The Delhi High Court recently declared Christian Louboutin’s ‘Red sole’ a well known trademark. The decision is rather surprising and is going to once again raise questions about the Delhi High Court’s jurisprudence on well-known trademarks. We invited Eashan Ghosh to write a post for us on the issue. In his post, Eashan conducts a deep dive into the judgment delivered by the Delhi High Court in the ‘Red Sole’ case. He covers the court’s analysis of well known mark as well as its analysis on damages.
Eashan has been in practice as an intellectual property advocate and consultant in New Delhi since 2011, and also teaches a seminar on intellectual property law at National Law University, Delhi. He has previously written about the two areas of law covered in this post: in the Indian Journal of Law & Technology (2015) on damages in trademark infringement cases, and in the Journal of Intellectual Property Rights (2016) on well-known trademarks. He regularly writes about Indian intellectual property law, including a monthly review of Delhi High Court judgments, on his Medium page which is accessible here. He has previously written for us over here.
A Comment on the Delhi High Court’s Ruling in Christian Louboutin
by Eashan Ghosh
Eashan Ghosh
There are two points of appreciable interest falling from Ms Justice Gupta’s December 12 Delhi High Court opinion confirming ex parte a permanent injunction and an aggregate damages and costs award of ₹10.72 lakh in Christian Louboutin v. Pawan Kumar.
Points of Interest
The first is a finding that the Plaintiff successfully demonstrated with evidence, led ex parte, that it is “the registered owner of its well-known trademark ‘RED SOLE’”. The second is the monetary award itself, which leans on a Delhi appeals court decision in HUL v. Reckitt Benckiser to shut out the Plaintiff’s claim for punitive damages.
The Well-Known Mark Finding
The Plaintiff’s ‘RED SOLE’ trademarks are understood by the judge to be composites of a “specific tone of the colour red…applied to the outsole of a shoe”. Paragraph 14 of the opinion then records several claims in support of the reputation of the trademarks. These are:
(i) the Plaintiff’s status as a well-known luxury brand in over 60 countries; (ii) extensive and continuous use of the trademarks since 1992; (iii) knowledge of Indian customers of the trademarks; (iv) the Plaintiff’s status as the sole licensor of the trademarks and several successful enforcement actions in the past; (v) extensive promotion of the trademarks in India; (vi) the Plaintiff’s extensive internet presence; (vii) the accessibility of the Plaintiff’s website in India and its role in making Indians aware of the Plaintiff’s trademarks and products; and (viii) awards and accolades received by the Plaintiff for products sold under the trademarks.
Ms Justice Gupta rules that this material makes it “evident that the Plaintiff’s ‘RED SOLE’ trademarks have acquired a well-known character” and that the evidence led by the Plaintiff “has proved that the Plaintiff is the registered owner of its well-known trademark ‘RED SOLE’ as quoted [above]”.
This is, evidently, an assertion that the Plaintiff’s trademarks have acquired a well-known character. It is not apparent, however, what weight attaches to this finding. There is no suggestion that the Plaintiff invited a ruling on the well-known character of its trademarks. Neither is there an outright benefit that would be accessible to the Plaintiff on these facts with a well-known mark determination that would not be accessible to it without such a determination.
If the finding is purely gratuitous, it sharpens the scrutiny of the Plaintiff’s evidence to see if the finding is justified. However, there is no discussion of the evidence itself. The Court simply lists categories of evidence led by the Plaintiff. This is illustrative but, in itself, does little to explain why a well-known mark determination was arrived at on these facts.
Even so, it is certainly possible, to some degree, to map the categories of evidence led by the Plaintiff to the positive conditions built into a well-known mark inquiry under Section 11(6) of the Trade Marks Act. Paragraphs 14(i), (iii) and (vii) correspond to Section 11(6)(i); paragraph 14(ii) corresponds to Section 11(6)(ii); paragraph 14(v) corresponds to Section 11(6)(iii), and paragraph 14(iv) corresponds to Section 11(6)(v). Equally, it possible to claim that paragraphs 14(vi), (vii) and (viii) are inexclusive to these trademarks, and cannot be used to sustain a well-known mark finding.
More broadly, though, the opinion suffers for its failure to reference the well-known mark application procedure under Rule 124 of the 2017 Trade Mark Rules. While the procedure itself has been criticized on these pages before for reasons that invite little disagreement, it is hard to defend not referring to it at all.
