop further.

There is no denying that punitive damages can be beneficial in terms of deterring infringers from infringing the rights of intellectual property rights holders. The decisions of the Indian courts seem to be pushing the development of the principle in the right direction.

Manisha Singh Nair is a partner at Lex Orbis, an intellectual property practice law firm headquartered in New Delhi