Understanding damages in Indian trademark law

Recently the courts in India have been deliberating the need to compensate aggrieved parties when their IP rights are infringed, and the nature and amount of damages that should be awarded. Damages are awarded for the loss suffered by a claimant on account of a defendant’s act. Damages as a relief in trademark infringement cases have progressively assumed more significance in the developed economies of the world, however the practice of granting damages, principally punitive, has emerged relatively recently. In the past, in order to restrain infringers, the courts granted injunctions and, only in rare cases, damages. However, with increasing instances of piracy and growth in the volume of counterfeit goods, the Indian courts have come to realize that awarding punitive damages may be a necessary deterrent to protect the interest of trademark holders.

In the context of trademark law, damages are one of the reliefs available to a plaintiff whose trademark has been infringed or misappropriated. Generally, damages are of three kinds: nominal, compensatory and punitive.

Nominal damages

Nominal damages are recoverable by a plaintiff when it successfully establishes that it has suffered an injury due to the wrongful act of a defendant, but cannot prove the actual loss that can be compensated. The amount awarded is generally a small and symbolic sum, although in some jurisdictions within India it may equal the costs of bringing the lawsuit with reasonable attorney’s fees.

Compensatory damages

Compensatory damages are awarded with the aim of placing the claimant who has suffered an injury in the same position as it would have been had the tort not been committed, and to indemnify it for the loss suffered by it.

The amount of damage is calculated on the basis of evidence brought by the plaintiff/claimant and accepted by the court, or on the basis of credible accounts of profit made by the defendant.

Punitive damages

Punitive damages, also known as exemplary damages, are a form of punishment and deterrence in cases where there is blatant misuse or misappropriation of intellectual property. The purpose is to punish the wrongdoers and deter the wrongdoer and others from committing similar unlawful acts.

In Hero Honda Motors Limited v Shree Assuramji Scooters, Justice Sanjay Kishan Kaul of the Delhi High Court observed:

“This court has no hesitation in saying that the time has come when the courts dealing with actions for infringement of trademarks, copyrights, patents, etc. should not only grant compensatory damages but award punitive damages also with a view to discourage and dishearten law breakers 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 turning point with respect to granting damages in trademark infringement came in the year 2005 in the case of Time Incorporated v Lokesh Srivastav, when the court awarded punitive damages along with compensatory damages for the first time. The plaintiff, Time Incorporated, is the publisher of the American news magazine TIME. The court in this case passed an ex-parte decree of permanent injunction in favour of the plaintiff and against the defendants, restraining the defendants, their officers, servants, agents, representatives and all others acting through them from printing, publishing, issuing and advertising their magazine under the trade name TIME ASIA SANSKARAN, or from using the component TIME in conjunction with any prefix or suffix, or from using the trade name TIME or TIME ASIA, and also from using the distinctive red border design used by TIME on any magazine to be published by them. The plaintiff had alleged that the actions of the defendants were dishonest in that by adopting the title TIME ASIA SANSKARAN, the defendants were representing to the public that their magazine was the Indian edition of the world renowned TIME magazine.

An order of delivery up of all goods bearing the impugned mark including letterheads, literature, magazines, negatives, dies, blocks, labels, promotional material, stationery articles and other infringing material was also passed.

Upon completion of the trial, a decree of Rs500,000 (U$10,600) on account of damages to the reputation and goodwill to the plaintiff was passed in favour of the plaintiff. A decree also in the sum of Rs500,000 on account of punitive/exemplary damages, including interest, was also passed in favour of the plaintiff and against the defendants for flagrant infringement of the plaintiff’s registered trademark and copyrights. The total damages awarded amounted to Rs1.6 million.

The court drew a distinction between punitive and compensatory damages in this case, and held that:

“Compensatory damages to a plaintiff are aimed at compensating him for the loss suffered by him, whereas punitive damages are aimed at deterring a wrongdoer and the like-minded from indulging in such unlawful activities. The punitive damages are founded on the philosophy of corrective justice and as such, in appropriate cases these must be awarded to give a signal to the wrongdoers that law does not take a breach merely as a matter between rival parties but feels concerned about those also who are not party to the list but suffer on account of the breach.”

In a 2007 judgment in Microsoft Corporation v Mr Rajendra Pawar and Another, the court made the observation that one of the functions of punitive damages is to relieve the pressure on an overloaded criminal justice system by providing a civil alternative to the criminal prosecution of minor crimes. The court further observed that the award of punitive damages serves the additional purpose of limiting the defendant’s ability to profit from its fraud by escaping detection and prosecution.

Manisha Singh Nair is a partner at Lex Orbis, an intellectual property practice law firm headquartered in New Delhi