The Hindu Business Line : Copycats, beware the doghouse

THE tide is turning against counterfeiters and infringers. Until now they were undeterred, given the inability of genuine branded product manufacturers to cause them financial damage, and the slow judicial redress. All this is now changing as a result of progressive judicial pronouncements and legislative amendments.

Award of punitive damages

In a landmark case, the Delhi High Court, in the Time Warner Inc. vs Lokesh Srivastava & Anr case, awarded "punitive and exemplary damages," in addition to compensatory damages, for flagrant infringement of trademarks and copyrights.

In this case, the plaintiff, a subsidiary of Time Warner Inc., was the registered proprietor of the mark "TIME" and "TIME ASIA", having acquired an international reputation and goodwill with it, and had copyrights for the cover design, with its distinctive red border.

The defendants published a magazine titled "TIME ASIA SANSKARAN" and used the slogan "now in Hindi, also a news magazine of international standards". The word "TIME" was also used in an identical typescript and font . The defendants invited advertisements in the magazine.

The court issued a permanent injunction restraining the defendants from using the mark `TIME ASIA' as part of the title of the magazine and from plagiarising the distinctive cover design . The court held that the "slavish imitation" of the plaintiffs' reputed trademark and cover design by the defendants was an effort to make "undue enrichment by creating confusion and deception in the trade as well as among consumers and attract advertisements for its magazine and have higher circulation."

As for compensatory damages, the court awarded Rs5 lakh for causing damage to the reputation and goodwill of the plaintiff's business, though no damages were granted for loss of sales due to inability to quantify that loss.

In addition, the court awarded "punitive or exemplary damages" for flagrant infringement of plaintiff's trademarks and copyrights. It held that the extent of punitive damages would depend on the flagrancy of the infringement and that whilst awarding punitive damages, of Rs 5 lakh as per the plaintiff's claim, a higher claim for such damages was also permissible.

Drawing a distinction between compensatory and punitive damages, the court held that the former was awarded "for compensating (the plaintiff) for the loss suffered by him, while punitive damages are aimed at deterring a wrong-doer and the like-minded from indulging in such unlawful activities".

The purpose or justification for grant of punitive damages was:

to deter wrong-doers

to emphasise that breach of intellectual property rights was a wrong not only to the plaintiff, but also society at large and the consumers who suffer on account of that deception.

to underscore that it is difficult for the plaintiff to prove the actual damages suffered by him considering that infringers do not maintain appropriate accounts of their transactions as they know that the same are objectionable and unlawful.

Statutory sanction for ex-parte relief

Modern-age counterfeiters are experts. They counterfeit goods using technologically innovative methods. Delay in judicial relief has assisted counterfeiters in remaining one step ahead of the law. In this context, Section 135 introduced in the Trademarks Act, 1999, is significant. It gives statutory powers to the courts to grant ex-parte(that is, without notice to the defendant) relief in appropriate cases. The courts are empowered to grant ex-parte injunctions against infringers restraining them from selling counterfeit goods, etc., and ex-parte order for discovery of documents, preserving of infringing goods, documents or other related evidence, and restraining the defendant from disposing of his assets in a manner which may affect plaintiff's ability to recover damages.

This provision will cause financial damage to counterfeiters by restraining the disposal of any asset of the counterfeiters even if the same are not related to the infringing activity.

In fact, it should also be possible to obtain interim orders compelling infringers to disclose the unauthorised profits or unjustified gains made by them by selling infringing goods and deposit the same in court until the final hearing. This will cause pecuniary loss and can be used as a potent deterrent weapon.

Progressive court decisions

Indian courts are becoming aware of the need for the Judiciary to develop progressive and novel methods of granting relief to check infringers and counterfeiters. The Supreme Court has taken the lead and in the case of Laxmikant Patel vs Chetanbhat Shah held that "once a case of passing-off has been made out, the practice is generally to grant a prompt ex-parte injunction followed by the appointment of a local commissioner, if necessary".

In several infringement and passing-off cases, the Bombay High Court has granted ex-parte orders not only restraining the infringers from manufacturing and selling infringing goods but also authorising the Court Receiver to seize the goods whether they are lying at the defendant's factories or at the premises of their retailers. These are known as roving orders. The Court Receiver is often authorised to take the help of the police in conducting the raids.

The normal rule is that the plaintiff has to specify the defendant's identity and address in the petition to the court. Counterfeiters and infringers who flood the market do not disclose their identity.

Thus manufacturers of genuine branded products are unable to obtain timely relief as the identity of the defendant is not easily ascertainable. This problem has been overcome by the grant of what are known as "John Doe" orders. These orders operate against infringing goods which may be seized wherever they are located and would operate against any potential defendant who is subsequently identified as the counterfeiter/infringer and the court order is served on him. One such `John Doe' order was granted by the Delhi High Court in Tej Television Limited vs Rajan Mondal. This practise is fairly well developed in the UK, New Zealand and Canada.

Home advantage and court jurisdiction

A plaintiff is normally required to initiate action in an appropriate court where the infringer carries on business or at the place where the infringing goods are sold.

This creates several practical difficulties and often gives home advantage to the infringer. In this context, Section 134 of the Trade Marks Act, 1999 (similar to Section 62 of the Copyrights Act) is extremely important as itpermits a registered trademark proprietor to initiate an infringement action at the place where such proprietor carries on business.

Thus, if the trademark proprietor carries on business in Mumbai, he would be entitled to initiate an action in the Bombay High Court even if the infringer is not located in Mumbai and the infringing goods are not sold in that city. The infringer will then be forced to defend the action in Mumbai which is not his home territory.

(The authors are legal associates, DSK Legal. The views are personal.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
For fiscal rectitude

Budget: On the soft trial

Budget 2005-06: Stage-managed humaneness

Battle ground Parliament

Case of, and for, private universities

Copycats, beware the doghouse

A blow to senior citizens

Transaction tax