On 26th May, 2014, the Delhi High Court, awarded punitive damages amounting to Rs. 2 Lakh in an ex parte order against the absconding defendant Simon Food Processors for infringement of trademark and copyright (read the judgment here). The case deals with trademark and copyright over the name and stylised logo of SCHWEPPES owned by Atlantic Industries, a wholly owned subsidiary of The Coca Cola Company.
The plaintiffs contended that they were the registered owners of the trademark over the name and copyright over the stylised logo of SCHWEPPES’, with the first registration for the marks being made as early as in the year 1943. They also contended that they were the copyright owners of the artistic work in the SCHEWEPPES label. In 2007, the plaintiffs found that the defendants had applied for the registration of trademarks under the names SCHWEPPES and SCHWAPPES. Although there was no evidence that the trademark was in use, the plaintiffs opposed and the current status of the defendants’ trademark in the Registry is ‘Opposed’. In 2010, the plaintiffs further investigated into whether the trademark was being used by the defendants, and it was revealed that there was no evidence of usage. The plaintiffs then enquired into whether the defendants had registered any additional trademarks infringing that of the plaintiffs. It was found that between 2007 and 2010, they had indeed applied for the registration of 3 more trademarks that were identical (with one being a photograph of the plaintiff’s product). However, the plaintiffs admitted that of the three applications, one has been withdrawn, another has been abandoned and the third has been refused by the Registry.
The plaintiffs also deposed that while there was no evidence of actual use of the mark, the website of the defendant, where the defendant claimed that they manufactured products such as Tonic Water, Ginger Ale, etc, raised “serious concerns that either the Defendant is and has in the past marketed and sold its products under the offending brand in Delhi, or is likely to do so in the near future”. The defendants’ product was also being sold on indiamart.com.
The case history in the present case is worth observing. The plaintiffs filed a suit against the defendants on 8th September, 2011 for injunction and damages for infringement of trademark and copyright. An ex-parte order of temporary injunction was granted on the same date, and the defendant first appeared on 11th November of the same year. On 31st May, 2012, the defendants submitted that they had stopped using the trademarks and time was sought for filing an application recording the compromise. However, compromise was never signed as the defendant has been absconding since then. The counsel for the defendant, on 9th September, 2013, sought to be discharged from the suit. On 29th January, 2011, the Managing Director sought time to engage another counsel. But none appeared in the next hearing and the Court finally proceeded to adjudicate upon the matter on an ex parte basis.
The Delhi High Court heard the plaintiff and examined the documents on record and came to the conclusion that the plaintiffs were indeed the trademark and copyright holders in the name and stylised logo of SCHWEPPES’, and that the defendants had copied, adopted and was using the same, thereby constituting infringement.
Where it gets interesting is that after considering all the circumstances of the case, the Court has awarded punitive damages against the defendants, who were not even present in the first place. The case of Microsoft Corporation v. Deepak Rawal was cited by the Court to hold that even in cases where the defendant is absent, punitive damages can be awarded in the interests of deterring the growing menace of piracy. In L&T v. Chagan Bhai Patel, it was held that not granting punitive damages because the defendant is absent from proceedings would amount to “encouraging the violators of intellectual property”.
In this case, the plaintiffs were unable to prove that the defendants had actually used the trademark or copyright owned by the plaintiffs. The defendants had attempted to enter into a compromise with respect to the first 2 infringing acts with the plaintiffs, and had either abandoned, withdrawn or gotten rejected the next 3 infringing acts that were discovered. This was clearly a case where the plaintiffs could not have asked for damages, as there was no external evidence of damage and the defendants themselves were unavailable to present their accounts to the Court. The High Court saw this as an opportunity to punish the defendants, as in their opinion, not imposing such a punishment would amount to encouraging parties to not submit themselves to litigation.
However, the Court has failed to consider the larger trends in such cases of blatant IP infringement– where the infringing parties are often small ‘fly by night’ entities who abscond as soon as a suit is filed. Even if punitive damages were awarded, it would be very difficult to get the award executed. (We have earlier posted a speech by Justice Arjan Sikri on the importance of temporary injunctions in IP litigation especially with respect to piracy here, where this argument was touched upon). The instant case appears to fall squarely within this ambit. The defendants did not have any appreciable commercial presence, nor were they insistent on using their trademarks, as evidenced by the withdrawal and abandonment of their marks.
The punitive damages awarded in this case amounted to Rs. 2 Lakh. The determination of the amount was made without any measure of loss caused to the plaintiff. Although this is not strictly relevant for punitive damages, in the USA for example, the Lanham Act allows awarding of punitive damages only by way of increasing the quantum of damages, which depends on monetary loss. This is reasonable, as the basis of trademark law itself is to protect consumers and prevent infringers from making profits off the trade reputation of another party.
The High Court cited ‘deterrence of piracy’ as a factor. In this case, there appears to be a case of attempted piracy more than actual piracy, in the absence of proof that goods were actually sold with the infringing trademarks. If nobody lost, why make the defendants pay? Is deterrence of piracy is an end in itself, worth protecting through punitive damages to an extent that even attempts are penalised?
Finally, the damages of Rs. 2 Lakh were awarded with no reference to the actual paying capacity of the defendants. As mentioned previously, it would be difficult to even get this order executed against the absconding defendants. All in all, even if this were an open-and-shut case of trademark and copyright violation, the awarding of punitive damages was, in my opinion, unwarranted.
[Click here to read Prashant Reddy’s informative Business Standard piece on the problem with the basis on which Supreme Court awards punitive damages in India].