JUDGMENT A.K. Sikri, J.
Page 2582
1. The defendants have moved this application under Order VII Rule 11 (d) of the Code of Civil Procedure read with Section 106(1) of the Trade Marks and Merchandise Act, 1958 (for short `the Act') for rejection of the plaint. Before coming to the grounds on which the defendants want rejection of the plaint, I may state the case of the plaintiff in the suit.
2. The plaintiff, Titan Industries Ltd., is a joint venture of Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO). It was incorporated in the year 1987 and its activities include manufacture and Page 2583 marketing of watches, clocks and jewellery. It enjoys a 25% share of the total domestic market. The cause of filing the present suit is the manufacturing and marketing of watches by the defendants under the trade name SONA. It is alleged that the defendants have not only adopted a deceptively similar trade mark, but have also adopted a similar lay out and get up for the packaging and have copied the dials of the plaintiff. Therefore, present suit is filed for permanent injunction, delivery of rendition of accounts and damages. For the purpose of the application filed by the defendants, we are concerned with the reliefs claimed by the plaintiff in respect of rendition of accounts and damages and the prayer made in this behalf is as under:
(d) An order for rendition of accounts of profits illegally earned by the defendants by reason of infringement of the plaintiff's copyrights, infringement of trade marks as aforesaid and by passing off their goods and/or business as the goods and business of the plaintiff, and a decree be passed against the defendants in the sum o the amount so ascertained.
(e) An order for damages to the tune of Rs.5,05,000/- payable to the plaintiff on account of loss of sale and reputation.
3. It may also be noted that for damages relief is valued for the purpose of court fee and jurisdiction at Rs.5,05,000/- and for rendition of accounts the relief is valued at Rs.20 lacs.
4. In this application filed by the defendants, the submission is that the plaintiff can, as per the Section 106 of the Act claim the relief either for damages or for rendition of accounts and it is not permissible for the plaintiff to claim both the reliefs. Section 106(1) of the Act reads as under:
"106. Reliefs in suits for infringement or for passing of.-(1) The relief which a court may grant in any suit for infringement or for passing off referred to in section 105 includes an injunction (subject to such terms, if any, as the court think fit) and the option of the plaintiff, either damages or on account of profits, together with or without any order for the delivery-up of the infringing labels and marks for destruction or erasure."
5. It is, therefore, submitted that the suit is barred by law and is liable to be dismissed.
6. The plaintiff has resisted this application on the ground that the suit is not merely for infringement/passing off of trade mark under the Act but it is also a suit for infringement of copyright under the Copyright Act, 1957 and thus in view of the provisions of Section 55 of the Copyright Act, relief of damages as well as rendition of accounts can be claimed. Without prejudice to this contention, it is submitted that even under the Act, where one or the other relief can be claimed, it is necessary for the plaintiff to make prayer for both the reliefs and the plaintiff can exercise the right of election of a particular remedy at the conclusion of the hearing once the infringement of trade mark/passing off thereof is established. In support of this plea, the plaintiff has referred to English case law a well as passages from certain books.
7. After hearing learned counsel for the parties, I am of the view that the learned counsel for the plaintiff is justified in his submission on both the counts and, therefore, this application is liable to be dismissed.
Page 2584
8. Para 11 of the plaint would indicate that specific averment is made that the trade mark SONATA is enclosed in a device which is an original artistic work within the meaning of Section 2(c) of the Copyright Act, 1957 and the same has been created by Mr Michael Foley,Chief Designer of the plaintiff company during the course of his employment. In para 12, it is averred that the instruction manual distributed along with the watches has a literary content, which is a literary work within the meaning of Section 2(c) of the Copyright Act, 1957 and the said literary work has been created by another employee Mr.Hemchander P.N., Senior Officer, Design Department of the plaintiff during the course of his employment. It is also stated in para 13 of the plaint that the watches of the plaintiff are sold in an attractive lay out. The said watch dials are created by three-dimensional reproductions of the two-dimensional artistic works created by the employees and the plaintiff is the proprietor of the copyright in the said works. The allegations against the defendants are that they are infringing the plaintiff's copy rights as well. Even in para 24 relating to the territorial jurisdiction, reliance is placed on Section 62(2) of the Copyright Act, 1957. Thus in the suit infringement of copy right is also alleged. Section 55 of the Copyright Act, 1957 clearly lays down that a suit can be filed both for damages and rendition of accounts as would be clear from the bare reading thereof:
"55. Civil remedies for infringement of copyright.-(1) Where copyright in any work has been infringed, the owner of the copyright shall, except as otherwise provided by this Act, be entitled to all such remedies by way of injunction, damages, accounts and otherwise as are of may be conferred by law for the infringement of a right:
Provided that if the defendant proves that at the date of the infringement he was not aware and had no reasonable ground for believing that copyright subsisted in the work, the plaintiff shall not be entitled to any remedy other than an injunction in respect of the infringement and a decree for the whole or part of the profits made by the defendant by the sale of the infringing copies as the court may in the circumstances deem reasonable.
