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Contempt in IPR cases – the dagger and sword approach

Introduction

The contempt jurisdiction is a rather interesting one. As the title of the Article might suggest, when you originally approach a Court of Law for an order against a third party, the dispute is seen by the Judge as essentially one involving two private parties. He may pull out a dagger metaphorically and pass an ex parte order such as an injunction or in a suitable case a bit stronger anton piller order to search the Defendant's premises and seize infringing goods or in some cases an even stronger order attaching bank accounts (a "Mareva Injunction") and orders of a similar nature that may measure 5-7 on the Richter scale.

On the other hand, if the Defendant misbehaves with the Local Commissioner or thwarts Court proceedings, he defies the Court order and such disobedience is an insult to the Court and in such a situation, the Court additionally becomes involved in the proceedings and the Judge pulls out again metaphorically a sword and passes orders which may measure 9-10 on the Richter scale.

This short article is about the latter genre of orders which are becoming so attractive that sometimes the flow of the entire case changes against a contemnor. Proceedings in contempt can bring in an early end to the dispute and result in presumptions favouring the suffering party and against the contemnor.

Contempt of Court normally happens when:

1) A party disobeys an injunction; or

2) Insults a Court in some way; or

3) Interferes with the due process of justice by approaching witnesses with the intention of influencing them, etc.

There was a time in the past when the Delhi High Court and for that matter a large number of Courts in the country would not take contempt proceedings very seriously. If a party violated an order of a Court and suffered contempt proceedings, he could quite easily get away by giving an apology to the Court and the Court would normally accept such an apology and move on with the case. Courts presumed that the Plaintiff was trying to arm-twist the Defendant and was being unfair or unjust in doing so.

This has happily changed and in the present times contempt of Court proceedings are taken very seriously. While this article does not cover every major Court in the country, it is representative of the orders passed by the High Courts and the Supreme Court.

Violating an injunction

The most common cases of contempt fall in this category when Defendants, despite an injunction order, continue to sell an infringing product. An example of a case in this category is the Cleanjo case.

In the Cleanjo1 execution petition, the judgement debtor continued to infringe the decree holder's "Cleanzo" trademark by using "Cleanjo" and "Parveen's Cleanjo", in breach of a settlement running for 9 years between the parties. After failing to appear before the Court on several dates the judgement debtor eventually filed his reply affidavit denying the allegations. However, when the decree holder confronted the Defendants with a carton bearing the infringing trademark in court, the judgement debtor changed his stance once he was prompted to come clean.

To punish the contempt and perjury the Court imprisoned the owner of the judgment debtor company for 2 weeks, attached all the stock at his premises along with his Maruti car and even imposed costs of Rs. 20,000 to be paid to the decree holder.

Insulting a court

Insulting a Court includes making a false statement on oath or filing a false claim in a legal proceeding. The former, apart from being contempt, is also an offence under Section 191 read with Section 193 of the Indian Penal Code, while the latter is an offence under Section 209 of the Indian Penal Code. If a false statement is made, not on oath, the punishment can extend upto 2 years imprisonment, while if a false statement is made on oath it can extend upto 9 years.

The other relevant provision is under the Criminal Procedure Code, Section 340 which prescribes the procedure for certain offences including those under Section 191 and Section 209 of the Indian Penal Code.

A very common form of an insult to the Court is for a party to disrupt, disallow or obstruct a Local Commissioner who has been appointed by the Court to search the party's premises and to seize infringing goods. Hurling abuses at the Commissioner or not disclosing the password to computers or delaying the proceedings on one pretext or the other (e.g. my lawyer is yet to come; my father has the keys to the room; this order is not properly authenticated; etc.) or hiding the goods or even running away with goods that have been seized by the Commissioner are usual activities of rogue Defendants and are met with a very strong action by the Courts.

Making false statements

The Bridgestone case was a classic example of this category where the Defendants claimed not to be exporting goods under the deceptively similar trademark Bridestone but under a different trademark 'Tolins'.

The Court summoned the Public Information Officer from the Customs Department, who confirmed that the Defendants had exported tyres bearing the Bridgestone trademark. The Directors of the Defendant company–who'd previously denied having done so–admitted to the correctness of the records after being questioned by the Court directly.

The Court found the Directors' apologies meaningless and held them in judicial custody for a day to be produced again to show-cause why perjury and criminal contempt proceedings should not be initiated against them. The Court also turned its attention to the defendants' advocate who was pulled up for not proactively checking the customs records and informed him that, as the Defendants' advocate, his role is not to be a mere spokesperson for his client and depose falsely under the garb of instructions being received from his client. The Hon'ble Judge rightfully reminded the litigants that they would not blindly accept what is simply said by the parties in a suit, or that being overburdened with a large pendency of matters would not lead to formal inquiry.2

The Directors, upon being summoned again the next day were ready to settle the suit over a sum of Rs. 30 Lakh, however the Court felt such an act would not act as a strong deterrent and directed them to also pay a sum of Rs. 5 Lakh to the Delhi Legal Services Authority (DLSA) and finally recorded an undertaking from the Directors to remain within territorial limits of the Court till the Court permits otherwise.3

In a similar case of Louis Vuitton Vs. Omi, the statement of one of the Defendants was recorded in Court and he stated never having dealt with branded goods and hence denied that the goods recovered during execution of the Local Commission proceedings were his.

The same day, the Plaintiffs moved the Court and got another officer appointed as a Local Commissioner and seized 35 different brands of goods from the Defendant's premises. The Court permitted a seizure of all the brands, not just Louis Vuitton, to which the case related but third party brands like Cartier, Chanel, Prada, Burberry, etc. since the Defendants had made a false statement to the Court and this was seen as a serious offence.

