6.7.2 Damages or an account of profits
Under Section 108(1) of the Patents Act, 1970, the patentee has the choice of seeking either damages or an account of profits.212 Plaintiffs cannot claim both as per settled law. The Act is silent on the quantification of damages. Unlike the US statute, for instance, the Act does not prescribe a lower threshold of reasonable royalty that has been interpreted to involve the application of the Georgia-Pacific factors.213
The general principle under Indian law is that damages will be compensatory in nature (i.e., the patentee should be restored to the position if the wrongful acts of the defendant had not occurred). Consequently, the measure of the damages is to be, as far as possible, akin to the sum of money that puts the plaintiff in the same position as they would have been in had they not sustained the wrong. Thus, for instance, if the patentee has shown a propensity to license the patent in the past, such licensing arrangements can become the guiding basis in assessing damages.
The reluctance of Indian courts to grant high-value damages is a thing of the past. It is usual, especially in pharmaceutical and SEP cases, for courts to grant damages or accounts of profits determined by the evidence, even if they seem of high value. In a few recent SEP disputes, the royalties payable ran into millions of dollars, even in interim arrangements, though this has not been made known internationally.214 Thus, even in non-SEP cases, damages or accounts of profits are reasonable possibilities, especially if infringement is established by the patentee.
The purpose of an account of profits is to prevent the unjust enrichment of the defendant by the use of the patented invention. The patentee is treated as if they are conducting the business of the defendant and made the profits that the defendant made. As such, the upper limit of an award is the sum of profits made by the patent-infringing defendant. In most cases, an award of damages will equal or exceed the maximum award in an account of profits; however, an account of profits may greatly outstrip an award of damages in the right case.
For an account of profits, the profits must have been earned from the use of the patentee’s invention, and, if the infringed invention formed only part of the overall product or process, then only that part of the profit attributable to the patented invention is recoverable. This is where the most difficulty is experienced in assessing the profits earned by the defendant, and a number of approaches may be taken during the assessment. Courts take the view that it would be unfair to the defendant to award a claim for all the profits where attribution of profits is possible. Where it is appropriate to apportion losses, the reference for the assessment will involve splitting the profits between the infringing and non-infringing parts of the process. Conversely, the patentee could also recover all of the profits of an invention; however, this turns on the facts of the case.
In the event that an infringer makes a loss in a manufacturing process, the sum by which the infringing process reduces those losses are recoverable on account.
Sometimes the patented invention has a readily discernible impact on profits, either positively or negatively. For instance, the patented invention may reduce the costs associated with the manufacturing process, making the process more efficient. In this case, a larger share of the profits would be payable to the patentee on an empirical basis. This would involve a comparison between the profitability achieved when the patented invention was used and when it was not. This brings the efficiencies introduced by the invention into consideration for the calculation of the portion of the profits to be awarded to the patentee.
As per Section 62(2) of the Act, no suit or other proceeding in respect of an infringement of a patent can be instituted during the period between the lapse of the patent (i.e., it had ceased to exist) and the publication of the application restoring the patent.215 A patentee enjoys all entitlements and rights from the date of the patent’s publication.216 However, this right does not extend to instituting any proceedings for infringement until a patent has been validly and finally granted.217 Nevertheless, the claim for damages would also be subject to the laws of limitation.
6.7.2.1 Punitive damages
Along with an account of profits or damages, courts can also impose punitive damages in the following exceptional circumstance: “wrongful conduct by the defendant, which has been calculated by him for himself, which may well exceed the compensation payable to the claimant.”218
The above principle was applied by a single judge of the Delhi High Court recently in Koninklijke Philips NV v. Amazestore,219 which was an SEP case. Indian courts have granted punitive damages in many other cases.220
6.7.2.2 Defenses to avoid damages or an account of profits
Courts refuse a grant of damages or an account of profits if the defendant proves that, at the date of the infringement, they were not aware and had no reasonable grounds for believing that the patent existed.221
The court may also refuse a grant of damages or an account of profits:
- “in respect of any infringement committed after a failure to pay any renewal fee within the prescribed period and before any extension of that period”;222 or
- “where an amendment of a specification by way of disclaimer, correction or explanation is allowed under [the Patents Act] after the publication of the specification […] in respect of the use of the invention before the date of the decision allowing the amendment.” However, damages or an account of profits may be granted if “the court is satisfied that the specification as originally published was framed in good faith and with reasonable skill and knowledge.”223