The globalization of economies has drawn trade circles closer, empowering multinational corporations to expand their reach across borders. This expansion has allowed access to products worldwide, transcending geographical barriers for consumers. However, amidst this global expansion, the risk of trademark misuse and infringement has amplified significantly.

Trademark infringement arises when an entity uses a trademark that is either identical or deceptively similar to another party's goods and services, thereby infringing upon the exclusive rights bestowed upon the registered trademark proprietor. This infringement is addressed through statutory remedies crafted to protect registered trademarks.

Conversely, passing off occurs when an entity falsely represents its goods or services as those of another, often resulting in confusion among consumers. Actions against passing off are common law remedies against such deceitful practices.

Remedies against trademark infringement and passing off aim to mitigate consumer confusion and preserve the goodwill of the trademark owner, differing in their legal footing and application. However, the primary challenge in both scenarios lies in quantifying or awarding damages, which entails evaluating the extent of harm suffered by the trademark owner.

In India, courts undertake the pivotal role of determining appropriate damages to be awarded in intellectual property infringement disputes. Courts consider various factors tailored to each circumstance, such as the severity of the infringement, the extent of financial losses incurred, the impact on the plaintiff's reputation or market share and any unjust enrichment gained by the defendant. Sometimes, parties themselves propose desired compensation for infringement or passing off, prompting Courts to meticulously examine the evidence, legal precedents and the extent of harm caused to arrive at a fair judgment.

Trademarks are protected under the Trademarks Act, 1999, without a specific definition of damages. Section 135 of the Trademarks Act empowers Courts to grant relief to an aggrieved party for infringement or passing off. This relief includes injunction, damages or an account of profits, sometimes coupled with orders for surrendering infringing labels and marks for destruction or erasure.

In awarding damages, the Courts not only safeguard the right of the parties involved but also consider broader contextual factors, including the impact of infringing products on public health and safety, and the necessity of imposing higher costs to deter habitual offenders or prevent mala fide attempts to exploit another’s goodwill and reputation.

Rule 20 of the Delhi High Court Intellectual Property Rights Division Rules, 2022 specifies the procedure for seeking damages or an account of profits in intellectual property disputes, requiring parties to furnish a reasonable estimate of damages along with supporting documentary or oral evidence. Additionally, the Rule outlines the following factors that the Court must consider when determining the quantum of damages:

1. Lost profits suffered by the injured party.

2. Profits earned by the infringing party.

3. Quantum of income which the injured party may have earned through royalties/ license fees, had the use of the subject IPR been duly authorized.

4. Duration of the infringement.

5. Degree of intention/ neglect underlying the infringement.

6. Conduct of the infringing party to mitigate the damages being incurred by the injured party.

The Court, while computing damages, may also take the assistance of an expert as provided under Rule 31 (Panel of Experts) of these Rules.

Compensatory Damages: These damages are awarded to the aggrieved party that has suffered losses due to the defendant's infringing activities. The calculation of these damages is based on several factors, including the defendant's business tenure, sales made during the infringement period, profit percentages, and the actual loss incurred by the plaintiff. It is incumbent upon the plaintiff to substantiate the claimed amount and the method of calculation used, ensuring it can withstand judicial scrutiny.

Punitive Damages: These damages, also referred to as exemplary damages, are awarded to punish a defendant for egregious conduct and to deter the defendant and others from engaging in similar activities in the future. The primary aim is to punish habitual offenders and prevent such conduct. Courts have used terms like 'aggravated damages' and 'exemplary damages' interchangeably with punitive damages. Following the decision in Hindustan Unilever Limited v. Reckitt Benckiser India Limited, the term 'punitive damages' has been replaced with other terms.

Nominal Damages: These damages are awarded when the plaintiff establishes that an injury was suffered due to the defendant's wrongful conduct but cannot substantiate a compensable loss. Typically, these damages of a nominal amount are intended to symbolically acknowledge the defendant’s wrongdoing.

Courts have adopted numerous principles for awarding damages in cases of trademark infringement or in passing off suits.

