Delhi High Court

Adobe Systems, Inc & Anr. vs Mr. Mahindra Saxena & Anr. on 7 July, 2009

Author: Manmohan Singh

*          HIGH COURT OF DELHI : NEW DELHI

+                     CS (OS) No.782/2002

                      Judgment reserved on:     2nd July, 2009

%                     Judgment decided on :         7th July, 2009

Adobe Systems, Inc & Anr.                        ......Plaintiffs
                    Through: Mr. Praveen Anand, Adv. with
                             Mr. Shantanu Sahay, Adv.

                      Versus

Mr. Mahindra Saxena & Anr.                             .....Defendants
           Through:              None

Coram:

HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
   be allowed to see the judgment?                                   Yes

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 present suit has been filed by two independent

companies i.e. Adobe Systems Inc, USA, plaintiff No.1 and M/s.

Microsoft Corporation, USA, Plaintiff No.2 for permanent injunction

against the defendants restraining them from infringement of copyrights,

trademarks, passing off, delivery up, rendition of accounts, damages etc.

and the same is pending before this Court. Mr. Bharatvir Singh is the

Constituted Attorney of the plaintiffs by virtue of a Letter of Authority

in his favour.

2. It is averred in the plaint that the Plaintiff No.1, Adobe

Systems Incorporated (hereinafter referred to as „Abode‟) and Plaintiff

No.2, Microsoft Corporation (hereinafter referred to as „Microsoft‟) are

the companies organized and existing under the laws of the State of

Washington, USA having its principal office at 345 San Jose, Park

Avenue, CA 95110-2704, USA and One Microsoft Way, Redmond, WA

98052-6399, USA respectively.

3. It is contended that the software programs as developed and

marked by the Plaintiffs are „computer programme‟ within the meaning

of Section 2(ffc) of the Copyright Act, 1957 and also included in the

definition of a literary work as per Section 2(o) of the Copyright Act,

1957. The Plaintiffs‟ works are protected in India under Section 40 of

the Copyright Act, 1957 read with the International Copyright Order,

1999 as the rights of authors of member countries of the Berne and

Universal Copyright Conventions are protected under Indian Copyright

law. India and the USA are signatories to both the universal Copyright

Convention as well as the Berne Convention.

4. The plaintiffs have filed original and Court Certified Copies

of Original Copyright registration certificates and trademark registration

certificates for the software programs as owned by the Plaintiffs

exhibited from Ex.P3 to Ex.P6 and Ex.P-7 to Ex.P-14 of the evidence

affidavit respectively.

5. It is stated in the plaint that the Plaintiffs, upon receiving

information of the Defendants‟ infringing activities in February, 2002

on BSA/NASSCOM anti piracy hotline, immediately initiated an

investigation to ascertain if the Defendants were infringing the

copyrights/trademarks of the Plaintiffs by using pirated software

programs of the Plaintiffs on the computer system used at their premises

for their day to day business activities. Later on, after coming to know

the activities of the defendants, the present suit has been filed by the

plaintiffs as the defendants were infringing the legal rights of both the

companies.

6. The suit along with the interim application were listed before

this court for the first time on 9th April, 2002 when the summons were

issued in the main suit and in I.A. No. 3334/2002, an ex parte ad interim

order was passed restraining the defendants, their representatives, agents

and all other persons acting for and on their behalf from using the

pirated/unlicensed software of the plaintiffs. In I.A. No. 3335/02, this

court had appointed Mr. R.K. Vats, Advocate as a Local commissioner

with a direction to visit the premises of the defendants or any other

premises belonging to the defendants to find the infringing software of

both the plaintiffs.

7. As per the report of the Local Commissioner filed in this

court on 24th April, 2002 it is recorded that 16 computer disks

containing counterfeit and unlicensed software of the plaintiffs were

found at the premises. A blue CD carry case containing 17 computer

disks having infringing software of plaintiff No.2 i.e. Microsoft

Corporation was also found at the premises.

8. No written statement was filed by the defendant no. 1 till 13 th

January, 2004 and his right to file written statement was closed on that

date. On the same date, written statement was filed on behalf of

defendant no. 2, however, only adjournments were sought after that by

the counsel for the defendant. Thus, on his non-appearance, by an order

dated 30th March, 2006 the defendants were proceeded ex parte and time

was granted to the plaintiffs to lead evidence by way of affidavit.

