This article is written by Gaurav Dadhich, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from lawsikho.com. Here he discusses “Applicability of Trademark Laws in the Reservation of Company Name”.

Before you understand the practical aspects of damages in terms of IPR, if any, if the readers don’t know about what IPR is?

You may read this article: Guide to IPR and Patent in India.

This paper will explain the practicality of claiming damages from the court.

After reading this paper, you will get to know about:

• What are the damages in terms of IPR?
• How can you claim damages for the infringement of your Trademark or Copyright or Patent in India?
• How to estimate the damages in terms of IPR?

Damages

The Black’s Law Dictionary has defined Legal Damages (Hereinafter ‘Damages’) as a pecuniary compensation which may be recovered in the courts by any non-breaching party which has suffered loss, detriment, or injury, whether to his person, property, or rights due to the unlawful act or omission or negligence on behalf of another party. 

There are 3 types of damages which are typically granted or considered by the court-

Nominal Damages 

Nominal damages are basically to recognize that the defendant has infringed the plaintiff’s Intellectual Property Rights.

Nominal Damages, so far, have nothing to do with the actual damages the plaintiff might have suffered and the actual damages that the plaintiff claims that the wrongful acts of the defendant have caused to him when the plaintiff approaches the court.

For Example: 

Most of you would relate to this example almost everyone is aware in cases of say liquor, you need to take the excise permission from the excise commissioner for using the label/Trademark.

Let’s assume that the defendant has not even started using a TrademarkTM but has filed an application for the registration of Trademark in the excise department, now what plaintiff does is that he also keeps an eye in the excise department. In case, if any, plaintiff comes across the same label for which the defendant has filed an application for the registration of that label as a ™.

Then in this case apart from objecting in the Excise Department, he also files the suit in court as a queer time in action on the basis of plaintiff’s apprehension that the defendant might use my trademark and it will amount to infringement of the plaintiff’s Trademark. Therefore, the plaintiff seeks an order against the defendant restraining him from using the label. In that crave because the defendant had not actually started using the ™, the damages which the plaintiff claims are only Estimated damages and therefore not per se damages to the plaintiff.

In these cases the appropriate court considers to award then nominal damages.   

NOTE– In order to claim damages in the case, you have to first make out the case and your first relief will always be for “restraining the defendant from doing something i.e. Injunction order”

Damages follow the injunction order, you can’t have damages as an independent remedy, at least in IPR.

To know more about injunction order in brief read this article, Remedies in case of IPR Violation

Real Damages

Plaintiff claims and the plaintiff estimates that because the wrongful acts of the defendant, the plaintiff has suffered these damages, that is how the plaintiff approaches the court.

Now, there is no straight jacket formula to ascertain the exact amount of damages, how exactly can a plaintiff ascertain looking at the balance sheet, book of accounts or further ask an expert to ascertain the exact amount of damages? So, as and when the plaintiff generally approaches the court, the plaintiff always goes with an estimate.

For Example:

Plaintiff files a suit for the infringement of Trademark or Copyright or Patent. Now, he believes that the damages which have been caused by the defendant due to wrongful acts, are to the tune of, say , Rs. 5,000,00 /-. Though there is no straight jacket formula, as and when the suit proceeds for the trial, the plaintiff claims that Rs. 5 Lacs amount can also increase or decrease. Ultimately, therefore in court plaintiff makes an averment in the plaint itself that, though right now, I estimate Rs. 5 Lacs in case, if any, after investigation or enquiry plaintiff discovers that the damages are way more than the aforesaid mentioned amount i.e. Rs. 5 Lacs, then plaintiff shall crave liberty to claim more damages from the defendant.

This example proves that you can only estimate the damages and nobody can come up with a fixed formula. In fact, these are very hard to calculate even for the plaintiff not only at initial level but also at the final hearing after the trial proceeds.

What happens when the plaintiff ordered to prove damages in court? 

There are generally two methods over a period of time from judicial precedents that have evolved and developed which Court, Lawyers and the Parties follow. 

I will be using two simple examples to intricate these two methods separately.

For Example:

I am using a simple hypothetical example of ™ infringement.

Plaintiff’s product- VAT 69

Defendant product- VAT 96 

Plaintiff files the suit and claims that the defendant has used the product VAT 96 and in which VAT is associated with me and it’s my registered ™. So, the defendant has infringed my ™ then the court grants interlocutory order, the matter ultimately proceeds for trial. At the time of plaintiff’s filing the suit, the damages which are, say, to the tune of Rs. 10 Lacs claimed. Now, the goodwill and popularity of the plaintiff’s product is so high that the plaintiff will have to prove these damages.

Now, How to prove these damages?

And what are the factors that the court considers?

Let’s assume, the defendant infringed the Trademark in the year 2012 and the plaintiff filed a suit in the next year 2013. In this scenario, the plaintiff will have to produce the annual report from almost last 5-6 years say from the year 2009 to the year 2014, the reason for producing these annual report is to point out that because of this defendant’s product which stepped into the market in the year 2012 the percentage of sales decreased. You will also have to point out the nature of the product, trends and all you have to reason for the Damages to claim.

Had had the defendant not used the plaintiff’s impugned mark the sales would not have been decreased. Similarly, by the infringement of my ™, from the year 2012 to 2013 I have lost Rs. X amount of money. Therefore, in this way the court may or anyway will consider the submissions of the plaintiff.

For Example:

In the aforesaid example, Assume that VAT 69 is one of the products of Hindustan Unilever Co. it’s a big Company which has so many products, then the plaintiff have to produce general Annual Turnover of the whole company because they might not have the exact sales figure of the impugned product. By way of this approach shares or the percentage of the particular mark can be calculated, whether the percentage of sales has increased or decreased after the defendant entered into the market and by what percentage sales figures have been affected due to plaintiff’s Trademark infringement.  

By these two methods, the court comes to the conclusion.

Punitive Damages

Punitive damages or Exemplary damages, are the damages assessed in order to punish the defendant for outrageous conduct and /or to refer deterrent the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit.

 Some of the necessary conditions required for this conduct are: 

• dishonesty,
• malafide intention or the intention was to take the piggy bank right upon the plaintiff’s ™,
• the defendant is unable to show sufficient cause for doing the wrongful act.

Miscellaneous Information

Alternative relief 

• Accounts of profit/profit of Accounts

“I claim from you the money, what you have made out of your wrongful act.”

In simple language, plaintiff rather than asking for any of the aforementioned damages, he asks for the profit which the defendant has made out of the impugned product.

Generally plaintiffs prefer to claim damages than the Alternative Relief of in terms of Accounts of Profit/Profit of Accounts. 

Note: Once the infringement has been proved, the plaintiff has to select between the right to get damages or accounts of profits. These are alternative remedies (you cannot claim both simultaneously), and the plaintiff will have to choose one beforehand.

Conclusion

In the current times IPR is an ever growing profession.  India with one of the leading members of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) has extended the scope of IPR in every sense. Being the rapid growth in the litigation cases, IPR disputes are measured to be plethora in numbers as what is enumerated from the backlog research regarding the pending IPR litigation. A way step forward to the IPR litigation is damages which is not essentially calculated appropriately therefore, brings an appeal to the higher court and then to the apex court i.e. Supreme Court of India. Considering this scenario, in the current time every lay man before starting any business, patenting any invention, copyrighting any artistic work, trademark of any logo shall spare some time researching for the prior registration of any of the aforesaid Intellectual Property Rights so that they do not have to suffer with the suit of infringement and ultimately compensation for damages to be paid to the other party for the infringement. Therefore, in IPR the damages play a crucial role in deciding the IPR disputes.

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