We have yet another case of Microsoft seeking and receiving punitive damages for pirated software being used by a small hardware manufacturer in the course of sale of its products. The decision can be viewed here.
The Present Case
In this case, Microsoft alleged that the defendants, a business entity engaged in marketing and selling computer hardware, including assembled desktops and other peripherals. It appears that the vendors were in the habit of pre-installing unauthorised and unlicensed copies of Microsoft Windows and Microsoft Office on these machines, before selling it to customers.
Defendants’ Failure to Respond to Notice
It must be clarified that the defendant’s were sent a legal notice to appear for a settlement meeting with Microsoft representatives, but they failed to show up. As a result, an ex-parte interim injunction order was passed by the court, restraining the defendants from making unauthorised copies of the software and selling or distributing the programmes on machines to its customers. Further, the defendants failed to submit a written statement in reply to the plaint as well.
Quantum of Damages Awarded
The court relied on the affidavit of a chartered accountant, appointed by Microsoft, quantifying the damages to be Rs.30,06,000/- and held that they are entitled to the punitive damages to the tune of Rs.2 lakhs and the cost of the suit.
Reliance on Evidence of ‘Independent Investigators’ and Microsoft appointed ‘technical expert’
This case, like most software piracy cases, is important from a procedural point of view, particularly in terms of the evidence used, and the manner and authority designated to collect such evidence from the defendants’ business premises. It is found that the court in this case has relied on the sworn statements of ‘two independent investigators’, who visited the premises of the defendants and purchased a computer system from them. Thereafter, the system was examined by a ‘technical expert’, who was also appointed by the plaintiff, Microsoft itself.
The judgement does not provide any information as to what evidence of unauthorised use was discovered, but merely states that the expert ‘took printouts (screen shots) of the directory of its hard disk, in which he found the software programmes of the plaintiff as sold by the defendants, without any authorization’. The judgement remarks that Microsoft claims it lacked user manuals, holographic CD’s, Certificates of Authenticity and EULA’s, although how this was established is neither mentioned in the order, nor is it clear from the submissions made by Microsoft counsel.
Delhi High Court Guidelines on Software Piracy Raids
To put the procedural issues in perspective, it is perhaps important to refer to the ‘guidelines’ issued by the Delhi High Court in the case of Autodesk v. AVT Shankardass, with respect to the appointment of a Local Commissioner in software infringement and piracy matters of computer software. We had blogged about the procedural issues in software piracy cases earlier, sparking a very interesting debate in the comments section. Of course, it must be remembered that a commissioner may be appointed on an application made by the plaintiff for an Anton Pillar order and it is not mandatory. In fact, Prashant Iyengar has questioned the legality of such an appointment in the first place, in an interesting blog post, which can be found here.
The general justification used for the appointment of a Local Commissioner is that upon receipt of summons in suit or notice in the injunction application, the infringers could easily remove the evidence of infringing software. It is thus interesting to note that a request for such appointment was not made by the plaintiffs and instead an assessment of the damages cause and use of unauthorised software was made by private investigators, technical experts and a chartered accountant appointed by Microsoft itself. However, relying on the Delhi High Court guidelines, which state that ‘a report of private Investigator need not be disregarded or rejected simply because of his engagement by the plaintiff. The information provided by the private Investigator should receive objective evaluation’, there does not appear to be any procedural lapse on their part.
Thus, it appears as if the affidavits submitted by Microsoft demonstrating use of unauthorised software has been relied on by the courts, without the need for appointment of a Local Commissioner. However, I feel there is a marked absence, in the judgement, of any clear proof of unauthorised use, although this is clearly a finding of fact, as judged by the court.
Given that this is a peculiar case where assembled computers were being sold with allegedly unauthorised copies of Microsoft software, additional procedural issues such as the right of the defendant to make back-up copies of data (whether created using authorised or unauthorised software) did not emerge. However, it might be time to revisit the entire debate once again.