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Introduction
Intellectual property refers to a product of the mind or intellect that can be traded, purchased, granted, or restricted. Consumers can make informed decisions about the protection, reliability, and effectiveness of their purchases owing to rising IP rights. The protection of intellectual property rights ensures that products are authentic and of the high quality that consumers expect. All of this is possible, but there are problems to be addressed. Trademarks are very important aspects of intellectual property, and trademark protection has become increasingly important in recent years because any manufacturer of a product or service wants his mark to be exclusive, eye-catching, and easily distinguishable from others.
The Trade Marks Act, 1999 (the “Trademarks Act”) and the Trade Marks Rules, 2017 (the “Trademarks Rules”) provide the legal structure for trademark registration and usage in India. Start-ups benefit from trademark registration because it allows them to differentiate their products or services from those in the market. Registering a mark by any person or undertaking is not an obligation but the same registration provides a way of safeguarding against any infringement. The purpose of legal provisions governing trademarks is to safeguard the prominence and benevolence of any entity or person who has a trademark to protect consumers from the fraudulent activity of the entity’s goods and services. Thus, both producers and consumers are protected by a trademark.
In recent years, judicial decisions in trademark cases in India have shown a trend toward higher punitive damages. In a very notable development in the trademark regime, whopping Rs.1.85 crores have been awarded as punitive damages to a UK-based firm Whatman International Ltd, under a Suit[1] for permanent injunction restraining infringement of its trademark, trade dress, and get up (providing similar packaging), as well as counterfeit production of similar goods. The company is involved in filter papers and is a registered trademark holder in India under Classes 1 (Chemicals), 9 (Computer, Software, and Electronics), and 16 (Paper, Books and office stationery). This case analysis helps to have a closer look at the criteria of the Indian courts and their reasoning for granting punitive damages over the past few years.
Facts
Whatman International is a healthcare company that specialises in laboratory filtration and separation technologies. Whatman International was founded in 1740 by James Whatman and is named after him. The firm owns the trademark ‘Whatman,’ which it uses to sell its products.
The company discovered that infringers were using the Whatman Trademark to manufacture, sell, and market counterfeit Whatman products in India; the said activity was discovered in 1992 and again in 2005. On May 23, 2014, Plaintiff applied for an interim injunction under Order 39 XXXIX Rule 1 & 2 of the Code of Civil Procedure, 1908 (hereinafter “the Code“), which was issued by the court. An interim injunction was issued in the subject suit on May 23, 2014, and Local Commissioners were named to visit the Defendants’ premises in Mumbai. The police confiscated several counterfeit Whatman Products at the factory; however, the company argued that Whatman International has no prestige or goodwill in India, so they cannot assert exclusivity over the Whatman Trademark there.
Although seizures were carried out and an interim injunction was in place, the Defendants proceeded to sell infringing items. The defendants had issued the company several undertakings to cease such infringing activity; however, they proceeded to infringe on the Whatman Trademark, prompting Whatman International to file a complaint with the Delhi High Court. It is a situation in which the Defendants have been infringing on the Plaintiff’s trademark for the past 25 years.
Contentions of the Parties
Plaintiff
- The Plaintiff’s learned counsel has consistently stated that all the Defendants are connected. They are members of the same family, and they have been infringing the Plaintiff’s trademark rights in the trademark WHATMAN since 1992. Not only have the defendants manufactured and marketed counterfeit Whatman filter papers, but they have also used the same colour scheme, get-up, and style on filter paper sold under various trademarks, including HIRAL, SUN, LABSMAN, U-CHEM, and ACHME.
- It is also claimed that, despite several criminal charges being lodged and undertakings provided by the Defendants in the lawsuit cases, they have continued to use the trademark WHATMAN with impunity. The reports of the Local Commissioners appointed by the Court, as well as the Panchnama reported by the police in FIR No.08/2018, are relied upon.
- It is asserted that the Defendants, as frequent infringers of the Plaintiff’s mark, have made many false statements in their pleadings and oral statements to the Court. They have consistently made promises that they have chosen not to keep. According to Plaintiff’s estimates, the infringing goods confiscated from the Defendants’ premises were worth INR 4,48,53,280/-. In these cases, Plaintiff is not only entitled to damages, but also punitive damages against the Defendants.
