Please join me in thanking Prakruthi for documenting this talk so well and thereby advancing the cause of IP education in India.
Talk on “Injunctions v. Damages in Intellectual Property Cases” by Justice Arjan K. Sikri
(Prepared by Prakruthi Gowda, 4th year, NUJS, Kolkata)
The Honourable Judge presented the judiciary’s perspective with respect to the development of jurisprudence in Intellectual Property infringement. He began with by explaining basic concepts of infringement in Trademark law and identified three main kinds of infringement in trademarks, namely:
(i) when identical marks are used on similar goods.
(ii) When similar marks are used on identical goods.
(iii) When identical marks are used on identical goods (Counterfeiting).
He discussed the Confusion or the Deception test and Civil and Criminal Remedies that are available to the plaintiff in the instance of an infringement. Injunctions and damages or accounts of profit are among the civil remedies that are available to the plaintiff.
The three kinds of injunctions that a plaintiff can seek are
(a) Temporary injunction.
(b) Permanent Injunction.
(c) Mandatory Injunction.
Temporary Injunctions are granted under Order XXXIX of the Civil Procedure Code. Temporary injunctions are grnated during the pendency of the suit, when there is a need to restrain the defendant and where immediate relief is required. There are however certain conditions that need to satisfied before a temporary injunction is granted. A prima facie case needs to established before the court as the court has not formed a final opinion and balance of convenience with respect to both the parties needs to be looked into.
The Honourable Judge discussed balance of convenience with special reference to IP cases. Whereby he pointed out that one of the most relevant considerations before granting a temporary injunction is whether the denial of a temporary injunction can be compensated by the granting of damages at the conclusion of the suit. Another relevant consideration which he said has begun to increasingly influence judges is public interest. For instance in the case of pharmaceutical goods, public interest needs to be considered as the granting or refusing of an injunction would directly affect the public.
He then discussed his judgment in the case of Kanungo Media (P) Ltd. Vs. RGV Film Factory, 138 (2007) DLT 312. The controversy in this case was with respect to a film produced by the Ram Gopal Verma Film Factory titled Nishabd which was to be released in ten days. The plaintiffs claimed right over the title on the ground that it had already produced a movie titled ‘Nisshab’, which had won several awards. The plaintiff prayed for a decree of permanent injunction preventing the Defendants from using the brand name and title “NISHABD”. They also prayed for an ad interim injunction to restrain the defendants from using the name and the title ‘NISHABD’ for their film. The case extensively looks into the position of law in relation to legal protection of titles.
Temporary injunction was refused on the grounds that the plaintiff had failed to approach the court earlier. The same line of reasoning was previously adopted in the case of Biswaroop Roy Choudhary v. Karan Johar, 2006 VII AD (Delhi) 351 where it was held that since the plaintiff had waited for the defendants to expend large sums of money and energy in the completion of the film with the same title, the balance of convenience shifts in favour of the defendant. He then discussed the vacating of the stay with respect to release of the Hindi remake of the Tamil film Ghajini. He noted that granting of an interim injunction would have caused irreperable damage to the defendant. Damages were thus deposited by the defendant to be paid on the conclusion of the case.
The other forms of relief that can be obtained in infringement suits are damages or an account of profits.The former is the calculation of damages on the basis of basis of the loss suffered by the plaintiff where as the latter is calculated on the basis of profits earned by the defendant . Punitive damages are also awarded in some cases to act as a deterrent.
The following considerations are taken into account in the calculation of lost profits of the plaintiff:
i) Royalty which is lost by the plaintiff owing to infringement.
ii) The loss caused by ‘but for sales’ i.e., the profits that would have accrued to the plaintiff from the sale of his product in the instance of non-infringement. This would include the actual loss in sales as well as the loss of profits caused by the loss in reputation and goodwill.
iii) The loss caused to the plaintiff when he is forced to reduce the price of his goods in the market in order to compete with the pirated or counterfeit version (which is priced much lower owing to the reduced cost of production).
The jurisprudence in relation to damages is very well developed in the United States unlike in India where the jurisprudence is oriented towards the granting of injunctions in intellectual property infringement cases. In this context the Honourable Judge referred to the case of EBay Inc. v. MercExchange, 547 U.S 388 (2006) where the US supreme court held that patent cases were no different from other cases when it came to applying the four factor test for determing whether or not an injunction ought to be grnated: prima facie case, balance of convenience, irreparable injury and public interest. He made a reference to contentious questions that arose after this decision as to whether refusal of an injunction amounts compulsory licensing.