Obstructing the commission proceedings

In a case relating to GE Motors, a Local Commissioner had been appointed to inspect goods at the Defendants' premises and if found infringing to seize them. While executing the Commission, the Defendants were found to be in possession of a large quantity of GE branded water coolers. The Defendants began to shout at the Local Commissioner and physically assaulted accompanying lawyers with sticks. The contemnors went a step further and resorted to hooliganism by tearing the Local Commissioner's Spot Proceedings Report and threw the seized property on the street.

Before the single Judge, the Contemnors issued an unconditional apology to the Court but stated that the incident had never occurred. The single Judge, disbelieving them, rejected the apology and referred the matter to the Division Bench comprising the Chief Justice and another Judge. Ultimately, by order dated 26th October, 2005, the Defendants were sentenced to one month imprisonment and had to pay all the people who are associated, a monetary compensation including the lawyers who were present during the execution of the Commission.

When the contempt is of the third category i.e. obstructing the Commission proceedings it can get so serious that Courts have gone to the extent of pulling up the police and even sealing the Defendants' business premises.

In the Foundry4 case, the Local Commissioner was not allowed to carry out an audit of the computer systems for pirated versions of the Plaintiff's NUKE software at the Defendants premises. It was reported to the Court that the Police did not provide the assistance to carry out the Court's order. The Court punished the contemnors by directing the LC to seal the entire premises of the Defendants. The Court also impleaded the Station House Officer (SHO) in the contempt proceedings for an explanation, also directed him to deploy a requisite number of police personnel to assist the LC.

In another case of trademark infringement filed by Louis Vuitton5 the LC found the Defendants hiding and destroying counterfeit "LV" branded goods that were to be inventorised and seized by the LC. The local SHO refused to assist the LC execute the Court order, stating it would create a law & order situation. While impleading the SHO into the proceedings, the Court sternly recorded that that the concerned SHO is unfit for his post if he is incapable of discharging his duties to uphold and obey the Court's orders.

The Court ordered the LC to seal the entire premises of the defendants and notified the Deputy Commissioner of Police (DCP) and Senior Superintendent of Police (SSP) to provide assistance. Upon being summoned, the Defendants tendered an unconditional apology to the Court and disclosed the names of 10 obstructers of the Local Commission. The Court directed the Defendants to pay a sum of Rs. 5 lakh as damages and granted liberty to the Plaintiff to initiate individual actions against all the obstructers. The Defendants were even directed to depose against the obstructers, if necessary.

Interfering with the due process of justice

A fourth form of contempt is the litigants taking matters into their own hands and doing things that might prejudice a fair trial.

In a case pending before a Bangalore court that is adjudicating upon a multijurisdictional dispute for violation of contract and copyright, the Plaintiff (a software company) was granted an ex-parte ad-interim injunction restraining the defendant (also a software company) from altering the source code of the software application (App) in question. Unsatisfied with the order, the Plaintiff filed an Application for modification of the order in an effort to expand the scope of the injunction.

However, before the court could pass its judgment on the said Application the Plaintiff issued a takedown notice to an intermediary company calling upon it to remove the Defendant's Apps from the software application marketplace. The intermediary not only took down the Apps, which were the subject matter of the suit, but also removed an additional App forming no mention in the pleadings of the suit. The Defendant opted to initiate criminal contempt proceedings against the Plaintiff for interfering with the due process of law. Although the Defendant did not succeed in these proceedings, but it illustrates typical acts which may end up in a Court concluding that the party was interfering with due process of justice.

Conclusion

In the fight against piracy, it is of critical importance to create deterrence so that the level of piracy comes down.

Deterrence is the additional relief which the Plaintiff gets over and above an injunction. The greater this additional relief, the greater the deterrence. In other words, merely stopping someone from doing a wrong does not create deterrence, as it is like telling a thief to return the stolen property without actually punishing him for having done the wrong thing in the first place.

Deterrence comes in two classic ways by imprisonment and damages. However, experience has shown that imprisonment relies heavily on the state of the Criminal Justice System in a country and in India the rate of conviction being low, imprisonment in Intellectual Property cases is rare.

There may be arrests made at the time of seizure in a criminal case, but most accused get bail after two or three days of detention and this hardly creates a meaningful deterrence as most infringers have handymen to go to prison as their proxy.

The damages jurisprudence has been changing ever since 2005 and it is still uneven and sporadic. Of the 24 High Courts in the country, the Delhi High Court is perhaps the only one that has earned a reputation for awarding damages in Intellectual Property cases.

Of the 260 odd cases where damages have been awarded, there are only five where the quantum is more than Rs.20 Lakhs i.e. approx. US$ 30,000. There is a classic bell curve showing that the majority of cases fall in the category of Rs. 1 to 5 Lakh (equivalent of approx. US$ 1,500 to 7,500).

Apart from the damages being confined to one High Court and being low in quantum, the other problem is that it is only in about 30% of cases that they have been actually collected.

Thus, if imprisonment and damages do not provide the deterrence, where does it actually come from? It has been an attempt of this article to show that deterrence can actually come from contempt orders as demonstrated in the Bridgestone, Louis Vuitton or GE cases illustrated above. It is for the Courts now to find unique ways of creating deterrence and to concentrate on the 'Delta beyond injunctions".


  1. Metropol India (P) Ltd Vs Parveen Industries India Ex P. No. 134 of 2007, Order dated 08.07.2009
  2. Ibid
  3. Ibid. Order dated 17.03.2017
  4. The Foundry Visionmongers Ltd Vs Vishal Dudeja and Ors. CCP 109 of 2014 in CS (OS) 2083 of 2014; Order dated 13.08.2014
  5. Louis Vuitton Malletier Vs Lucky Arora & Ors. CS(Comm) 77 of 2015, Order dated 08.01.2016