Defendants
- The Defendants vehemently denied ever hearing of Plaintiff’s brand or trademark. To a point, the defendants have denied being linked to one another.
- The defendant’s learned lawyer argued that his clients had not violated the injunction. The police only confiscated old stock that was lying around on the premises.
- In their written submissions, the Defendants also note that they are willing to pay a token amount of money. According to the written submissions, the Defendants used to buy the goods at a 30%-40% discount and then market them with a 10% profit margin. As a result, the Defendants are contesting Plaintiff’s computation.
Issues
The issues, thereby, arising before the Delhi High Court were:
• The plaintiff’s motion to dismiss the application under Order 39 Rule 2A.
• How the seized content was delivered to the complainant.
• The rendition of accounts and profits/damages, as well as the computation of the plaintiff’s expenses.
Judicial Decision
The Court determined that the Defendants had not seriously contested the Plaintiff’s rights in its trademark “WHATMAN” or the white and blue colour combination of the trade dress after reviewing the pleadings on record and the Defendants’ submissions. Rather, the Defendants had stated unequivocally that they were prepared to accept a permanent injunction.
In light of all this, the Court noted that the question that needed to be resolved was the Plaintiff’s application under Order XXXIX Rule 2A, which included the distribution up, rendition of accounts, and profits/damages. The Court was persuaded that the Defendants were serial criminals, consistently using the Plaintiff’s trademark and trade dress, similar colour scheme and get up for the filter paper sold by them under different trademarks as described above, based on records put on record by the Plaintiff, including earlier complaints lodged and reports of the local commissioner. The Court further said that a quick perusal of the product packaging seized from Defendant’s premises revealed that the Defendants’ packaging was a near-exact replica of Plaintiff’s.
The defendants were found to be repeat offenders by the court. Defendants have a history of using the WHATMAN trademark as well as an identical getup, colour combination, and style for filter paper sold by the plaintiff, according to the decision. The denial of knowledge of the WHATMAN brand and the Plaintiff’s trademark rights was found to be unfounded, and the motive was to pass off the Defendants’ goods as Plaintiff’s. The court stated that all 1-6 Defendants were well aware of the grant of the ad-interim ex-parte injunction dated May 23, 2014. The defendants were found guilty not only of infringement and passing off but also of contempt of court since they engaged in malicious infringement and passing off since 1992 and made false claims before the court.
The Court came to the distinctive conclusion that the Defendants had behaved in concert; that, except Defendant No. 6, all the other Defendants were connected; and that the Defendants had not been forthcoming with the Court. The Defendants were not only in violation of Order XXXIX Rule 2A of the Code by disobeying the Court’s injunction order but also of contempt under Section 14 of the Contempt of Courts Act, 1971.
The court decided in the company’s favour, stating that the timeline of events reveals illegalities, persistent breaches, and disobedience of undertakings on the defendant’s side. As a result, the court determined that it was a suitable case for awarding punitive damages, considering the reasons for doing so. As a result, the Court determined that the defendants’ actions were “deliberate and aware”, and that they deserved to be prosecuted under the statute. Defendant’s conduct, in this case, was found to be grievously incorrect over 25 years for selling look-alike filter paper and counterfeit WHATMAN filter paper.
The defendants No. 1-5, 7 & 8 were found guilty of trademark infringement as well as passing off their products as the plaintiff’s, causing substantial harm to both the plaintiff and the customers who purchased the goods.
Plaintiff was granted punitive damages of Rs. 1 crore against three defendants, Rs. 25 lakhs against the other three defendants, and Rs. 10 lakhs against one defendant, all of which were to be paid to the Plaintiff within three months of the order’s date. The Court issued a permanent injunction against the defendants and awarded punitive damages of INR 1 Crore 85 Lacs (approximately USD 2,66,750) as well as actual costs. The Delhi High Court has made a bold and strong statement in response to the threat of counterfeiting, which has been defying court orders and encroaching on the Plaintiff’s intellectual property for more than two decades.
Analysis
Plaintiff’s registered trademark WHATMAN and similar marks for filter papers were found to be infringed by defendants regularly in this case. In this case, Justice Pratibha Singh held that there is no opposition to the request for a permanent injunction and that this is a matter that does not need to be addressed.
