India: Quantum Of Punitive Damages In IPR Disputes

Last Updated: 7 June 2019
Article by Vijay Pal Dalmia, Partner and Satyam Sharma

By Vijay Pal Dalmia, Advocate
Supreme Court of India & High Court
Partner Vaish Associates Advocates
Email id: vpdalmia@vaishlaw.com Mobile No.: +91 9810081079
LinkedIn: https://www.linkedin.com/in/vpdalmia/
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Twitter: @vpdalmia
AND -Satyam Sharma, Symbiosis Law School, Pune
E-mail id: satyam98.2011@gmail.com Phone no: 9911456255

Indian Jurisprudence pertaining to the Quantum of damages in cases of IPR disputes has been uncertain for a very long time. While the parliament has laid down a formula to calculate compensation in acts such as the Motor Vehicles Act for 'no fault liability' or the Workmen Compensation Act, 1923 a straightjacket formula to calculate the quantum of damages awarded in IPR disputes seems to be impermissible. While the judiciary has played a pro-active role in elucidating clearer and just guidelines for the compensation under the MV Act,1 their approach towards IPR disputes vis-a-vis damages has made the process confusing and perplexing. Although there seems to be some certainty in context of calculating compensatory damages the judicial approach in calculation of punitive damages is what seems to be a matter of concern. While awarding compensatory damages the court generally appreciates the computation of the same by an expert in that particular field but there seems to be no uniformity in awarding punitive damages by analyzing various judgments of the courts. In one such case Microsoft Corporation v. Deepak Rawal2 the court relied on the quantification of damages provided by a Chartered Account who had an experience of 18 years while calculating compensatory damages.

The rationale between compensatory damages and punitive damages has been enumerated by the courts in multiple cases while award of compensatory damages is considered to make up for the loss suffered by the plaintiff, the rationale behind granting punitive damages is to deter a wrong doer from indulging in unlawful activities.3 The grant of punitive damages in cases of IPR disputes can be traced back to the case of Time Incorporated v. Lokesh Srivastava4 where the court for the first time elaborated the need for punitive damages in cases of IPR disputes ''to discourage and 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". The Delhi High Court in this judgement referred to the case of Mathias v. Accordingly Economy Lodging,5 and held that the grant of punitive damages relieves the pressure on an overloaded system of criminal justice by providing a civil alternative to criminal prosecution of minor crimes. A sum of 5 lakhs was awarded as punitive damages to the appellants in the present case but no justification was given as to the how the court computed this amount. This view was further reaffirmed in the case of Adobe Systems Inc. v Mr. P.Bhooominathan6 and Microsoft Corporation v. Rajendra Pawar7. In these judgments although the courts granted punitive damages none of them gave an explanation as to what factors need to be taken into consideration while determining its measure.

Time Inc. was overruled by a division bench of the Delhi High Court in the case of Hindustan Unilever Limited v. Reckitt Benckiser India Limited8. The court in this case upheld the award of 5 lakhs as punitive damages awarded by the single judge placing reliance on two landmark judgments Rookes v. Barnard9 and Cassell v. Broome10. The House of Lords in Rookes v. Barnard defined three categories of case in which punitive damages might be awarded. These are:

  1. Oppressive, arbitrary or unconstitutional action of the servants of the government.
  2. Wrongful conduct by the defendant which has been calculated by him for himself which may well exceed the compensation payable to the claimant.
  3. Any case where exemplary damages are authorized by the statute.

Moreover Cassell & Co. Ltd. v. Broome, upheld these categories for which exemplary damages could be awarded, but made important clarificatory observations.

  1. That the mere fact that the case falls within the categories does not of itself entitle the jury to award damages purely exemplary in character. They can and should award nothing unless they are satisfied that the punitive or exemplary element is not sufficiently met within the figure which they have arrived at for the plaintiff's solatium.
  2. That, in assessing the total sum which the defendant should pay, the total figure awarded should be in substitution for and not in addition to the smaller figure which would have been treated as adequate solatium, that is to say, should be a round sum larger than the latter and satisfying the jury's idea of what the defendant ought to pay.