9. The plaintiffs filed evidence by way of affidavit of Sh.

Anand Banerjee on the basis of copy of letter of authority in his favour

by plaintiff nos. 1 and 2 exhibited as Ex.P-1 and Ex.P-2 of the evidence

affidavit. The plaintiffs also filed another affidavit of Sh. Sanjiv Sharma

showing the computation of damages. In the said affidavit, a statement

has been made that approximate average market price of licensed

Microsoft product and Adobe products which were pirated/unlicensed

and used illegally by the defendants on the computer system for use at

their premises respectively were as follows:-

(A)         MICROSOFT

a. Microsoft Office 97                       Rs. 15,000 per unit
b. Microsoft Windows 98                      Rs. 6,000 per unit
c. Microsoft Server SQL 7.0                  Rs. 35,000 per unit
d. Microsoft Project (various versions)      Rs. 16,000 per unit
e. Microsoft Windows 2000 server             Rs. 27,000 per unit
f. Microsoft Visio 2000                      Rs. 20,000 per unit
g. Microsoft Windows 2000 PRO                Rs. 7,000 per unit
h. Microsoft Exchange Server                 Rs. 36,000 per unit
   (various versions)
i. Microsoft Visual Studio 6.0               Rs. 50,000 per unit
j. Microsoft Windows NT server               Rs. 36,000 per unit

(B)         ADOBE

a.   Adobe Photoshop                         Rs. 25,000 per unit
b.   Adobe Pagemaker                         Rs. 25,000 per unit
c.   Adobe Acrobat                           Rs. 15,000 per unit
d.   Macromedia Dreamweaver                  Rs. 50,000 per unit
e.   Macromedia Flash                        Rs. 50,000 per unit
f.   Macromedia Fireworks                    Rs. 60,000 per unit

10. In Para No.8 of the affidavit, the details of conservative

assumption and estimates have been made which are as follows:-

"(a) that the defendants are engaged in the business of providing consultancy services to companies desirous of setting up call centre business. They have extensive use of plaintiff‟s software program and much of their business activities are dependent on such usage. Despite making huge profits in the business, the defendants have not invested any money in purchase of genuine software, even though use of such software is integral to their business activities.

(b) that the plaintiffs caught the defendants violating their copyrights by indulging in blatant end user piracy of their software programs in the year 2002. The Hon‟ble Court has granted an ex parte ad interim injunction against the defendants on 9th April, 2002, restraning them from infringing the copyrights of the plaintiffs by using pirated/unlicensed software of the plaintiffs and infringing the plaintiffs‟ registered trademarks Adobe, Adobe Illustrator, Microsoft etc. Keeping the Defendnts‟ conduct in view, it will be fair and justified to conservatively assume that the defendants were indulging in piracy of plaintiff‟s software programs on a large scale.

(c) that as per the Local Commissioner‟s report, the defendants had a total of 23 computers installed in their premises, all of which were loaded with infringing copies of the plaintiffs‟ software. Apart from these computers, other disks were also recovered from the defendants‟ premises. An inventory of 16 computers disks containing pirated/unlicensed versions of the plantiffs‟ software was made during the local commission proceedings. The report of the Local Commissioner has been filed in the present proceedings and may kindly be referred to."

11. In Para No.9 of the affidavit, it is stated that the potential

revenue that the plaintiffs could have earned if genuine software had

been purchased by the defendants is computed as follows:-

Name of software Approx. Cost of No. of Approx.

                          licensed software       Computers      revenue            to
                                                 having pirated plaintiffs
                                                 versions
  Microsoft              Rs.6000/- per license   15             Rs.90,000

  (Standard)
  Microsoft              Rs.15000/- per unit     21                Rs.3,15,000
  Windows       Office
  (Standard)
  Microsoft Server       Rs.35,000/- per unit    2                 Rs.70,000
  SQL 7.0
  Microsoft Project      Rs.16,000/- per unit    4                 Rs.64,000
  (various versions)
  Microsoft              Rs.27,000/- per unit    5                 Rs.1,35,000/-
  Windows        2000
  Server
  Microsoft      Visio   Rs.20,000/- per unit    1                 Rs.20,000/-

  Microsoft              Rs.7,000/- per unit     3                 Rs.21,000/-
  Windows        2000
  PRO
  Microsoft              Rs.36,000/- per unit    1                 Rs.36,000/-
  Exchange Server
  (various versions)
  Microsoft Visual       Rs.50,000/- per unit    3                 Rs.1,50,000/-
  Studio 6.0
  Microsoft              Rs.36,000/- per unit    1                 Rs.36,000/-
  Windows NT 4.0
  Server
  Adobe       Acrobat    Rs.15,000/- per unit    3                 Rs.45,000/-
  (various versions)
  Adobe PageMaker        Rs.25,000/- per unit    3                 Rs.75,000/-
  (various versions)
  Adobe Photoshop        Rs.25,000/- per unit    6                 Rs.1,50,000/-
  (various versions)
  Macromedia             Rs.50,000/- per unit    3                 Rs.1,50,000/-
  Dreamweaver
  Macromedia             Rs.60,000/- per unit    2                 Rs.1,20,000/-
  Fireworks 3.0
  Macromedia Flash       Rs.50,000/- per unit    2                 Rs.1,00,000
  Total                                                            Rs.15,77,000

