United Biotech (P) Ltd. vs Schon Pharmaceuticals Ltd.
2009 Latest Caselaw 5063 Del

*          HIGH COURT OF DELHI : NEW DELHI

+                      CS (OS) No.1400/2008

                       Judgment reserved on:      26th November, 2009

%                      Judgment decided on :         8th December, 2009

United Biotech (P) Ltd.                           ......Plaintiff
                     Through: Ms. Mamta Jha, Adv.

                       Versus

Schon Pharmaceuticals Ltd.                               .....Defendant
                    Through: None


Coram:

HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
   be allowed to see the judgment?                       No

2. To be referred to Reporter or not?                    Yes

3. Whether the judgment should be reported               Yes
   in the Digest?

MANMOHAN SINGH, J.

1. The plaintiff filed the aforesaid suit for permanent injunction,

passing off, rendition of accounts of profits/damages and delivery up

etc. against the defendant.

2. The brief factual matrix of the case is that the plaintiff is a

company incorporated under the Companies Act, 1956 having its

registered office at United House, E-142, Saket, New Delhi-17. Mr.

Sanjiv Kumar is the authorized signatory of the plaintiff company who

is duly authorized to file the present suit. The power of attorney in his

favour is filed on record and exhibited as Ex-PW1/1.

3. The plaintiff claims to be one of the fastest growing and

reputed pharmaceutical company in India engaged in the manufacturing

and marketing drugs and formulations since the year 1997. The plaintiff

Company avers that it has dedicated specialty therapy in areas like

oncology medicinal preparation for the treatment of cancer. The

plaintiff submits that it has recently invested Rs.15 crores on its

oncology division and has tied up with Blausiegel, a Brazilian

company, for its entire range of biotechnology products for cancer

treatment with the vision to make and sell medicines cheaper than the

drugs sold by international pharma companies. The plaintiff's

manufacturing facility is located at Himachal Pradesh and is approved

by WHO-cGMP and has also compliant of USFDA, UKMHRA, TGA-

Australia guidelines.

4. The plaintiff avers that it has four divisions and state of the

art research centre with a total work force of over 500 employees. The

plaintiff has also given its sales figures for the last five years to depict

its growth in Indian Pharmaceutical Industry which was Rs. 1320.11 lac

in 2003-04 and Rs. 5901.78 lac in 2007-08.

5. The plaintiff submits that one of the medicinal preparations

manufactured and marketed by it is piperacillin and tazobactam under

the trademark TAZIN which is a semi-synthetic antibiotic and is used in

therapy for appendicitis and peritonitis, uncomplicated and complicated

skin and soft tissue infection, pelvic inflammatory disease, community

acquired or nosocomial pneumonia, febrile neutropenia etc.

6. The plaintiff claims to the proprietor of the trade mark

TAZIN and applied for its registration on 18 th October, 2002 under

No.01144251 in respect of pharmaceutical preparations falling in Class

5 of the Fourth Schedule of the Trade Marks Rules, 2002. The said

application is still pending.

7. The plaintiff asserts that since the trademark TAZIN is a

coined and invented trademark of the plaintiff, it enjoys high decree of

inherent distinctiveness and is indicative of origin and source of

medicinal preparation of the plaintiff company.

8. The plaintiff entered into an agreement with Oscar Remedies

Private Limited, Oscar House, Badi Mazra, Yamuna Nagar, Haryana on

30th January, 2001 and Schon Pharmaceuticals Limited 145/2-B,

Jambudi Hapsi, hatod Road, Indore-453112, the defendant herein in

January, 2005 for the purpose of manufacturing the said pharmaceutical

preparation under its trademark TAZIN. However, counsel for the

plaintiff states that as a matter of record, no manufacturing activity was

undertaken by the defendant herein for the plaintiff's products, being

sold under the trademark, TAZIN. The plaintiff urged that even prior to

such agreement, the plaintiff has been marketing its drug under the

trademark TAZIN since 2002.

9. The plaintiff submit that on 22 nd February, 2006 the Drug

Controller cum Licensing Authority, Shimla granted permission to the

plaintiff for manufacturing pharmaceuticals preparation including

TAZIN. The plaintiff avers that the plaintiff has thus been

manufacturing TAZIN drug exclusively since 2006.