These two judgments have been affirmed by the Supreme Court and are the law of the land.11 Hindustan Unilever although lays down the criteria which needs to be met while awarding punitive damages the peculiarity still lies that the courts have still not evolved proper standards to ensure proportionality in the award of such exemplary or punitive damages. Further, the reasoning that "one function of punitive damages is to relieve the pressure on an overloaded system of criminal justice by providing a civil alternative to criminal prosecution of minor crimes" was discarded, because where the law provides that a crime is committed, it indicates the punishment. Therefore, the reasoning that civil alternative to an overloaded criminal justice system is in public interest would be in fact to sanction violation of the law.

Since the pronouncement of this Judgement even though the criteria to grant punitive damages has been settled to a certain extent, the mode of its determination still remains a mystery. The courts in recent judgments continues its trend of awarding punitive damages explaining 'why' but not how they reached that figure. In Koninlijke Philips v. Amazestore12 the Delhi High Court awarded damages to the appellants for copyright and design infringement. This case is a perfect example of how courts compute compensatory damages but doesn't discuss as to how the court in the case decided the measure of punitive damages as 50 lakhs. The Delhi High Court in another case awarded damages of Rs. 3,50,000/- without explaining the rationale behind the figure.13 The Bombay High Court in Nippon Steel & Sumitomo Metal Corporation v. Kishor D Jain14 awarded costs of Rupees Five Crores to act as a deterrent factor not only to these Defendants but also to the other unscrupulous parties/entities without giving any reason whatsoever behind this random figure.

The courts in India need to give due attention to the concept of "reasoned decision" and make sure that they explain the reason behind not only the grant of punitive damages but the computation of the figure as well. There is a requirement of some broad guidelines if not specific to reach the figure for punitive damages, considering the subjective nature of the attributes it is dependent on such as loss to goodwill, economic status of the respondent etc. The courts might as well be considering these attributes while deciding the measure but still there is a need for them to elaborate on them while delivering the judgments. This would help create uniformity in the awards comprising of punitive damages and make the whole procedure much more transparent and certain.

Footnotes

1. National Insurance Company Ltd. v. Pranay Sethi, AIR 2017 SC 5157

2. Microsoft Corporation v. Deepak Rawal, 2006 (33) PTC 122 (Del).

3. Aktiebolaget Volvo and Ors. v. A.K. Bhuva and Ors, 2006 (32) PTC 682 (Del).

4. Time Incorporated v. Lokesh Srivastava and Ors.,116 (2005) DLT 599.

5. Mathias v. Accordingly Economy Lodging, 347 F.3d 672 (7th Cir. 2003).

6. Adobe Systems Inc. and Anr. v Mr. P.Bhooominathan and Anr, (2009) 39 PTC 658 (Del)

7. Microsoft Corporation v. Rajendra Pawar & Anr, (2008) 36 PTC 697 (Del).

8. Hindustan Unilever Limited v. Reckitt Benckiser India Limited, 2014 (57) PTC 495 (Del).

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

10. Cassell & Co. Ltd. v. Broome, 1972 AC 1027.

11. Ghaziabad Development Authority v. Balbir Singh, (2004) 5 SCC 6; Lucknow Development Authority v. M.K. Gupta, 1994 SCC (1) 243.

12. Koninlijke Philips N.V. and Ors. v. Amazestore and Ors., 2019 SCC OnLine Del 8198.

13. Louis Vuitton Malletier v. Iqbal Singh and Ors., 2019 SCC OnLine Del 7879.

14. Nippon Steel & Sumitomo Metal Corporation v. Kishor D Jain & Anr., Notice of Motion(L) NO. 810 OF 2019 IN COMIP (L) NO. 383 OF 2019

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