If in fact the Plaintiff had invited judgment on the well-known mark issue, there’s certainly a case to be made for directing the Plaintiff to apply to the Trade Marks Registry under the Rule 124 procedure. (In November’s Samsung Electronics, Mr Justice Manmohan shut down an ex parte well-known mark claim for precisely this reason.) If the well-known mark determination was a discretionary finding, again, at a minimum, a nod to the new procedure, if not a reasoned divergence from Samsung Electronics, was in order.
To be clear, the Rule 124 procedure does not prohibit Courts of first instance from making well-known mark determinations. Indeed, there is room to argue that Sections 11(6)(v) and (8) [and the new Rule 124(2)] have hardwired judicial acknowledgement/determinations of trademarks as well-known into the legal understanding of what a well-known mark is.
This creates a subset problem at two levels.
At the first level, by hypothesis, Courts and the Trade Marks Registry can both rule on well-known mark claims. If this is so, it is incongruent in the extreme that a ruling by one is legally bound to consider ruling(s) by the other at the point where they simultaneously retain the freedom to arrive at conflicting rulings. Over and above this, it remains possible for Courts to return well-known mark findings on evidence led ex parte, as Ms Justice Gupta has done in Louboutin.
At the second level, well-known mark rulings by Courts specifically run the risk of turning into recursive loops. This is because the requirement for Courts deciding well-known mark claims to acknowledge other Court rulings on the same subject. In practice, this translates to Plaintiffs stockpiling broadly similar ex parte orders containing well-known mark findings to secure the next well-known mark finding. In this situation, it is inevitable that each successive finding leans progressively more heavily on previous judicial acknowledgements of the well-known status than engaging in de novo appraisals of well-known status. In these cases, quite literally, a trademark is well-known principally because it is well-known.
To break this loop, it must to be emphasised that a well-known mark determination is envisioned as a one and done classification for the class of the public to which the claim relates. This makes it imperative that the status be extended with the sense of levity that accompanies a judicial determination which is intended to be permanent, and have non-derogable consequences in the future on second- and third-parties.
As such, the complaint with Louboutin isn’t that the determination is unjustified on the evidence the Plaintiff led here, or even that such determinations shouldn’t be rendered ex parte (although both points are arguable). It is simply that, without reference to a statutorily recommended procedure or a discussion of why the evidence meets the statutory standards under Sections 11(6) to (8), it is impossible to know whether the classification of this trademark as well-known is merited.
The Damages and Costs Payout
The second conversation that Louboutin stokes hinges on its endorsement of the position that it is impermissible to award punitive damages without proper evidence of damages incurred by the Plaintiffs.
To be sure, ex parte decrees in trademark and copyright infringement cases shutting down punitive damages claims for want of evidence of damage have been a signature of a section of the Delhi High Court in 2017. (See, for instance, January’s Montblanc, May’s Louis Vuitton, and August’s L’Oréal.) However, it wasn’t until Mr Justice Manmohan’s October decision in SCIL v. HRCN Cable Network that a Delhi judge fully confronted the 2014 Delhi appeals decision in HUL to supply authority for this disavowal of punitive damages.
HUL, as has been discussed on these pages previously, is notable because it departs – at some length – from Time v. Lokesh Srivastava, a decision on the strength of which dozens of punitive damages awards have been made since 2005, the majority of them by Delhi judges.
To the extent that it is relevant here, HUL offers three propositions of value.
First, punitive damages (which are intended to punish and deter) cannot be awarded without first awarding general damages (which are intended to compensate the Plaintiff). Punitive damages can only be granted in the event that – to quote from 1972’s House of Lords opinion in Cassell v. Broome – the “punitive [element] is not sufficiently met within the figure [arrived at] for the Plaintiff’s solatium.” Under this view, therefore, the punitive component can be a part of an overall damages award, or can be a separate category of damages that accompanies a general damages award, but it cannot be awarded in substitution of general damages.
Second, HUL expressly disowns Time’s justification that punitive damages awards are merited for the reason that they are a viable civil alternative for minor crimes that would otherwise clog up an overburdened criminal system. HUL overrules, in as many words, decisions that adopt “the reasoning and formulation of law enabling courts to determine punitive damages, based on the ruling in [Time]”.