In Hero Honda Motors Ltd. v. Shree Assuramji Scooters [125 (2005) DLT 504], the Delhi High Court granted a permanent injunction against the defendant for using the plaintiff’s mark HERO HONDA and logo, as well as for selling goods in packaging identical or deceptively similar to that of the plaintiff. The Court awarded plaintiff a sum of ₹5 lakhs as damages and the costs for the proceedings.

The Delhi High Court in Hindustan Unilever Limited v. Reckitt Benckiser India Limited [207 (2014) DLT 713] held that punitive or exemplary damages should only be awarded in cases falling within the specific categories outlined in Rookes v. Barnard [(1964) AC 1129], as affirmed in Cassell & Co. Ltd. v. Broome [(1972) AC 1027]. The Court emphasized the necessity of awarding punitive damages only when general damages are insufficient to account for the punitive element, ensuring proportionality and proper assessment of harm. It critiqued the Times Incorporated v. Lokesh Srivastava [116 (2005) DLT 569] judgment for advocating punitive damages in intellectual property cases without sufficient basis, reiterating that damages should remain a civil remedy aimed at compensating the plaintiff rather than punishing the defendant as in criminal law. The Court also highlighted the need for developing clear standards for awarding punitive damages in economic torts.

In SanDisk LLC v. Transton [(2018) DHC 3103], the plaintiff filed a suit for trademark infringement and passing off seeking damages for a sum of ₹1,00,01,000/- towards the loss of sales, reputation and goodwill caused by the activities of the defendants. The Delhi High Court awarded compensatory damages for a sum of ₹33,16,320/- based on the value of seized goods and the estimated duration of the defendant’s business activities. However, following the precedent set in Super Cassettes Industries v. HRCN Cable Network and Hindustan Unilever Limited v. Reckitt Benckiser India Limited, the Court ruled that the plaintiffs were not entitled to punitive damages.

In Whatman International Limited v. Paresh Mehta & Ors. [(2019) 257 DLT 472], the Delhi High Court granted permanent injunction to the plaintiff as the defendants committed infringement of the plaintiff's trademark and impinged on their rights deliberately, consciously and wilfully for a period spanning over 25 years. The Court applied the principles laid down in Rookes v. Barnard and awarded ₹1.85 crores to the plaintiff as exemplary, aggravated and punitive damages.

The Delhi High Court, following the Division Bench judgment of Hindustan Unilever Limited, delivered a landmark judgment in Koninlijke Philips N.V. & Anr. v. Amazestore & Ors. [260 (2019) DLT 135] regarding the infringement of copyright, design and trademark as well as passing off and unfair competition. The Court laid down the basic principles to be followed while awarding damages in case of intellectual property infringement. Drawing on precedents from Rookes v. Barnard (supra) and Cassell & Co. Limited v. Broome (supra), the Court emphasized that the nature and amount of damages are directly linked to the degree of malicious intent involved. The ruling affirmed that exemplary damages are justified in cases where the defendant intentionally infringes upon someone's rights, knowing that the profits gained from the wrongful act are likely to surpass the damages owed to the victim. The Hon’ble Court laid down the following set of guidelines to be followed while granting damages:

In Tata Sia Airlines Limited v. Shenzhen Coloursplendour Gift Co. Ltd. [2022 SCC Online Del 2662], the Delhi High Court imposed damages and costs quantified at ₹20 lakhs on the defendant for selling infringing products, highlighting the critical nature of national and international security concerns, especially in industries like aviation.

In Blue Heaven Cosmetics Pvt. Ltd. v. Shivani Cosmetics [290 (2022) DLT 614], the Delhi High Court awarded ₹10 lakhs as damages and ₹2 lakhs as costs to the plaintiff due to the sale of counterfeit cosmetic products, emphasizing upon the importance of maintaining quality standards, particularly in products like eyeliners used around sensitive areas such as the eyes.

The article is continued in the second part.

About the authors: Mayank Grover is a Partner, and Pratibha Vyas is an Associate at Singhania & Partners LLP.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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