10. The plaintiff urged that it has spent enormous money to

promote the sale of the said medicinal preparations bearing the trade

mark TAZIN in medicinal journals, bulletins, etc. and also promoted it

by way of leaflets, booklets and other visual aids in respect of the said

preparations.

11. The plaintiff asserts that the medicinal preparations bearing

the trade mark TAZIN has been widely accepted by the medical

profession and the trade mark TAZIN is exclusively identified and

associated by the doctors, members of the trade and public as the drug

manufactured and originating from the plaintiff and no one else. The

trade mark TAZIN has been extensively and commercially used by the

plaintiff in the course of trade of medicinal preparations since January,

2002. The medicinal preparations bearing the trade mark TAZIN thus

enjoys formidable reputation and goodwill and has been very widely

accepted all over the country.

12. The learned counsel for the plaintiff submits that in

November, 2006, after the expiry of the agreement with the defendant,

the plaintiff came to know that the aforesaid medicines comprising of

the same salts was being manufactured by the defendant under the same

trademark, TAZIN. The plaintiff immediately cautioned the defendant

by writing letters calling upon the defendant to stop manufacturing and

marketing the said product under the impugned trademark TAZIN.

Thereafter, the defendant is stated to have discontinued the infringing

activity.

13. In the third week of 3rd July, 2008 the plaintiff through its

sales representative learnt that the defendant has restarted

manufacturing and selling spurious medicinal preparations under the

trade mark TAZIN which is plaintiff's trade mark. It is stated that the

impugned trade mark TAZIN is identical to the plaintiff's trade mark

TAZIN. The defendant knowingly and deliberately adopted the

trademark TAZIN with mala fide intention to cause confusion and

deception about the source of the goods marketed under the said trade

mark.

14. The plaintiff submits that the use of the trade mark TAZIN

by the defendant constitutes an act of misrepresentation of the source

and origin, and leads to misappropriation of the goodwill and reputation

enjoyed by the plaintiff's trade mark TAZIN. Such use by the defendant

is bound to lead to passing off of the defendant's goods and business for

those of the plaintiff.

15. The plaintiff alleged that the use of the trademark TAZIN by

the defendant also constitutes an act of unfair competition as the mark

TAZIN is identical trademark for identical drug of the plaintiff.

16. The learned counsel for the plaintiff relied upon the case of

Cadila Health Care Ltd. Vs. Cadila Pharmaceuticals Ltd. AIR 2001

SC 952 to contend that confusion between medicinal products is life

threatening and may lead to infatal results to purchasers, therefore,

greater protection is required in such cases. The plaintiff claims

damages to the tune of Rs.20,05,000/- against the defendant in the plaint

on account of loss to the goodwill and reputation to the plaintiff.

17. Summons in the suit were issued to the defendant on 25 th

July, 2008. An ex parte ad interim order was granted in favour of the

plaintiff on 1st August, 2008. On the same date, a local commissioner

was also appointed to visit the premises of the defendant and to seize

and take into custody the infringing article in possession of the

defendant. The local commissioner has inspected the premises of the

defendant and filed a list of inventory along with his report as annexure

"A" containing the details of infringing material found at the premises

of the defendant containing the mark TAZIN.

18. The defendant was proceeded ex parte by order dated 25 th

May, 2009. The plaintiff produced the evidence by way of affidavit of

Mr. Sanjiv Kumar which is marked as PW 1/A. In the affidavit filed by

Mr. Sanjiv Kumar, he has reaffirmed the averments made in the plaint.

He has stated in the affidavit on the basis of local commissioner's report

that the defendant has sold more than 14,000 vials of impugned TAZIN

medicinal preparation worth Rs. 55 lacs and the cost of one vial is

approximately Rs. 400/-. Thus, the actual damages suffered by the

plaintiff were estimated at Rs. 55 lac apart from the compensatory and

penal damages.