The judge pointed out that in India 75% of intellectual property rights infringement cases are filed under the original jurisdiction of the High Courts. Cases are often valued at more than Rs. 20 lakhs as the discretion with respect to valuation of suits in the case of damages and injunction vests with the plaintiff. The entire battle with respect to infringement suits is in relation to temporary injunction under Order XXXIX (Rules 1 and 2) of the Civil Procedure Code. Appeals are filed in most cases to the Supreme Court on the granting or refusal of an injunction by a Single Judge of the High Court. 90% of jurisprudence in relation to intellectual property rights infringement is under Order XXXIX and thus cannot be treated as precedents. Numerous cases are settled after the granting or refusal of injunction by the Supreme Court on appeal.
The insistence on injunction in India over damages is because of the nature of the infringers and the difficulties associated with assessing damages. Defendants are often fly by night companies, who shift or abscond as soon as an infringement suit is filed. Small traders and shop owners who are the infringers in most cases do not maintain account books and file returns, which makes it very difficult to assess account of profits. As if often also pointed out by intellectual property owners, the true battle begins only after the decree with respect to damages is granted. It is often impossible to obtain damages from the defendant even after obtaining an execution decree. Thus, the plaintiff gives up on the damages pleaded for once an injunction is granted.
His honour pointed out that there are often three kinds of disputes in infringement cases. Firstly disputes with respect to infringers dealing in counterfeit or pirated goods, where identical marks are used on identical goods. Ex-parte injunctions are often granted in these cases. Secondly disputes involving small traders attempting to exploit the goodwill of established brands. This for instance would include underwear with the brand name of Mercedez Benz. In this case, there need not be any similarity between the goods. Injunctions are granted in these cases also. Thirdly, there are genuine disputes in relation to infringement involving established manufacturers where the defendant is not a fly by night company. Most cases fall in the first two categories and there are often no final judgments.
He made references to the cases of Kabushiki Kaisha Toshiba v. TOSIBA Appliances Company 2008(37)PTC394(SC), Khoday Distilleries Limited (Now known as Khoday India Limited) v. The Scotch Whiskey Association 2008(37)PTC413(SC), Pfizer Products, Inc. v. Mr. Altamash Khan MIPR 2007 (3) 445, among others as involving genuine disputes. In the Pfizer case the plaintiff, sought to restrain the defendant from using his trademark “VIAGRA” or deceptive variants and also from using the domain name www.viagra.in which was deceptively similar to that of the plaintff www.viagra.com. The suit was decreed in favour of the plaintiff. The Khoday case was in relation to alleged infringement of trademark owned by The Scotch Whiskey Association by Khoday distilleries which manufactures whiskey under the mark ‘Peter Scot’. The Court held that the tests of deceptive similarity required to be applied in each case would be different and would depend on the nature and kind of customers.
And since in this instance the class of buyers is educated and rich and are mostly aware of the difference between Scotch Whiskey and ‘Peter Scot’ the use of the mark ‘Peter Scot’ was not held to be causing confusion and deception. He also referred to the case relating to alleged infringement by Pearl Pet, which is a manufacturer of plastic containers where injunction was refused after looking into the balance of convenience and public interest. The defendant was employing hundreds of employers in his factories and an injunction would cause irreparable damage. He also referred to factors influencing the decision making process with respect to infringement cases like market power of the of the parties and issues in relation to competition law. He went on to stress the need of innovative interpretation and the need for innovative solutions.
The hon’ble judge began his discussion on punitive damages by quoting the judgment in the case of Time Incorporated v. Lokesh Srivastava 2005(30)PTC3(Del). The defendants in this case infringed the trademark ‘TIME ASIA’ owned by Time Warner Incorporation. The defendants had started printing, publishing and distributing for sale “TIME ASIA SANSKARAN” by using the words “now in Hindi also a News Magazine of International Standards”. An ex parte decree of permanent injunction and punitive damages were awarded to the plaintiff. The court held that punitive damages need to be granted to discourage and dishearten law breakers who indulge in violations with impunity. Punitive damages often spell financial disaster to the defendant. With reference to the granting of punitive damages the judge stressed the importance of differentiating between an honest trader who infringes a right and a dishonest trader. Here he made a reference to the infringement action filed by J.K Rowling with respect to the sale of a downloadable e-book on ebay.
Ebay refused to take responsibility for the content posted on its website. And the defendant who had posted the content was a college student who claimed to have had no knowledge of the fact that his action would constitute infringement. An interim injunction was awarded in this case. This instance is clearly the case of an honest trader and clearly does not warrant the awarding of punitive damages.
The judge concluded by stressing the need for rules to be framed for improved case management in Courts and the importance of alternative dispute resolution mechanisms in intellectual property law litigation.