26 February 2019

Punitive damages in trademark infringement suits

By  R. Parthasarathy & Gunjan Hans

 “The disobedience or breach of an injunction has to have consequences in law. If strict action is not taken, orders of Courts would not be complied with by litigants…” [End note 1] 

In recent years, the grant of punitive damages in trademark infringement suits has evolved in India. There has been increase in the number of instances wherein the Courts had awarded punitive damages as means to penalize nefarious defendants. The Delhi High Court, on February 1, 2019, while disposing of a suit for trademark infringement and passing-off, awarded INR 1.85 crores (INR 18,500,000) as punitive damages. The present suit was filed by Whatman International Ltd. (Plaintiff) in 2014 against Mr. Paresh Mehta and his close family members and business concerns (Defendant No. 1 – 5, 7, 8), for permanently injuncting the Defendants from infringing the Plaintiff’s registered trademark “WHATMAN”, trade-dress, copyright and also passing-off counterfeit products as that of the Plaintiff. An interim injunction was granted in favor of the Plaintiff on May 23, 2014; Local Commissioners were appointed; infringing products were found during raids of the Defendants’ premises in Mumbai and an FIR was lodged against the Defendants. Despite all this the Defendants continued to sell the infringing products. The repeated misconduct and disregard of law on the part of the Defendants, led to the awarding of exemplary punitive damages.

Factual matrix:

The Plaintiff is the owner of and has been using the trademark “WHATMAN” in relation to ‘filter paper’ since 1740. The Plaintiff’s trademark “WHATMAN” is registered in India in classes 1, 9 and 16. The Plaintiff uses a trade-dress consisting of a white background with blue script used for its ‘Whatman filter paper’.
The Defendants were habitual offenders, with a history of manufacturing counterfeits of Whatman filter paper since 1992. Complaints were filed by the Plaintiff against the Defendants in 1993 and thereafter in 2005 which were settled and whereby the Defendants signed undertakings to the effect that they would refrain from using Plaintiff’s trademark and trade dress for their products and also from manufacturing counterfeits of the Plaintiff’s products. Despite the undertakings, the Defendants continued to sell infringing products and the Plaintiff was thus forced to file the present suit in 2014. The Plaintiff also moved an application under Order 39 XXXIX Rule 1 & 2 of Code of Civil Procedure, 1908 (hereinafter “the Code”) for the grant of interim injunction which was allowed by the court on May 23, 2014, local commissioners were appointed to visit the premises of the Defendants and seizures of infringing products were made.

Even though an interim injunction was in force, the Defendants did not desist from selling the infringing products. In 2018, the Plaintiff received information about the continuing activities of the Defendants and moved an application under Order XXXIX Rule 2A of the Code contending that the Defendants were in breach of the interim injunction. The Plaintiff also lodged an FIR with the Mumbai police whereby two premises of the Defendants (which were not investigated earlier in 1992 or 2005) were raided and the police recovered infringing products.

Contentions of the parties:

It was claimed by the Plaintiff that due to its use for over 250 years, the Plaintiff’s trademark “WHATMAN” had acquired a secondary meaning in trade. Moreover, the trade-dress used by the Plaintiff for its ‘Whatman filter paper’, its color combination, script, get-up and layout – a white background with blue script – was distinctive. The Plaintiff contended that the Defendants had been deliberately violating the Plaintiff’s rights in the trademark “WHATMAN” since 1992. The Defendants had not only manufactured and sold counterfeits of the Plaintiff’s products (i.e. Whatman filter paper) but had also adopted an identical color scheme, get up and layout in respect of filter paper sold by them under other trademarks like HIRAL, SUN, LABSMAN, U-CHEM and ACHME. Further, the Plaintiff emphasized that despite the criminal proceedings being launched, undertakings signed, and an interim injunction operating against them, the Defendants had continued to sell the infringing and counterfeit products. Further, the Defendant No. 1 – 5, Defendant No. 7, and Defendant No. 8 were related and clearly acting in concert with each other, and  had blatantly made false, misleading and contradictory statements  before the Court on multiple occasions, in their written statements.

As per the Plaintiff’s computation, the value of the infringing goods seized from the Defendants’ premises was INR 4,48,53,280/-. Thus, it was contended by the Plaintiff that in the facts and circumstances of the present case, Plaintiff was entitled to not only damages, but punitive damages also and the Defendants ought to be punished for lying on oath.