9. There is, therefore, nothing wrong in claiming both the reliefs.
10. Even if it was a suit only under the Act of 1958 or Trade Marks Act, 1999, it was open to the plaintiff to paraphrase the prayer clause in the manner done by the plaintiff in prayers (d) & (e) extracted above and exercise its right of election either between damages or profits at the conclusion of hearing of the case. Kerly's Law of Trade Marks and Trade Names (13th Edn.), in the chapter under the heading `Financial Remedies-Damages and Accounts of Profits', deals with this aspect in the following manner:
"Damages are a matter of right; the account of profits is an equitable remedy and the court has a discretion whether or not to grant it. Accordingly, a successful claimant in an infringement action is entitled to an inquiry as to damages (at his own risk as to costs) in any case where there is a prospect that the inquiry would reach a positive result; whilst only in certain cases will the court grant an account of profits. In these cases, the claimant has an option (exercisable at the conclusion of the hearing of the case) to claim Page 2585 either damages or profits; he cannot have both. Accordingly, it is usual in particulars of claim to ask for the two in the alternative. The principle upon which the court grants an account of profits is that where one party owes a duty to another, the person to whom the duty is owed is entitled to recover from the other party every benefit which that other party has received by virtue of his fiduciary position if in fact he has obtained it without the knowledge or consent of the party to whom he owed the duty. An account is generally refused if the defendant had no knowledge of the claimant's mark and, when ordered, is limited to the period during which such knowledge had existed; whilst knowledge or absence of knowledge does not affect the right to damages.
A claimant who has been successful in an action for trade mark infringement or passing of may not have sufficient knowledge of the defendant's activities to make an informed decision as to whether he should seek an inquiry as to damages or an account of profits. In such a case he may seek disclosure before making his election: Island Records v.Tring. Disclosure given in such circumstances should be limited to that which is necessary for the claimant to make an informed decision within a reasonable time; he is not entitled to all the disclosure which would be given in the inquiry, and in appropriate circumstances an audited schedule of infringing dealings may be a substitute for documentary disclosure."
11. It is clear from the above that whereas damages are a matter of right, account of profits is an equitable remedy and the court may or may not grant the latter relief. It is for this reason the claimant is given an option to claim either damages or profits and such an option is exercisable at the conclusion of hearing of the case. The claimant is, thus, permitted to plead for both the remedies, though in the alternative, so that the claimant who has been successful in action of trade mark infringement or passing off may exercise for such an option at the time of conclusion of the hearing. The reason for giving such an option at the conclusion of hearing is that the claimant may not have sufficient knowledge of the defendants' activities to make an informed decision as to whether he will seek an inquiry as to damages or an account of profits and, therefore, he may seek disclosure before making his election.
12. Volume-2 of the Modern Law of Copyright and Designs (3rd Edn.) authored by Sir Hugh Laddie, Justice of the High Court of Justice England and four others, also deals with this topic giving the same treatment as noted above which would be clear from the following passage at page 1804:
"A claimant must elect whether to seek an award of damages or an account of the defendant's profits. He is not entitled to both. This is because the two remedies are mutually inconsistent, the first being concerned with the loss or damage sustained by the owner of the right as a result of the defendant's wrongful acts, the second with the profit made by the infringer's wrongful acts. If the claimant elects for an account of profits he is precluded from seeking additional statutory damages. In the past the election had to be made prior to judgment being entered but the modern practice is that the claimant is entitled to limited disclosure from the defendant before making his election and this is reflected in the order drawn up by the Page 2586 court. In particular, the claimant is entitled to disclosure of documents relevant to the sums received or receivable by the defendant in respect of the infringement, the sales of infringing copies, the numbers left unsold, and the costs incurred by the defendant in respect of the manufacture, distribution and sale of the infringing copies or to an audited schedule setting out such information or, where the provision of such information would be costly and time consuming, to an affidavit setting out such information with an approximate estimate of the costs incurred together with a statement of how the estimate was made."
13. To the same effect is the judgment of the Chancery Division in the High Court of Justice, England in the case of Island Records Limited v. Tring International PLC and another reported as Fleet Street Reports (1995) 560. After discussing in detail the law on the point and holding that in proceedings in which the plaintiff claims in the alternative damages of an account of profits, the plaintiff may seek and obtain a trial at which will be determined all issues of liability, of the assessment of damages and of calculation of profits. In such a case full discovery will include all documents relevant to the assessment and calculation, and the plaintiff can make an informed election between damages and profits in the course of the trial in the light of the information revealed on discovery and in the evidence at the trial.
