India: Evolving Principles For Award Of Punitive And Compensatory Damages In India

Last Updated: 9 July 2019
Article by LexOrbis  

Introduction of punitive damages in IP litigations in India

The principles involved in awarding of damages in IP litigation in India have seen a great evolution in the recent past. The landscape focusing on the award of punitive damages was aggressively set in January, 2005 when a single judge of the Delhi High Court in a suit for trademark infringement in Time Incorporated v. Lokesh Srivastava and Anr. 2005 (30) PTC 3 Delobserved that "This Court has no hesitation in saying that the time has come when the Courts dealing actions for infringement of trademarks, copyrights, patents etc. should not only grant compensatory damages but award punitive damages also with a view to discourageand 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..."

"In Mathias v. Accor Economy Lodging, Inc. reported in 347 F.3d 672 (7th Cir. 2003) the factors underlying the grant of punitive damages were discussed and it was observed 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......."

"This Court feels that this approach is necessitated further for the reason that it is very difficult for a plaintiff to give proof of actual damages suffered by him as the defendants who indulge in such activities never maintain proper accounts of their transactions since they know that the same are objectionable and unlawful."

In the instant case, the Court accordingly awarded punitive damages of INR 5 Lacs (about USD 7000) to the Plaintiff as claimed, and observed that "the claim of punitive damages is of INR 5 lacs only which can be safely awarded. Had it been higher even, this court would not have hesitated in awarding the same. 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."

It is important to note that even though the court was unequivocally expressive in awarding punitive damages owing to the conduct and wrong committed by the Defendants; the Plaintiff 's claim for damages of INR 12.5 Lacs (USD 17,150) or the order of rendition of accounts of the profits illegally earned by the defendants by use of suchtrade mark, was not entertained by the court and it was observed that "Damages in the sum of INR 12.5 lacs as claimed cannot be awarded on account of the fact that the plaintiff has not succeeded in proving on record as to how and on what basis these damages have been calculated". Thus, these observations of the court also pertained to the element of compensatory damages wherein the plaintiff is required to establish as to how he has reached the claimed figure and what calculation has been employed.

Thereafter, a catena of judgements have relied upon the above ratio until 2014 when in the case of Hindustan Unilever Ltd. v. Reckitt Benckiser India Ltd. a division bench of the Delhi High Court overruled the aforesaid reasoning elucidated in the case of Time Incorporated v. Lokesh Srivastava andAnr. in respect of punitive damages and observed:

"With due respect, this Court is unable to subscribe to that reasoning...... An added difficulty in holding that every violation of statute can result in punitive damages and proceeding to apply it in cases involving economic or commercial causes, such as intellectual property and not in other such matters, would be that even though statutes might provide penalties, prison sentences and fines (like under the Trademarks Act, the Copyrights Act, Designs Act, etc) and such provisions invariably cap the amount of fine, sentence or statutory compensation, civil courts can nevertheless proceed unhindered, on the assumption that such causes involve criminal propensity, and award "punitive" damages despite the plaintiff's inability to prove any general damage. 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" is plainly wrong, because where the law provides that a crime is committed, it indicates the punishment. No statute authorizes the punishment of anyone for a libel- or infringement of trademark with a huge monetary fine-which goes not to the public exchequer, but to private coffers. Moreover, penalties and offences, wherever prescribed, require the prosecution to prove them without reasonable doubt. Therefore, to say that civil alternative to an overloaded criminal justice system is in public interest would be in fact to sanction violation of the law. This can also lead to undesirable results such as casual and unprincipled and eventually disproportionate awards. Consequently, this court declares that the reasoning and formulation of law enabling courts to determine punitive damages, based on the ruling in Lokesh Srivastava, and Microsoft Corporation v. Yogesh Papat and Anr., is without authority. Those decisions are accordingly overruled."

The division bench of the Delhi High Court in the above case also gave instructions to the courts to follow and observe the categorization and principles while awarding punitive/exemplary damages and the definitive conditions where such kind of damages would be applicable, namely:

  1. Where there has been oppressive, arbitrary or unconstitutional action by the defendant. In other words, where the conduct of the defendant in the case or before the court has been reprehensible, contemptuous and oppressive.
  2. Wrongful conduct by the defendant which has been calculated by him for himself which may well exceed the compensation payable to the claimant; and 3
  3. Any case where exemplary damages are authorised by the statute.
  4. The division bench also clarified that the burden of proof rests on the plaintiff to establish the facts necessary in order to bring the case within the above three categories.As it maybe appreciated, this approach is more circumspect and judicious in coming to a conclusion that the case warrants and/or ifthe plaintiff deserves an award of punitive or exemplary damages.

Although this case of 2014 overruled the findings/observations made in the case of Time Incorporated, the case of Time Incorporated has time and again been referred to by the courts where the question of awarding punitive damages has been an issue. This also signifies that where the conduct of the defendant has been reprehensible and contemptuous, the reasoning in the case of Time Incorporated still seemingly holds ground for disputes in all domains of IP including Trademarks, Patents, Copyright and impliedly invoked in Designs as the nature of protection is essentially of a copyright. These cases and other recent judgments on the issue of awarding punitive damages in light of the jurisprudential trend in this regard are succinctly discussed hereunder:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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