The Defendants, on the other hand, claimed that they had not violated the injunction order passed on May 23, 2014 and that the stock found by the police on their premises was old stock which was lying there. The Defendants categorically denied having knowledge of Plaintiff’s brand and trademark. The Defendants, to a certain extent, also denied being related to each other. The Defendants challenged the computation put forth by the Plaintiff and stated that they were willing to pay a token amount as compensation nevertheless.
Decision of the Court:

After perusing the pleadings on record and the submissions made by the Defendants, the Court was of the view that the Defendants had neither seriously challenged the Plaintiff’s rights in its trademark “WHATMAN” nor in the white and blue color combination of the trade-dress. Rather the Defendants had made a categorical submission that they were willing to suffer a permanent injunction. In the light thereof, the Court observed that the issue that remained to be decided was with regard to the delivery up, rendition of accounts and profits/ damages along with the application under Order XXXIX Rule 2A filed by the Plaintiff.

In the light of documents placed on record by the Plaintiff including the earlier complaints filed and reports of the local commissioner, the Court was convinced that the Defendants were habitual offenders, repeatedly using the Plaintiff’s trademark and trade-dress – identical color scheme and get up – for the filter paper sold by them under different trademarks as mentioned above. The Court further observed that a bare perusal of the packaging of the products seized from the Defendants’ premises showed that the product packaging used by the Defendants was a substantial reproduction of the Plaintiff’s. Further, tests conducted on the products revealed that some of the seized products were counterfeits. The denial of knowledge of the Plaintiff’s brand or trademark by the Defendants was nothing but a baseless and bare denial. The Court was of the view that the Defendants, having full knowledge of the previous and current criminal proceedings as well as the interim injunction granted on May 23, 2014, had continued with their infringing activities.

Accordingly, the court held that the conduct of the Defendants had been completely dishonest, having made false, incorrect and misleading statements in their pleadings and also the statements made by them in the Court. The Court then referred to the statements of various Defendants recorded in the court and those in the written statements filed, in order to show inconsistency and contradiction in the arguments of the Defendants. The Court arrived at the irrefutable conclusion that the Defendants had acted in concert; that except for Defendant No. 6, all other Defendants were related to each other; the Defendants had not come clean with the Court. The Defendants in disobeying the injunction order of the Court had not only violated the provisions of Order XXXIX Rule 2A of the Code, but were also guilty of contempt  under Section 14 of the Contempt of Courts Act, 1971.

The Court referred to and relied upon the case of Louis Vuitton Malletier v. Mr. Omi & Anr.[End note 2], wherein the Delhi High Court took a strict view of the contemptuous conduct of the Defendant, and committed the Defendant to one month’s imprisonment for making false statements under oath, holding that the Court cannot ignore such conduct as it will be a severe blow to the rule of law, undermine the dignity of the Court and interfere with the administration of justice.

The Court while discussing the principles that would be applicable for granting punitive damages in the present case, placed reliance on Hindustan Unilever Limited v. Reckitt Benckiser India Limited [End note 3] wherein the Division Bench of the Delhi High Court, had held that the principles governing the award of punitive damages were laid down in the cases of Rookes v. Barnard [End note 4] and Cassell & Co. v. Broome [End note 5]. In Rookes (supra), the House of Lords sets out as one of the three circumstances for the grant of punitive damages as ‘wrongful conduct by the defendant which exceeds the compensation payable to the claimant’. The Court was of the view that in the present case, the conduct of the Defendants in infringing the Plaintiff’s trademark consciously, deliberately and wilfully for a period of more than 25 years was sufficient for allowing a decree of punitive damages to the Plaintiffs. The Defendants had remained undeterred even after repeated legal action, criminal proceedings, and had caused damage not only to the Plaintiff but also to the consumers who had purchased the counterfeit/ infringing products from the Defendants presuming them to be genuine ‘Whatman filter paper’. Clearly, the present case was a fit case where damages awarded for wrongdoing were insufficient and called for an award of aggravated, punitive damages.

Accordingly, the Plaintiff was awarded a decree of punitive damages to the tune of INR 1.85 crores (INR 18,500,000) against Defendant Nos. 1 to 5, 7 and 8, which was to be paid to the Plaintiff within three months from the date of the order. The Court also ordered permanent injunction against all Defendants and additionally awarded costs on actual basis.

[The authors are Principal Partner and Associate respectively in IPR Practice Team, Lakshmikumaran & Sridharan, New Delhi] 

  1. CS (COMM) 351/2016 & I.A. 5235/2018, Whatman International Limited v. P. Mehta & Ors., judgment dated February 1, 2019, passed by a Single Judge of the Delhi High Court.
  2. CS(COMM) 291/2018, Delhi High Court, order dated August 07, 2018.
  3. RFA (OS) 50/2008, C.M. APPL. 17116/2008, Delhi High Court, order dated January 31, 2014.
  4. [1964] 1All E.R. 367
  5. [1992] AC 1027

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