Calculating punitive damages in infringement

By DPS Parmar, LexOrbis
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Although there have been several intellectual property (IP) infringement cases in India, most of the time the litigants either settle the dispute out of court or are satisfied with a permanent injunction. Injunctions including quia timet injunctions are being granted to stop the infringers, but real punishment in the form of damages or loss of profit remains rare.

The highest damages award in India was in the Microsoft v Yogesh Popat (2005) case, where the court considered the violation of trademarks and copyright and, after calculating the actual loss of business caused to the plaintiff, awarded consolidated damage of ₹1.97 million (US$28,500). In another case, Glenmark Pharmaceuticals Ltd v Curetech Skincare and Galpha Laboratories Ltd, Bombay High Court awarded exemplary damages of ₹15 million on finding the defendant to be a habitual offender. Though the amount of punitive damage was fixed in several other cases, in the absence of judicial guidelines, the courts simply follow the double or treble damage rule or grant the actual damages as claimed.

DPS Parmar id
DPS Parmar
Special counsel
LexOrbis

The judgment in the Time Incorporated v Lokesh Srivastava case triggered a rise in damage awards. The view of the court that punitive damage should really be punitive and not merely a “flea bite” found favour with courts and punitive damages were granted in many cases. In Tata Sons v Fashion ID (2005) and Buffalo Network v Jain (2005), Delhi High Court awarded punitive damages of ₹100,000 each to the plaintiffs. However, this trend nearly stopped when a division bench overruled the reasoning in the Time judgment. Although the bench clearly indicated that such rulings may lead to the grant of disproportionate awards, it did not lay down the rules for determining the amount of any punitive award.

One way to resolve the issue of calculating the damage amount is to follow the treble damages award rule, which allows the courts to fix punitive damages at three times the compensatory damages to be awarded to the plaintiff. For example, if the compensatory damages amounted to ₹100,000, the plaintiff would get an award of ₹300,000.

However, Indian courts prefer to double the damage. For example in the Time case, the court awarded ₹500,000 as punitive damages for infringement with additional compensatory damages of ₹500,000 for loss of reputation and goodwill to the plaintiff. However, in the Yahoo Inc v Rinshad Rinu & Ors case, the punitive award was one-and-a-half times the compensatory damages, ₹300,000 and ₹200,000 respectively.

In the Microsoft Corporation v Deepak Raval (2006) case, Delhi High Court awarded only the damages actually claimed in the suit. In doing so, the court observed that though the total damages were worked out to ₹12.82 million, the damages claimed in the suit were ₹500,000. Therefore, there was no option but to limit the award to ₹500,000.

This case highlights the importance of calculating the quantum of the damages claimed in a suit correctly thereby giving no room for the court to restrict it to an amount that is less than the actual loss suffered.

These cases show that an expert has to calculate the loss suffered before a suit is filed and the appellant should seek the maximum punitive damages as courts are not reluctant to grant what is claimed.

Indian courts also look into the conduct of the defendant before awarding punitive damages in IP rights violation cases. In the Microsoft Corporation v Rajendra Pawar & Anr case, the court, coming down heavily on the defendant for failing to cooperate with the court, observed that, “such flagrancy of the defendant’s conduct is strictly deprecatory, and those who recklessly indulge in such shenanigans must do so at their peril, for it is now an inherited wisdom that evasion of court proceedings does not de facto tantamount to escape from liability”. Similarly, in Nokia Corporation and Ors v Movieexpress and Ors, the court awarded punitive damages of ₹500,000 for non-appearance.

Though in all these cases the courts punished the IPR offenders, they fell short of laying down a principle to calculate the amount of the punitive award. The assimilation of the punitive damages remedy into the field of IPR violation has just begun.

However, one thing is certain, if the defendant tries to hoodwink judicial proceedings the courts will not hesitate to grant punitive damages. Effective enforcement in the form of judicial remedies are available and Indian courts do not hesitate to award punitive damages to strictly enforce IP rights.

DPS Parmar is a special counsel with LexOrbis’s IPAB practice group.

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