The Delhi High Court, in a recent trademark matter before it, awarded exemplary compensation to the U.K. based plaintiff, Whatman International Limited in lieu of damage caused to its various intellectual property rights by the defendants since a period stretching over 25 years.
The defendants had continually and persistently infringed trademark, copyright and trade-dress, while passing off their goods under the trademark of Whatman International limited and diluted the market by fraudulently selling duplicate goods, poised to be those of the plaintiff's.
In this case the plaintiff had lodged an FIR against the defendants claiming they have continuously violated its trademark by making and selling illicit copies of the goods sold by the plaintiff and acting in concert to illegally circulate the goods in the market thereby resulting in huge damage to the plaintiff's business.
The Plaintiff is involved in the manufacture and selling of various products including Filter papers and has been carrying on the business with the same trademark for over 250 years. Further, the mark whatman has been registered in India under the classes of 1, 9 and 16 of schedule 4 of trademark act, 1999. In manufacturing the filter paper the plaintiff had been using the distinctive colour combination and script consisting of white background with blue inscription.
The defendants have been using the identical colour combination for filter paper sold under various other trademarks such as "HIRAL", "ACHME", "LABSMAN", "U-CHEM" and "SUN". The defendants have habitually infringed, manufactured and sold counterfeit whatman filter paper beginning from the year 1992 and thereafter in 2005. The defendants gave undertakings to the effect that they would not indulge in such activities but the undertaking was not deterrent enough to stop them from doing so.
Following which the plaintiff preferred the present suit and an ad interim injunction was granted in 23rd May, 2014 following which seizures were made by the appointed commissioners. Even this could not prevent the defendants from selling the infringing products.
Of the seven defendants that were made a party to the case, all of them are related to each other except one although it has been vehemently claimed that they run their independent business and are not connected to each other. Further, although the defendants had challenged the rights of the plaintiff on the said mark in their written statements but there was no opposition as far as the relief of permanent injunction was concerned.
The issues, thereby, arising before the Delhi High Court were:
- The disposition of the application under Order 39 Rule 2A moved forth by the plaintiff.
- The manner and mode of the delivery of the seized material to the plaintiff.
- The rendition of accounts and profits/damages as well as the computation of the costs that may be awarded to the plaintiff.
The defendants had continued with the infringement even after the court had passed an order restraining them from "manufacturing , selling , importing , offering for sale, distributing and advertising the trademark whatman as also proprietary packaging Schleicher & Schuell and GE healthcare or any other deceptively similar mark of plaintiff " hence, the disobedience constitutes violation of order 39 rule 2A as well as the Contempt of Courts Act, 1971. The court while closing on this question, ended with stating that such callous and fraudulent attitude of the defendant must not go unchecked and must attract punishment to deter circumvention of court orders. The conduct of the defendants in the present case clearly attracted the provisions of Section 14 of the Contempt of Courts Act, 1971.
In a recent judgement, a single judge of the Delhi High Court, in the matter of Louis Vuitton Malletier v. Mr. Omi & anr1. took a strict view and observed that the defendant made a false statement under oath, The court took the view that it strikes a blow at the rule of law and no court can ignore such conduct which has the tendency to shake public confidence in judicial institutions because the very structure of an ordered life is put at stake. In the present case also it could be observed that the defendants did not slightly shudder in making false and dishonest statements before the court and were therefore liable to be punished for the contempt and disobedience of the orders of the court.
The Defendants No 1-5, 7 & 8 were found guilty of infringement of the plaintiff's trademark and also of passing off their goods as that of the plaintiff's, thereby causing substantial damage to the plaintiff as well as the consumers who bought the goods. The extended timeline of violation presents that the illegalities committed by the defendants were deliberate and continuous. The pleadings contained false statements which were subsequently brought to light by the reports of the local commissioners and even more so, the little regard given to the court is contemptuous in nature. Therefore, so far as the damages for the plaintiff is concerned, the defendant are liable for selling both counterfeit products as well as lookalike filter paper under various marks similar to the packaging, colour combination and get up of the original Whatman products.
