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May 20, 2021

Comment: Calculation Of Damages In IP Matters- Do We Need A Fixed Set Of Guidelines?

Author: Shreya Das

For assessment of damages in infringement matters, some of the factors to be considered are natural and direct consequences of the infringement and loss of goodwill and reputation due to the infringing activities. In order to get punitive/ monetary damages from the other party, it is required to produce the necessary legal evidence of such damage and a valuation thereof.

Whereas it is feasible to calculate the actual loss caused due to loss of business and loss of profit, courts often take the easier route to calculate the damage caused due to loss of goodwill and reputation. It has been seen in several cases that while the court does recognize infringement action and takes appropriate steps to prevent and stop abuse of someone else’s rights, damages for loss of reputation/goodwill are not often awarded. The court simply applies the ‘Double and Treble Formula’ to calculate damages for loss of reputation/goodwill. In the case of Time Incorporated vs Lokesh Srivastava And Anr. [1], for example, the High Court of Delhi, simply doubled the punitive damages to compensate for the loss of reputation and goodwill. But this formula is not justifiable in all cases.

It is important that we have specified and more sophisticated guiding principles or factors to calculate damages for loss of reputation and goodwill. We currently do not have any framework of clear principles for calculating damages in diverse and complex cases, especially for the damage caused due to the loss of reputation and loss of goodwill. From a practitioner’s perspective, there is uncertainty about what types of evidence are to be produced to enable the court to assess the monetary damages to compensate for the loss of reputation or goodwill.

Simply doubling or tripling the punitive damages of the actual loss may not be reasonable or sensible. Time, money and effort invested in building reputation and goodwill can hypothetically be less or more and even significantly less or more than the worth of the reputation and goodwill. The damage caused to reputation and goodwill by infringement or passing off can be a variable fraction of the worth of the reputation and goodwill. It is important that the computation of damages be alive to these subtleties. The application of mind to these various considerations is required for this jurisprudence to grow and mature and be equal to the demands of economy and society. Currently this jurisprudence is quite underdeveloped. Hence, there is a case for framing a fixed set of guidelines for calculation of damages for loss of goodwill and reputation.

End Notes:[1] 2006 131 CompCas 198 Delhi.  https://indiankanoon.org/doc/1152738/

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