In this post our Spicy IP Fellowship applicant, Vasundhara Majithia, analyses the recent decision of the Delhi High Court in Cartier International Ag vs. Gaurav Bhatia. This is Vasundhara’s second submission for the fellowship.
Counterfeited goods can become a nightmare across all industries; however, the fashion and lifestyle industry is affected most by such practices. With the advent of the internet, this problem is even harder to tackle. The growing market for counterfeits is fed by high consumer demand for cheap branded products. A counterfeit is an imitation, usually of an expensive “branded” product with the idea of fraudulently passing it off as genuine. The intent of the seller is to cash in on the goodwill created by the established product. The present case is relatively straightforward and can be accessed here. It deals with a scenario where the defendants made huge profits selling counterfeited goods. The jurisprudence with respect to punitive damages and ex-parte injunctions has been discussed extensively on this blog. The method and reasoning used for deciding the punitive damages makes this case interesting.
The plaintiffs, Cartier International AG, Officine Panerai AG (proprietor of the trademark Panerai), Richemont International S.A., (proprietor of the trademarks Vacheron Constantin and Jaeger Lecoultre) have a successful presence in India and their turnover in India exceeded 100 million USD from 2003 to 2013. They alleged that the defendants were operating an e-commerce website called www.digaaz.com where they were offering counterfeit products bearing the trademarks of various luxury brands, including those of the plaintiffs, for sale. During the raids conducted at the defendants’ premises, thousands of counterfeit products were seized by the police. Defendants were arrested and a charge sheet was filed. In the present case, the defendants deliberately stayed away from the proceedings.
Arguments of the Plaintiff
First, the plaintiffs argued that they did not even manufacture corresponding products as put up for sale on the infringing website and further, they do not sell their products for discounted rates whereas the infringing website offered discounts as high as 95% on the counterfeit products.
Second, the defendants falsely claimed on their website, “We cover world’s most coveted brands and guarantee 100% authenticity to offer you safe and secure shopping“. They quoted exorbitant prices for these counterfeited products and then claimed to sell them at huge discounts. Thus, customers were duped into buying these products under the mistaken belief that these were originals.
Third, the defendants were seasoned infringers as demonstrated by the sheer volume of counterfeited products of various other luxury brands including Louis Vuitton, Burberry, Hermes, Chanel, D&G, Prada, Givenchy, Dior, Bvlgari, Fendi, Bottega Veneta, etc. seized from their premises. The infringing activities were further demonstrated by the numerous consumer complaints lodged against the defendants by hundreds of duped consumers.
Fourth, the plaintiffs argued that the purchasing public is bound to assume some sort of association or connection between the defendants’ products and the plaintiffs leading to confusion. The defendants used the plaintiffs’ trademarks to trade on the reputation and goodwill enjoyed by the plaintiffs.
Fifth, the plaintiffs submitted a methodology for the computation of damages. They argued that on the basis of the number of visitors on the website (nearly 10,000 hits a month), even if it is assumed that nearly 1% of the hits converted to sales and each sale was worth Rs. 10,000, the turnover of the website for the past two years would amount to Rs. 36 crores. Even if 10% of the turnover is attributed to the sale of counterfeit products bearing any of the suit trademarks, then the illegal profits made by the defendants’ under the suit trademarks would amount to Rs. 3.6 crores.
The plaintiffs also used an alternative methodology. They argued that if it is presumed that the defendants have till date sold at least 1000 counterfeit products under each of the suit brands, amounting to a total of 4000 counterfeit products and if the cost of each of such product is estimated to be Rs. 63,000/- (the average price quoted on www.digaaz.com) the total illegal turnover of this website from the sale of counterfeited products under the suit trademarks amounted to Rs. 25 Crores.
Findings of the Court
After considering the overwhelming evidence establishing the defendants’ guilt, theCourt passed a permanent injunction restraining the defendants from using the plaintiffs’ trademarks or any deceptive or confusingly similar trademark. The Court referred to the principle in Time Incorporated v. Lokesh Srivastava & Anr. where it was observed:
“time has come when the Courts dealing in actions for infringement of trademarks, copyrights, patents etc., should not only grant compensatory damages but also award punitive damages with a view to discourage and dishearten law breakers who indulge in violation with impunity out of lust for money, so that they realise 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 also, which may spell financial disaster for them.”
The defendants deliberately stayed away from the proceedings and did not provide accounts of their illegal profits. The Court held that a party who chooses to stay away from court proceedings must, thus, suffer the consequences of damages as stated and set out by the plaintiffs in such cases. The Court thus granted damages of Rs. 1 crore to the plaintiffs.
The Court emphasized the importance of punitive damages in this case, and the damages awarded thus are on the high side as compared to the average. This shows the readiness of Indian Courts to award high damages in order to deter such crimes. However, in the present case, the damages awarded were less than one-third of the minimum damages demanded and could have been even higher in order to set a precedent. However in this case, the courts have responded positively by asking the infringers to pay costs based on the illegal profits made.
With the boom in the e-commerce industry in India, such incidences cannot be said to be isolated and many more might crop up in the future. Therefore, in order to safeguard IP rights, institutions and companies need to put in place an effective mechanism of online vigilance to control counterfeit products.
Image from here