14. The court also noted that with a view to savings of cost, the practice has developed, in particular in intellectual property cases, when it is practicable, to have a "split trial". The action is divided into two stages. The first stage is the trial at which the issue is limited to that of liability, i.e. whether the plaintiff's rights have been infringed. The second stage, which is contingent upon liability being established at the first stage, is concerned with the question of assessment of damages and calculation of profits. In this way, the costs of exploring the issue of damages and profits is put off until it is clear that the defendant is liable and the issue really arises and requires determination. As a concomitant with this practice, there has likewise developed the practice of limiting discovery at the first stage to documents relevant to the issue of liability and excluding documents relevant only to the second stage. In this way the burden of discovery at the first stage is reduced, and the invasion of confidence necessarily involved in discovery is postponed and if liability is not established, entirely obviated: [see also Baldock v.Addison [1995] 1 W.L.R.158.]
15. Learned counsel for the defendants tried to urge that there is no practice of 'split trial' in this country and, therefore, the aforesaid provision is not applicable. This submission of learned counsel is reflective of ignorance on this part. The system of 'split trial' prevails in all those cases where relief of rendition of accounts or damages/mesne profits is made. In the first stage the court holds inquiry as to whether the right of the plaintiff is infringed or not and once it is so held, a preliminary decree for rendition of accounts is passed and at the second stage the evidence is led on the question of assessment of damages.
16. In the Island Records Ltd. (supra), the court distilled four principles to be kept in mind, in such cases, after scanning through the relevant case law Page 2587 that has emerged on the point. These four principles have been stated in the following words:
"Four principles are clear. First whilst a plaintiff can apply in proceedings in the alternative for damages and an account of profits, he cannot obtain judgment for both: he can only obtain judgment for one or the other: see Neilson v.Betts (1871) L.R.5 H.L.1 and De Vitre v. Betts (1873) L.R.H.L.319 at 321. Secondly, once judgment has been entered either for damages or an account of profits, any right of election is lost: any claim to the remedy other than that for which judgment is entered is forever lost: see United Australia Ltd.v.Barclays Bank Ltd [1941] A.C.1 at 30. Thirdly, a party should in general not be required to elect or be found to have elected between remedies unless and until he is able to make an informed choice. A right of election, if it is to be meaningful and not a mere gamble, must embrace the right to readily available information as to his likely entitlement in case of both the two alternative remedies. It is quite unreasonable to require the plaintiff to speculate totally in the dark as to whether or not the sum recoverable by way of damages will exceed that recoverable under an account of profits. In an analogous situation, it has been held unreasonable to require a plaintiff to speculate whether a payment into court is sufficient to satisfy his claim for damages for infringement of copyright before he has been afforded inspection of the records of sales in the defendants book: see Mate & Son v.Samuel Stephen Ltd (1928-1935) Mac CC 257 at 261. Fourthly, the exercise of right of election should not be unreasonably delayed to the prejudice of the defendant."
17. The aforesaid principles laid down by the English Courts on the claims for damages and/or account of profits are based on common law principle applicable in torts. Section 106 of the Act and its equivalent provision contained in Section 135 of the Trade Marks Act, 1999, are nothing but the legislative mandate to the aforesaid common law principles. Therefore, once this provisions states that the plaintiff can claim relief either for damages or relief for account of profits, reading the aforesaid principles into this provision it is also to be held that both the reliefs can be claimed in the alternative with right to the plaintiff to make an informed election between damages and profits in the course of trial in the light of information revealed on discovery and the evidence at the trial.
18. Thus Section 106(1) of the Act has made no change in the common law principle but as only put the existing principle into statutory form. Even, in India, this rule that a successful plaintiff in an action for infringement could elect between an inquiry as to damages and an account of profits is followed since the decision in Kinmond v. Jackson reported as (1878) 3 Cal. In Juggilal Kamalapat v. The Swadeshi Mills Co.Ltd. reported as (1929) 50 I.A.1 the court opined that a plaintiff who originally claimed an account of profits may give up this claim subsequently at the trial and ask for damages instead.
19. No doubt, in view of the aforesaid provisions normally the plaintiff should have made the two prayers, namely, for damages and rendition of accounts, in the alternative as under the Act the plaintiff could be given only one of the Page 2588 two reliefs. However, since the infringement under the Copyright Act, 1957 is also alleged, the manner in which the two reliefs are worded, cannot be faulted with. I, therefore, do not find any mrit in this application which is accordingly dismissed.