This view acknowledges that intellectual property statutes specify criminal punishments, including monetary fines. If a civil award travels beyond those amounts to award punitive damages, this cannot occur in a case where the Plaintiff fails to prove general damage but the Court nevertheless determines, in the absence of a criminal conviction, that it wants to curb actions that involve a criminal propensity.
Third, the controlling objective in such cases is to avoid “ad hoc judge-centric award of damages without discussion of the extent of harm or injury suffered by the Plaintiff”. Permitting this, according to HUL, would prompt “casual and unprincipled and eventually disproportionate awards”.
Two qualifications attach to these observations.
First, the case before the HUL Court was one of product disparagement. HUL acknowledged, at numerous points, that what applies to a civil action rooted in defamation may not apply in like manner to a violation of intellectual property rights. In theory, this offers an interpretive window – albeit a narrow one – to save punitive damages awards that have relied on Time for reasons other than those that are utterly slated by the HUL Court.
Second, HUL offers plenty of ammunition to contend that the hurdle that Plaintiffs need to overcome to set up a tenable claim for general damage is a small one. (HUL acknowledges the problems inherent in empirically or accurately proving the quantum of damage suffered by Plaintiffs. It also says that “rough and ready calculations” in such cases may be sanctioned to award general damages.)
Mr Justice Manmohan’s excavation of HUL in SCIL has opened the doors to like conclusions by him in November’s Verizon v. Solanki, and KRBL v. Kanakaraj earlier this month. Viewed from this standpoint, Ms Justice Gupta’s reliance on HUL to refuse a punitive damages award to the Louboutin Plaintiff is a logical continuation of a perfectly defensible trend.
In the event, the monetary award in Louboutin breaks down as ₹2.08 lakh against the two sets of Defendants in general/compensatory damages plus another ₹8.63 lakh in legal fees, court fees and associated expenses. (The latter, in particular, has become a virtually everpresent feature of recent Delhi decisions confirming payouts to Plaintiffs. Since August alone, Delhi courts have sanctioned no-questions-asked costs payouts for Nokia, Puma, SAP, Wockhardt, Bata, Tata Sons, Icon Health, Merck, Monsanto, Mankind Pharma, Singer, Kent, The Living Media Group, Prudential, Samsung, and Siemens, among several others.)
The compensatory amount in Louboutin is calculated on the basis of a distinctly “rough and ready” formula that runs:
25% (the Defendants’ assumed profit margin) x price per unit x number of infringing units recovered from the Defendants’ premises x number of months the Defendants have been in business.
(The award against the first set of Defendants is listed as ₹15,093 which isn’t per formula – I presume this is an oversight and the intended number is ₹60,375, which is what the formula would yield if applied to these Defendants.)
The burden to pay the ₹8.63 lakh costs amount, delivered as received on the basis of a calculation submitted by the Plaintiff on affidavit, is split equally between the two sets of Defendants.
This payout raises several queries. Why is 25% the assumed “margin of profit on the illegal turnover”? Is units discovered in stock a good (or even serviceable) baseline from which to extrapolate sales volumes? Is the Plaintiff’s actual monetary loss restricted to the number of infringing units sold? Should general damages be pegged to profits earned at all? Is it a good idea to accept an ex parte Plaintiff’s calculations of legal costs it has incurred without further scrutiny? Should these amounts be split across categories of Defendants in this manner?
I trust that some of these questions will start to be resolved once judges begin to digest the HUL parameters. Further, there are, of course, arguments to be run about Defendants’ capacity to pay and the effectiveness of damages awards in stamping out infringement of the Louboutin nature.
Further still, bringing IP judges across persuasions onside to follow the HUL parameters in evaluating damages is, on recent evidence, unlikely to be straightforward. (To illustrate, ex parte decrees by Mr Justice Khanna of the Delhi High Court in the last four months alone in Biocodex, Optimus Pharma, DRS Logistics, Kent, Ahuja Radios, Xegent Consultants, Nokia and Orient Ceramics have all yielded punitive damages payouts between ₹2-10 lakh. They are accompanied by reasoning that falls comfortably within the HUL stricture on “ad hoc judge-centric awards of damages without discussion of the extent of harm or injury suffered by the Plaintiff”.)
However, after twelve post-Time years littered with unreasoned punitive damages payouts, perhaps being thankful that decisions like Louboutin carry damages calculations at all wouldn’t be a bad first step.