In India, when it comes to calculating the quantum of damages for IP infringement, there are no set parameters or guidelines so courts place reliance on existing broad principles and precedents.
In the case of Microsoft Corporation v Deepak Raval, the Delhi High Court awarded only the damages actually claimed in the suit. In doing so, the court observed that though the total damages were worked out to ₹12.82 million, the damages claimed in the suit were ₹500,000. Therefore, there was no option but to limit the award to ₹500,000.This case highlights the importance of calculating the quantum of the damages claimed in a suit correctly so that there is no scope for the court to restrict it to an amount that is less than the actual loss suffered by the right owners. Therefore it becomes all the more important that an expert in the field of IP calculate the loss suffered before a suit is filed so that right owners could seek maximum damages from the Court.
Damages are quantified in three categories viz., actual damages, damages to goodwill and reputation, and exemplary /punitive damages. Actual/Compensatory damages aim to place the plaintiff in the same position as if the defendants caused no loss to the plaintiff. Damages to goodwill and reputation are in respect of the injury caused to the goodwill and reputation of the plaintiff due to the infringing activities of the defendant. Punitive damages are awarded if there is a flagrant violation by the defendants of the plaintiff’s rights, to set a deterrent example for others.
Calculating damages for Copyright
Factors to be considered when calculating damages suffered by the copyright holder are as follows:
The author’s reputation:
The status of an author who has won awards for scientific, cultural or literary achievement is taken into account when assessing compensation for the material damage (economic losses suffered) , including the benefits that the infringer unlawfully gained as a result of their infringement, which also represents a loss of profits for the author. The author’s status is also an important element that IP experts should take into account in assessing the moral damage where an author’s moral rights are infringement.
The value of a copyrighted work
The value of an award-winning work, which is highly rated, widely viewed or considered to be influential in its domain, shall be taken into account when assessing compensation for material and moral damage. Herein the measure of damages is the depreciation caused by the infringement to the value of the copyright.
The extent to which the infringer benefited from the exploitation of the work
For this purpose, the right holder must establish the following:
- Quantity of works affected by copyright infringement;
- Market share loss by the plaintiff due to such infringement; and
- Loss of profits for the plaintiff due to such loss of market share.
Calculating damages for Trademarks
In principle, any damage suffered by a trademark proprietor is a material damage resulting in economic losses. Consequently, the basis for calculating damages is as outlined below:
The market value of the trademark
IP Attorneys evaluating the trademark rights should assess the value of the damage suffered by the trademark owner as well as the impact of the infringement on the trademark’s value in the market.
Damage resulting from loss of profits
The profits of the trademark owner can be assessed by reference to the plaintiff’s audited financial statements before and after the infringing act. This is used to determine the damage resulting from loss of profits.
The decrease must be established by the plaintiff by showing (a) a likelihood of confusion between the plaintiff’s and defendant’s trademarks; and (b) that the latter is using the trademark to mislead the public by creating the belief that it is a branch or agent of the plaintiff so as to divert sales from the plaintiff to the defendant. Thereafter, establish the subsequent decrease in sales during which period the defendant’s counterfeit products had entered the market.
For calculation of damages, some of the factors to be considered were laid down in the case of Syed Zakirali vs. Syed Zahidali and Ors. which are as follows:
- loss sustained by the plaintiff, resulting from the natural and direct consequences of the infringement
- drop in trade of the plaintiff pursuant to the infringing activities of the defendant (not due to market forces),
- impact on the goodwill, reputation resulting from the infringing activities.
By taking these factors into consideration the IP Attorneys can compute the damages that could be recoverable from the infringers through judicial enforcement.
Author: Neha Uppin, Legal Intern at PA Legal.
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