Applying the judgment of Hindustan Unilever Limited v. Reckitt Benckiser India Limited2, the Delhi High Court held the defendants liable for punitive as well as general damages. The Court discussed the avenue of awarding punitive damages in civil cases. The Hon'ble judge observed that although the Supreme Court has affirmed the principles of awarding punitive damages as held in the Rookes v Barnard3 and Broome v Cassell & Co Ltd4, the application has been with respect to cases of abuse of authority leading to infringement of constitutional rights or by public authorities but the said standards are yet to be applied while adjudicating damages in libel or tortuous claims with economic matters such as Intellectual property matters. The court further observed that the caution laid down in Cassel remain constant that damages remain a civil and not a criminal remedy even when an exemplary award is appropriate, and that the bottom line while deciding such cases remains that the judges need to keep in mind that in making such awards, they are putting money in the plaintiff's pocket. Further, the awarding of punitive damages must always follow the general damages, where the court feels that the general damages is not sufficient to compensate the loss caused to the plaintiff, it(punitive damages) can never be a separate head thereof.
Moreover, the Hon'ble Court while dealing with the impugned judgment passed by the lower court with regards to punitive damages, it discussed the judicial pronouncement relied on by the lower court to arrive at the conclusion, Times Incorporated v. Lokesh Srivastava5 in which the Single judge in an ex parte trademark infringement action held:
'This Court has no hesitation in saying that the time has come when the Courts dealing actions for infringement of trade-marks, copy rights, patents etc. should not only grant compensatory damages but award punitive damages also with a view 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". The Single judge while further discussing the ratio laid down in Mathias v. Accor Economy Lodging, Inc6 observed that another function of punitive damages is to ease the pressure on the criminal justice system by way of civil alternative remedy during prosecution of minor crimes and that such an approach is further necessitated for the reason that it is difficult forplaintiff to give proof of the actual damage caused as the defendants indulging in such activities usually avoid maintaining proper accounts of transactions to avoid prosecution.
The Delhi High Court while analysing this judgment has observed that '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'. And further, the statutes which prescribe offences of criminal nature also provide the penalties to be awarded in case of commission of the same. Therefore, to say that awarding such exemplary damages to ease the overloaded criminal justice system would be to sanction violation of law. The result therefore, of not following the rule of caution laid down in Brookes (supra) and Cassel (Supra) would result in disproportionate and judge centric awards, thereby resulting in flagrant miscarriage of justice. Therefore, the judgments in Lokesh srivastava(supra) and Microsoft Corporation v. Yogesh Papat & anr7, enabling courts to determine punitive damages based on such reasoning are without authority and thus overruled by this judgment by the Delhi High Court.
The circumstances necessitating award of punitive damages as laid down in Rookes and Cassel and further confirmed by the Hon'ble Supreme Court 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.
Thereby, applying these principles in the present case the Delhi High Court established it as a case fit for awarding of punitive damages and awarded a sum amounting to Three Crores and Eighty Five Lakhs as computation of damages and costs to the plaintiff i.e Whatman Inc.
By this judgment the Delhi High Court has established that the courts need to exercise a great degree of caution while awarding exemplary punitive damages in cases of Libel and tortuous claims involving financial and Intellectual property matters and that the circumstances and rule of caution laid down in Brookes and Cassel and further confirmed in Hindustan Unilever (supra) by the Hon'ble Supreme Court is the rule of law and of paramount importance while adjudicating such claims.
Footnotes
1 CS(COMM) 351/2016
2 RFA(OS) 50/2008, decided on 31st ,2014
3 [1964] AC 1129
4 [1972] 2 WLR 645
5 116 (2005) DLT 569
6 347 F.3d 672 (7th Cir. 2003)
7 2005 (30) PTC 245 (del)
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