Unprecedented amount of statutory damages for trademark infringement awarded

Singapore

In Converse Inc v Ramchandani ([2014] SGHCR 11), the High Court of Singapore has awarded the plaintiff an unprecedented sum of S$100,000 - the maximum amount of statutory damages under Section 31(5) of the Singapore Trademarks Act (Cap 322, 2005 Rev Ed) - for infringement of its registered trademark CONVERSE.

Only the first defendant, Mr Ramchandani, contested the proceedings, in which he allegedly had dealings in counterfeit high-top Chuck Taylor All Star canvas shoes in large quantities. On the occasion which formed the subject-matter of the case, a total of 13,716 pairs of shoes were seized from a container that had passed through Singapore and was finally stopped in Rotterdam.

At the time of hearing, interlocutory judgment had already been obtained in favour of the plaintiff, as both defendants had defaulted in filing their defences. As the plaintiff had already elected the remedy of statutory damages, the only issue in this case was simply the quantum of statutory damages to be awarded, having regard to the factors set out in Section 31(6) of the Trademarks Act.

Adopting a purposive interpretation, the registrar elucidated the key principles behind the legislature's intent in providing such a remedy as statutory damages as follows:

  • The remedy is compensatory in nature - it aims to compensate rights owners for losses suffered, particularly where such losses are difficult to prove;

  • Such a remedy was alternative and complementary to existing remedies - the law recognises that the plaintiff should not be deprived of a remedy simply because of the infringer's failure to cooperate; and

  • Although there is no need for a plaintiff to prove an actual or foreseeable loss (unlike the other remedies), statutory damages are assessed based on compensatory principles and on the evidence and circumstances of the case.

Due to the dearth of precedents on statutory damages for trademark cases, the registrar applied a copyright case, PH Hydraulics & Engineering Pte Ltd v Intrepid Offshore Construction Pte Ltd ([2012] 4 SLR 36), which involved the assessment of statutory damages under the Singapore Copyright Act. As the factors for such an assessment are similar across IP cases, PH Hydraulics was found to be applicable in the present case.

While Section 31(5) of the Trademarks Act gave the court a wide discretion to award an appropriate amount of damages, this did not mean that the plaintiff did not need to prove its loss at all to obtain potentially disproportionate amounts of damages. Otherwise, the plaintiff would take the risk that the court would accord little, if any, weight to such evidence, which would impact on the quantum of damages that it would be able to recover.

For cost efficiency, the plaintiff did not adduce voluminous evidence to justify its claim for statutory damages. Rather, the plaintiff submitted that its losses should be quantified based solely on what it would have hypothetically suffered from the loss of the sale of shoes and the potential loss of royalties. In this regard, the plaintiff relied heavily on an earlier European case against a different set of defendants, in which the value of each pair of shoes was approximated to be €50 (about S$86) and its losses were computed as follows:

  • hypothetical loss of sales: S$86 x 13,716 = S$1,179,576

  • loss of royalties: retail price of shoes (S$68) x 13,716 x 5% = S$46,634.40

However, the learned registrar declined to simply adopt the above calculation as submitted by the plaintiff, and ruled that the correct approach was to apply the factors in Section 31(6) of the Trademarks Act based on the evidence and circumstances of the case, considering all relevant matters, including:

  • the flagrancy of the infringement and the need for deterrence - in this regard, the learned registrar considered the past conduct of the defendants, and noted that the shipment which formed the basis of the current claim was the defendants' third container-load of counterfeit shoes. Although the first defendant had claimed that they were merely middlemen and had no role to play in the matter, on the face of the evidence, it was apparent that the defendants had considerable experience in dealing with counterfeit goods; and

  • any loss suffered by the plaintiff and any benefit accrued to the defendants - the heads of damages were three-fold: loss of royalties; loss of reputation and other "intangible" losses (such as damage to commercial value of the trademark); and benefit which would have accrued to the defendants. The loss of royalties was calculated as described above. In relation to intangible losses, the learned registrar found that the plaintiff would clearly have incurred investigative costs in discovering and collating the necessary evidence to bring a case against the defendants. In relation to the benefit accrued to the defendants, the learned registrar found that the plaintiff could have done more to provide evidence (such as the number of pairs of shoes and sale price), and left the question of the defendant's profit margin open, as it was not possible to ascertain exactly what the profit margin was.

Based on the evidence above and an assessment of the relevant factors, the registrar was of the view that an award of statutory damages in the maximum amount of S$100,000 was fair and appropriate. As noted above, the legislative intent was that statutory damages should be compensatory in nature and serve as an alternative to existing remedies (eg, an account of profits). Therefore, there exists an inherent tension in this decision, which requires plaintiffs to adduce sufficient evidence, yet, on the other hand, accepts that the plaintiff may be unable to provide such evidence. Until this approach is clarified by the court, future claimants should bear in mind that the above factors will be taken into account when assessing claims for statutory damages, and adduce evidence to prove those factors accordingly.

Angeline Lee and Carolyn Ang, Baker & McKenzie. Wong & Leow LLC, Singapore

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