12. In the evidence produced by the plaintiffs, it is claimed that

on a fair and conservative basis, the defendants would have deprived the

plaintiffs a potential revenue of Rs. 15,77,000/-. This figure includes

profits that would have been legitimately due to the plaintiffs.

13. As regards the infringement part is concerned, it is an

undisputed fact that the learned Local commissioner has recovered the

infringing software of the plaintiffs from the premises of the defendants.

In view of material available on record, it is clear that the defendants

are guilty of counterfeiting the products of the plaintiffs. Both the

plaintiffs are, therefore, entitled for a decree of permanent injunction as

prayed for in Para 36(A) to (C) of the plaint.

14. On the basis of pleadings, documents, evidence produced by

the plaintiffs and report of the local commissioner, it is apparent that the

plaintiffs have statutory rights in respect of the software for which

software by the defendants is clearly illegal and in violation of legal

rights of the plaintiffs. It causes financial damage not only to the

plaintiffs but also amounts to deception to the public at large. At the

same time, the government is also losing huge revenue because of such

illegal activities as it is a known fact in this trade that the counterfeiters

do not maintain any account books nor pay any taxes and in case

damages are not granted in counterfeiting cases, they will be

encouraged.

15. In Microsoft Corporation v. Kiran, 2007 (35) PTC 748

(Del) it has been held that „wilfully, intentionally and flagrantly

violating the copyrights and trademark‟ is deliberate and calculated

infringement.

16. In Microsoft Corporation Vs. Kamal Vahi & Ors., CS

(OS) No.817 of 2004 it was observed that compensatory damages are

awarded based on a calculation of a percentage of revenue that would

have been earned if the defendants had not indulged in the infringing

activity.

17. In Amarnath Sehgal Vs. Union of India, 2005 (30) PTC

253 (Del) it was observed that compensatory damages may be paid

where the acts and commissions of the defendants violate the

established rights of the plaintiffs.

18. In Microsoft Corporation Vs. Deepak Raval,

MIPR2007(1)72 in CS (OS) No.529 of 2003, it was observed that

where the defendants fails to respond and are recklessly indifferent as to

whether or not the goods they are selling counterfeit, dishonest intention

may be inferred and the defendants can be said not to be "honest

traders".

19. The primary purpose of the damages is to restore losses to

the plaintiffs. However as tort litigation has evolved, I find that the

concept of damages is not limited to compensation for loss and damages

alone. Three kinds of damages are being awarded by courts, which

include nominal damages, exemplary damages and compensatory

damages.

20. Punitive damages, also commonly referred to in English as

exemplary damages, are designed to punish and not to compensate. In

general, punitive damages are awarded for socially deplorable conduct,

such as fraud or malicious, reckless, or abusive action. Since the early

1900s, punitive damages have been available only for tort but not for

contract. Punitive damages are discretionary and are never given as a

matter of right.

21. The concept of punitive damages made its entry in the

Indian legal system in the year 1999 with the decision of the Apex

Court with regard to allotment of petrol pumps, which was obviously

not relating to Intellectual property. In Common Cause v. UOI, AIR

1999 SC 2979, the Hon‟ble Supreme Court of India recorded a finding

that the conduct of the petitioner is oppressive and that he had made

allotments of the petrol pumps in favour of various persons for

extraneous consideration. The Supreme Court awarded an amount of Rs.

50 Lakhs as Punitive Damages.

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

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

of damages as punitive damages apart from compensatory and nominal

damages. The Court has made some relevant observations discussing the

aspect of punitive 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."

The court justified the grant of punitive damages on the

basis of flagrancy of infringement which is the doctrine derived from

US law.

23. The judgment of Times‟s case (supra) was followed by

Hero Honda Motors Ltd. v. Shree Assuramji Scooters, 125 (2005)

DLT 504 where the Court took the view that damages in such a case

should be awarded against defendants who chose to stay away from

proceedings of the Court and they should not be permitted to enjoy the

benefits of evasion of Court proceedings. The rationale for the same is

that while defendants who appear in Court may be burdened with

damages while those who choose to stay away from the Court escape

such damages.