A permanent injunction would almost certainly be granted. Punitive damages and the declaration of contempt under Order XXXIX Rule 2A of the CPC were the main issues before the court. It was determined that the filter paper packaging is a substantial replica of the WHATMAN filter paper packaging, in terms of colour combination, layout get-up, and so on; additionally, one of the websites of the defendants’, which uses the trade name ACHNE FILTERS, explicitly states that “our filter paper is equivalent to WHATMAN at the best rate”. Despite an interim injunction, the defendants proceeded to infringe on the plaintiff’s trademarks despite providing numerous undertakings to the plaintiff. The present case was one in which the damages awarded for wrongdoing were insufficient and aggravated, punitive damages were appropriate.
When determining punitive damages in trademark proceedings, courts should weigh the seriousness of the case, including the defendant’s malice and the severity of the violation, including the contribution to the infringement, the length of the infringement, the scale of the infringement, and obstruction of evidence discovery.
Concerning the most relevant question of “exemplary damage”, the Court relied on Rookes v. Bernard [1964] 1 All ER 367[2], an order made by the House of Lords decreed as a law on land by the Supreme Court of Hindustan Unilever v. Reckitt Benckiser India Limited[3], to the greatest extent possible. The Court of Justice cites the decision of the House of Lords as a categorical test. Since there is money in the plaintiff’s hands, this is a very cautious approach. The 3 situations prescribed are as follows:
(a) Oppressive, arbitrary or unconstitutional action any the servants of the government;
(b) Wrongful conduct by the defendant which has been calculated by him for himself which may well exceed the compensation payable to the claimant; and
(c) Any case where exemplary damages are authorized by the statute.
In the case at hand, the court determined that, if nothing else, the defendant had engaged in serious wrongdoing. By applying these concepts to the present case, the Delhi High Court determined that it was a case suitable for punitive damages and awarded the plaintiff i.e. a total of three crores and eighty-five lakhs as damages and costs.
When determining the punitive damages, courts should fully consider the malice of the infringer and the serious circumstances, for instance, in this it is found that the defendant’s conduct had been repeatedly dishonest for many years, and they had even made false statements under oath before the court. The Court referred to and relied on the Louis Vuitton Malletier v. Mr Omi & Anr [4] case, in which the Delhi High Court adopted a strict opinion on the defendant’s contemptuous conduct and sent the accused to a one month’s imprisonment for false statements under oath that the Court should not ignore such behaviour because it would seriously undermine the rule of law.
The event of punitive damages was aggressively defined in January 2005 when in Time Incorporated v. Lokesh Srivastava and Anr. 2005 (30) PTC 3 Del[5], a single judge from the Delhi High Court sued for trademark infringement observed that “This Court has no hesitation in saying that the time has come when the Courts dealing actions for infringement of trademarks, copyrights, patents etc. should not only grant compensatory damages but award punitive damages also to discourage and dishearten lawbreakers who indulge in violations with impunity out of lust for money so that they realize 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 principals involved in awarding damages in IP litigation in India have seen a great evolution in recent past years.
Conclusion
Punitive damages in cases of trademark violation have evolved in India over recent years. The approach of the courts to grant compensation in years has changed. In recent times, when the courts have awarded effective and punitive damages based on corrective justice and as civil alternatives to criminal proceedings, the courts have taken a step forward that considers the behaviour of the defendant as the principal factor in the calculation of damages. The number of cases where the courts have awarded punitive damages to punish unjust defendants has increased. In a recent case concerning the marks, the High Court of Delhi granted an exemplary settlement, instead of damage to its different intellectual property rights incurred by the defendants for 25 years, to the U.K.-based complainant, Whatman International Limited. This judgement emphasizes the fact that the courts have strongly opposed false statements and deliberate violations. To establish the truth, the courts resort to calling the parties to the court to establish the nature of their involvement and therefore decide on their punishment, which may include heavy damages, as in the above case, but not limited to them.
References:
[1] 2019 (78) PTC 51 (Del).
[2] (1964) 1 All ER 367.
[3] RFA (OS) 50/2008, C.M. APPL. 17116/2008.
[4] CCP(O) 10/2018 IN CS(COMM) 291/2018.
[5] 2005 (30) PTC 3 Del.