19. The plaintiff has established its case of passing off by filing

documents in support of its case. The plaintiff has annexed the copy of

the initial representation pertaining to the application for registration of

the trademark TAZIN under No. 01144251 in respect of pharmaceutical

preparations falling in Class 5 of the Fourth Schedule of the Trade

Marks Rules, 2002. The plaintiff has filed on record a copy of

manufacturing license granted by Drug Controller cum Licensing

Authority, Shimla on 22nd February, 2006 which is marked as Ex. PW-

1/8. Sample invoices and purchase order by the plaintiff for the

pharmaceutical preparation under the trade mark TAZIN for the years

2002-2008 were collectively exhibited as Ex PW-1/10 (colly). The

plaintiff company has also put on record the original sample carton of

the plaintiff's pharmaceutical preparations containing the trademark

TAZIN which are proved as Ex. PW-1/13. The report of the local

commissioner is marked as Ex. PW-1/14 (colly). Original

memorandum, articles of associations and brochure of the plaintiff

company are also filed on record.

20. I have heard learned counsel for the plaintiff and have also

gone through the relevant pleadings and documents placed on record. It

is an undisputed fact that the plaintiff has been continuously and

consistently using the trade mark and trade name TAZIN from the year

2001. The plaintiff has also applied for its registration in October, 2002

and obtained a manufacturing license from the Drug Controller cum

Licensing Authority, Shimla on 22nd February, 2006. Since, the goods in

dispute are medicinal preparation and are sold under the identical trade

mark, the defendant is conspiring and abetting sale of spurious and

counterfeit medicines. The defendant is also trying to trade upon the

plaintiff's goodwill and reputation associated with the drug piperacillin

and tazobactam, thus, causing loss to the plaintiff company.

21. It is clear that the defendant is indulging in the acts of

passing off by representing its business as that of or associated with the

plaintiff by using the impugned trade mark/name of the plaintiff. The

defendant has defrauded the general public and is likely to continue to

mislead/deceive or confuse the potential customers into believing that

the defendant has the approval or license from the plaintiff which in fact

is not true. It appears, therefore, that the adoption and use of the said

trade mark by the defendant is only with a view to make illegal profits

out of the same. The adoption of the said highly distinctive trade mark

TAZIN by the defendant is malafide and the defendant's activities

deserve to be permanently restrained by this court in relation to the

relief of passing off.

22. In passing off action, one has to see as to whether the

defendant is selling goods/service so marked to be designed or

calculated to lead purchasers to believe that they are plaintiff's goods.

The law of passing off prevents commercial dishonesty representing

one's goods as the goods of somebody else. It is well settled law that an

action for passing off is a common law remedy being an action in

substance of deceit under the law of Tort. In Warnik Vs Townend &

Sons (HULL) Ltd. 1979 AC 731, Lord Diplock identified the following

five characteristics which must be represented in order to create a valid

cause of action for passing off:-

- A misrepresentation.

- Made by a trader in course of trade,

- To prospective customers of his or ultimate customers of goods or services supplied by him,

- Which is calculated to injure the business or goodwill of another trader (in the sense that there is a reasonable forceably consequence) and

- Which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in quia timet action) will probably do so.

23. In view of the above discussion, the plaintiff has established

his case for passing off.

24. In the case of Time Incorporated v. Lokesh Srivastava,

2005 (30) PTC 3 (Del), the Court has recognized third type of damages

as punitive damages apart from compensatory and nominal damages.

The court held that:

"The award of compensatory damages to a plaintiff is aimed at compensating him for the loss suffered by him whereas punitive damages are aimed at deterring a wrong doer and the like minded from indulging in such unlawful activities...""

"This Court has no hesitation in saying that the time has come when the Courts dealing actions for infringement of trademark, copy rights, patents etc. should not only grant compensatory damages but award punitive damages also with a view to discourage and dishearten law breakers who indulge in violations with impunity out of lust for money so that they realize that in case they are caught, they would be liable not only to reimburse the aggrieved party but would be liable to pay punitive damages also, which may spell financial disaster for them."

25. As regards the relief of damages is concerned, the plaintiff

has prayed for the loss of profits at Rs.55 lac by filing of the affidavit.

26. The suit of the plaintiff is accordingly decreed in terms of

Para 22(a) and (b) of the plaint. The relief of damages as prayed is

granted to the extent of Rs.2 lac (Rupees Two Lac) as compensatory

damages and further sum of Rs.2 lac (Rupees Two Lac) as

punitive/exemplary damages. The plaintiff is also entitled for the costs

in the proceedings.

MANMOHAN SINGH, J.

DECEMBER 8, 2009 sa