The Delhi High Court has clarified that compensatory damages can be awarded based on a reasonable estimation of the infringer’s profits, which can be calculated by extrapolating available sales data over the period of infringement and applying a conservative profit margin, especially when the defendant fails to provide any contradictory evidence.
The Court also pointed out that the exemplary damages are warranted in cases where the defendant’s conduct demonstrates a wilful and contumacious disregard for the court’s orders and the plaintiff’s intellectual property rights, such as by continuing infringing activities post-injunction and subsequently abandoning the legal proceedings.
Under the Commercial Courts Act, 2015, and the applicable High Court rules, a successful plaintiff is entitled to the recovery of actual costs incurred in the litigation, provided such costs are substantiated by evidence, added the Court, while observing that in an ex-parte proceeding for patent infringement, where the defendant fails to lead evidence to support its defence, the unrebutted evidence of the plaintiff can be accepted in its entirety.
Accordingly, the Court decreed the suit for infringing product, ‘SEPAMET-XR’, listed on various e-commerce websites, in favour of the plaintiffs and against the defendants. The Court also ordered the defendants, jointly and severally, to pay the plaintiffs the compensatory damages of Rs. 49.44 Lakhs, exemplary damages of Rs. 10 Lakhs, and cost of Rs. 21.67 Lakhs.
A Single Judge Bench of Justice Tushar Rao Gedela relied on the method of calculating damages based on the infringer’s profits, as established in Koninlijke Philips vs Amazestore [2019 SCC OnLine Del 8198], and considered the export data for three months (September 2017 to November 2017) obtained from Seair Exim Solutions, which showed sales valued at Rs. 49.44 Lakhs.
The Bench estimated the total period of infringement to be 12 months (September 2017 to August 2018), by applying a multiplier of 4 to the three-month sales figure to arrive at an approximate annual sales figure of Rs. 1.97 Crores. Accepting the plaintiffs’ conservative estimate of a 25% profit margin, the Bench calculated the compensatory damages to be Rs. 49.44 Lakhs.
Referring to Rule 20(ii) of the Delhi High Court Intellectual Property Rights Division Rules, 2022, which allows for the determination of damages based on profits earned by the infringing party, the Bench observed that the defendants continued to advertise the infringing product for sale on e-pharmacies in 2021, even after the injunction order. This wilful violation, coupled with their decision to stop appearing in the proceedings, propelled the Bench to award exemplary damages.
Briefly, the suit was filed by Plaintiff No. 1, Merck Sharp & Dohme Corp., the owner of Indian Patent No. 209816 for the molecule SITAGLIPTIN, and Plaintiff No. 2, Sun Pharmaceutical Industries Ltd., a licensee of Plaintiff No. 1. The plaintiffs commercially sell SITAGLIPTIN and its combination with METFORMIN HCI under brand names like JANUVIA, JANUMET, ISTAVEL, and ISTAMET.
The cause of action arose in May 2018 when the plaintiffs discovered the defendants’ infringing product, ‘SEPAMET-XR’, listed on various e-commerce websites. Page 2 Investigations and data from Seair Exim Solutions revealed that the defendants were commercially exporting the infringing product. Thereafter, an ex-parte ad interim injunction was granted, restraining the defendants from infringing the suit patent.
The defendants initially denied infringement, challenging the court’s territorial jurisdiction, and claiming they were not responsible for third-party website listings. Subsequently, the defendants’ counsel sought discharge due to a lack of instructions, which was allowed. As the defendants were served through substituted service but failed to appear, they were proceeded ex-parte. The plaintiffs therefore informed the Court that the suit patent had lapsed, rendering the prayer for an injunction infructuous.
Appearances:
Advocates Pravin Anand, Tusha Malhotra, and Sugandha Yadav, for the Plaintiff
None, for the Defendant
