Tuesday, 3 May 2016

India: Highest Damages Awarded By Delhi High Court in IP Matters

Delhi High Court Grants Punitive Damages of Rs. 1 Crore

The Delhi High Court in Cartier International AG and Ors. v. Gaurav Bhatia and Ors. [2016 (65) PTC 168 Del] has ruled in favor of the Plaintiffs, Cartier International AG and Others by awarding punitive damages of Rs. 10,000,000 (151000 $ Approx.) in the Plaintiffs’ favor. The Plaintiffs have also been granted a permanent injunction restraining the Defendants from selling or offering for sale any goods bearing the Trade Marks of the Plaintiffs or any other similar marks. 

Brief Background

The Plaintiffs are a part of the Richemont Group which is a group of companies that are considered to be world leaders in the field of luxury goods, with particular strengths in watches, writing instruments, jewellery, leather, accessories and clothing. The Plaintiffs are engaged in the manufacture and sale of a wide range of luxury products under their respective trademarks. The Plaintiffs filed the suit before the Delhi High Court seeking permanent injunction, restraining infringement of trademark, passing off, damages etc. It was alleged by the Plaintiffs that the Defendants were operating an e-commerce website www.digaaz.com where they were offering counterfeit lifestyle and fashion products for sale bearing the trademarks and logos of various luxury brands, including those of the Plaintiffs.

It is pertinent to note that The Defendants did not file any written statement in the suit and were proceeded ex-parte.

Major Contentions by Cartier International AG (Plaintiffs)
  1. The Plaintiffs have successfully secured registrations of their respective trademarks and the names of their prominent product collections.
  2. Due to long and continuous use with extensive sales spanning a wide geographical area, the Plaintiffs' products have acquired tremendous reputation and goodwill amongst consumers and the members of the trade all over the world.
  3. On account of the plaintiffs' overwhelming presence and activities all over the world including in India, knowledge and awareness of the suit trademarks is implicit and use thereof by any other entity is bound to create, a connection, affiliation or association with the Plaintiffs, in the minds of the consumer and the trade.
  4. The Defendants operate an ecommerce website www.digaaz.com where they offer lifestyle and fashion products for sale. The Defendants' website www.digaaz.com has been found to be offering for sale and supplying counterfeit products bearing several registered trademarks of the Plaintiffs including the suit trademarks.
  5. In February, 2014 the Plaintiffs learnt from MONTBLANC, another company in the Richemont Group, that the Defendants were selling and supplying counterfeit products of various luxury brands including those of the Plaintiffs on their website. The Plaintiffs issued cease and desist notices to the Defendants on 20th February, 2014 to which there was no response.
  6. The following factors establish that the Defendants are offering counterfeit products bearing the suit trademarks for sale on their website:
    1. The Plaintiffs do not sell their products at discounted rates whereas the Defendants are offering discounts as high as 95% on the products on their website.
    2. None of the Plaintiffs have ever authorized the Defendants to deal in products under their respective trademarks.
    3. Some of the products bearing the suit Trademarks being offered for sale on the Defendants' website do not have a corresponding original product being sold by the Plaintiffs.
  7. The Defendants has falsely claimed on their website www.digaaz.com that: 
    "At Digaaz.com, we strive to bring to you the latest in lifestyle and consumer merchandise products through lively sales and aspiring deals and discounts. We cover world's most coveted brands and guarantee 100% authenticity to offer you safe and secure shopping."
  8. The Defendants' website has been operational for at least 3 years as the domain name <www.digaaz.com> was created on 3rd April, 2012.The website www.digaaz.com was operational as early as at least 29th June, 2012 which is evidenced by internet extracts from www.web.archive.org.
  9. The volume of counterfeit goods sold by the Defendants demonstrates that the defendants are seasoned infringers and counterfeiters with a regular supply of counterfeit goods. Many of the right holders of other brands have instituted proceedings against the Defendants and have obtained orders restraining the Defendants from selling counterfeit products bearing their respective trademarks and logos.
  10. Numerous consumer complaints lodged against the defendants show that hundreds of consumers have been duped by the Defendants into believing that the goods offered on its website are genuine goods of various luxury brands.
  11. A complaint had been lodged before the Cyber Crime Cell of the Chandigarh Police. During the investigation the Cyber Cell ascertained that apart from the website www.digaaz.com, the Defendants were also selling their counterfeit products on the website www.watchcartz.com, and www.luxecart.com. On 24th September, 2014 raids were conducted at the Defendants' premises in Chandigarh where thousands of counterfeit products bearing the trademarks of various luxury brands including the suit trademarks were seized.
  12. The Plaintiffs have suffered irreparable loss and injury on account of the Defendants' acts of selling counterfeit products bearing the Plaintiffs' trademarks. And that the following factors to be considered by assessing the damages payable by the Defendants to the Plaintiffs:
    1. Actual illegal and unfair profits earned by the Defendants from selling counterfeit products bearing the suit trademarks of the Plaintiffs;
    2. Actual revenue lost by the Plaintiffs due to loss of sales of their original products on account of the illegal/infringing activities of the Defendants;
    3. Damage to Plaintiffs' valuable reputation and goodwill due to the availability of spurious products of the Defendants in the market;
    4. Punitive damages; and
    5. Attorney fees, costs and legal expenses.
  13. Defendants have made massive illegal profits from the sale of counterfeit products and all such profits convert into losses suffered by the Plaintiffs since the success of the Defendants' e-commerce websites and the sale of counterfeit goods on the websites are attributable to the immense reputation of the Plaintiffs' brands.
Contentions by Gaurav Bhatia and Ors. (Defendants)
The Defendants did not file any written statement in the suit. They also failed to admit or deny the documents of the Plaintiffs.

