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Skechers USA v. Pure Play Sports – Implications of Actual Costs and Taxation of Costs – A Notable And Welcome Change In the IP Regime


We’re pleased to bring to you a guest post by Abhimanyu Chopra. Abhimanyu is a Senior Associate at AZB & Partners. He has obtained his B.A. LL.B. (Hons.) degree from Amity Law School, New Delhi and his LL.M. degree from New Law College, Pune and is currently pursuing his PhD in Cyber Law from Amity Law School, Noida. He is also a qualified cyber forensics expert. He is currently practicing in the area of commercial litigation and arbitration with special focus in the area of IP & technology law. His expertise also extends to competition law, gaming law and the Insolvency and Bankruptcy Code. He has authored two books, one in the realm of cyber law and the other in that of gaming law and has a number of publications on various areas of law including IP and information technology law. He is also the creator of the Official Delhi High Court App for Android Platform.

Skechers USA v. Pure Play Sports – Implications of Actual Costs and Taxation of Costs – A Notable and Welcome Change In the IP Regime

Abhimanyu Chopra

Earlier this year, vide an order dated 15.05.2018, a suit for trade dress infringement and passing off was decreed in favour of Skechers, in a summary judgement by a Single Judge of the Delhi High Court (Justice Rajiv Sahai Endlaw). The Court granted a summary judgment in favour of Skechers, the Plaintiffs, despite there being no application filed by it for the same. The Court was of the opinion that it has the power to pass a decree in a suit summarily, if it is satisfied that nothing would come out of putting a party through the rigmarole of a trial along with costs.

Background

Skechers USA, along with its affiliated entities, had filed a suit against the four defendants, namely (a) Pure Play Sports, (b) Pearl Enterprises, (c) KVS Logistics Pvt. Ltd., (d) Simandhar Enterprises, for a permanent injunction restraining the defendants from infringing the trade dress of the plaintiffs’ qua shoes and thereby passing off their shoes as that of the plaintiffs’ and for ancillary reliefs of recovery of damages, rendition of accounts, delivery etc. Vide a detailed order dated 25.05.2016, the Court granted an interim injunction and appointed a local commissioner to visit the premises of the defendants to seize the offending goods.

Subsequently, upon enforcement of the changes introduced by the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (“The Commercial Courts Act, 2015”) (including, but not limited to strict timelines for completion of pleadings) in commercial suits such as the present case, the right of all the defendants to file written statement was declared to have closed (for the failure to file them within the prescribed period).

Thereafter, when the matter was posted before the Court, Defendant No. 2 to 4 were proceeded ex-parte as only Defendant No. 1 made the appearance. The Court granted a summary judgment in favour of Skechers on 15.05.2018, despite there being no application filed by it for the same. The Court was of the opinion that it has the power to pass a decree in a suit summarily, if it is satisfied that nothing would come out of putting a party through the rigmarole of a trial. On the basis of the averments in the plaint, the documents filed and the injunction order dated 25.05.2016, it passed a decree for permanent injunction as claimed by the Plaintiffs and costs of the suit from the Defendant No. 1.

The Plaintiffs, thereafter, filed its Bill of Costs as per the procedure enshrined under Chapter 23 of the Delhi High Court (Original Side) Rules, 2018 (“2018 Rules”), which came into effect on 01.03.2018. Interestingly, this was the first time that a party which was awarded costs had actually undergone the process of filing a Bill of Costs, presenting it before the Taxing Officer, leading evidence in support of such costs and arguing the same before the Taxing Officer (Joint Registrar of The Delhi High Court). In my opinion, this option of obtaining costs by filing a Bill of Costs wasn’t undertaken under the 1967 Rules (now replaced by 2018 Rules) solely due to the scale of charges prescribed in the Schedule appended to the Chapter 23 of the Rules. Therefore, it can reasonably be construed that the courts are conscious of the increasing docket explosion and have devised a mechanism to curb time consumed in litigation by imposing actual costs on the parties involved. Additionally, the 1967 Rules allowed for costs to be imposed only at the stage of passing of order and/or delivery of judgment, whereas the 2018 Rules allows for them to to be imposed at different stages of a suit. According to Rule 4 of Chapter 23:

(a) Parties shall file their respective Bill of Costs at the following stages:-

  • at the stage of framing of issues;
  • at the stage of the defendant being proceeded ex-parte or where the defendant has stopped appearing;
  • at the stage of conclusion of evidence of the parties; and
  • at the stage of delivery of judgment or final order.
  • additionally, each party may be required to file composite Bill of Costs not later than fifteen days from the date on which the judgment is delivered or order is passed, or within such time as the Taxing Officer may allow.(Emphasis Supplied)

(b) Notwithstanding Rule 4(a) of this Chapter, the Court may award costs at all or any stage of the case, as the facts and circumstances may warrant.”

In terms of Rule 5, the contents of the Bill of costs, include:- Court Fee, Process Fee Spent, Expenses of Witnesses, including the Actual Reasonable Expenses Incurred on Travel, Boarding and Lodging, if any, and other incidental expenses and Advocate‘s fee including the fee of a Senior Advocate, if any; along with expenses of typing, photocopying and expenses incurred for sending summons by Registered post, speed post, courier, fax, electronic mail service and by such other modes as may have been directed by Court and any other amounts as may be allowable under these Rules or as may be ordered by the Court as costs taking into account:-

  • Judicial time consumed in litigation;
  • Delay in service of summons or efforts made in serving summons on the defendant, as the case may be;
  • Delay caused by any of the parties by raising frivolous issues or unnecessary objections during the proceedings or during recording of evidence;
  • Failure of a party to effect discovery of documents or its refusal to answer interrogatories; incorrect denial of facts/ documents, thus, protracting trial;
  • Monetary and other stakes involved in the proceedings;
  • Costs incurred on execution of commission; and
  • Any other cost which Court may deem fit and proper.

Further, Rule 2 empowers the Court to additionally impose actual costs borne by the parties. It provides as follows: “In addition to imposition of costs, as provided in Rule 1 of this Chapter, the Court shall award costs guided by and upto actual costs as borne by the parties, even if the same has not been quantified by parties, at the time of decreeing or dismissing the suit. The Court will take into consideration all relevant factors including (but not restricted) the actual fees paid to the Advocates/ Senior Advocates; actual expenses for publication, citation etc.; actual costs incurred in prosecution and conduct of suit including but not limited to costs and expenses incurred for attending proceedings, procuring attendance of witnesses, experts etc.; execution of commissions; and all other legitimate expenses incurred by the party, which the Court orders to be paid to any party. In addition to the imposition of costs as above, the Court may also pass a decree for costs as provided in Sections 35-A and 35-B of the Code or under any applicable law.”

(Emphasis Supplied)

As per the aforementioned rules, the costs are to be determined by the Taxing Officer, which is the Joint Registrar, on the filing of a bill of costs by the party concerned. To arrive at the “actual cost”, the Taxing Officer has the power to appreciate the documentary evidence put forth by the party and entertain objections, if any, as well. In the present matter, vide an order dated 20.08.2018, the cost was awarded by Joint Registrar and taxed at Rs. 86,98,173.05 (Rupees Eighty-Six Lac Ninety Eight Thousand One Hundred and Seventy Three and Five Paise only). The cost, imposed in favour of Skechers, includes the amount paid by the American footwear brand towards expenses incurred by it on litigation, local commissioner and court fees.

Impact

This case is extremely important on two counts:

  • The judgment sets out the precedent that even in absence of an application for summary judgment before the Court, the Court has power to decree a suit summarily, if it is satisfied that nothing would come out of putting a party through the rigmarole of a trial. To the best of my knowledge, this was probably the second case in Delhi High Court in which a summary judgment was granted.
  • The enormity of costs awarded in favour of the Plaintiffs, which going forward has the potential to change the litigation dynamics in India and which will certainly act as a major disincentive for infringers and counterfeiters.

P.S. The author represented the Plaintiffs i.e. Skechers USA Inc. and its affiliate entities in the case.

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