Methodology of Computation of Damages
The following are the methods that were suggested to be used to compute damage by the Plaintiffs:
  1. The number of visitors to the Defendants' website www.digaaz.com can be estimated at around 100,000 visitors or hits per month. The Defendants' website can be estimated to have received approximately 36 lakh hits in three years that this website was operational. If it is assumed that as little as 1% of these hits converted into sales and that each such sale was for Rs.10,000/- the turnover of this website for the three years that it has been operational would have been at least Rs.36 crores. Even if 10% of this turnover is attributed to the revenue generated from the sale of counterfeit products bearing any of the suit trademarks then the illegal profits made by the Defendants' under the suit trademarks would amount to Rs. 3.6 Crores.
  2. Another way which can be used for computing damages payable by the Defendants is by assessing the number of counterfeit products which are likely to have been sold by the Defendants since at least June 2012. This can be assessed using the recording of a telephone conversation which took place in August 2013 between the Defendants' sales representative with a customer who had purchased a counterfeit product bearing the MONTBLANC trademark from the Defendants. In the transcript, the sales representative confirms that the Defendants have sold more than 1000 MONTBLANC pens through the website www.digaaz.com. Even though over 2 years have lapsed since this telecom when the Defendants confirmed that they had already sold 1000 counterfeit MONTBLANC pens, using their sales figure as a basis, if it is presumed that the Defendants have till date sold at least 1000 counterfeit products under each of the brands amounting to a total of 4000 counterfeit products bearing the suit trademarks and if the cost of each of such product is estimated to be Rs. 63,000/- (being the average price quoted by the defendants for the counterfeit products under the suit trademarks being offered for sale on the website www.digaaz.com) the total illegal turnover of this website from the sale of counterfeit products under the suit trademarks amounts to Rs. 25 Crores.
  3. The Defendants were found in custody of thousands and thousands of counterfeit products including those bearing the suit trademarks on September 24, 2014. Over 730 watches were recovered from the defendants' premises and around one third of these depicted the suit trademarks. The average price quoted for counterfeit watches bearing the suit trademarks being offered for sale on the defendants' website www.digaaz.com was Rs. 75,000 and it therefore stands to reason that the defendants were found in possession of approximately 1.82 crore worth of counterfeit watches alone under the suit trademarks on a single day.
Observation/Decision of the Court
  1. The evidence of the plaintiffs and documents filed by the plaintiffs were deemed to be admitted under the provision of Order XII Rule 2-A CPC.
  2. The adoption and use of the suit trademarks by the Defendants in relation to the counterfeit products being offered for sale on their website amounts to infringement of registered trade mark Nos.253395, 98671, 551274, 1246395, 774844, 1342959, 774842, 551999 and 202130 in class 14 and trademark Nos.289891 and 1248639 in class 18.
  3. The purchasing public is bound to assume some sort of association or connection between the Defendants' products and the Plaintiffs thereby leading to confusion as to the source of origin of the Defendants' goods and passing off of the Defendants' goods as those of the Plaintiffs.
  4. The Defendants have used the Plaintiffs' registered trademarks on and/or in relation to their goods with a view to trade their business on the reputation and goodwill enjoyed by the Plaintiffs.
  5. The use of the same suit trademarks along with the copying of various styles of the Plaintiffs are a tell-tale sign of the Defendants' attempts at deception.
  6. The Defendants have been found to be offering for sale and supplying massive quantities of counterfeit products bearing several registered trademarks of various luxury brands including the plaintiffs on their website www.digaaz.com. Many third party luxury brands including Montblanc, Louis Vuitton and Burberry have instituted proceedings against the Defendants and obtained injunction orders from this Court restraining the defendants from selling counterfeit products bearing their respective trademarks and logos.
  7. The use of the suit trademarks by the Defendants, on their counterfeit products amounts to a deliberate and willful infringement of the Plaintiffs' proprietary rights by the Defendants. The Plaintiffs have made classic case of infringement of trademark and passing off.

The Court passed a permanent injunction restraining the Defendants from using the Plaintiffs’ trademarks or any deceptive or confusingly similar trademark. The Defendants deliberately stayed away from the proceedings and did not provide accounts of their illegal profits. The Court held that a party who chooses to stay away from court proceedings must, thus, suffer the consequences of damages as stated and set out by the Plaintiffs in such cases. The Court, relying on the principle laid down in the case of Time Incorporated v. Lokesh Srivastava & Anr., granted damages worth of Rs. 1 crore (151000 $ Approx.) to the plaintiffs.

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