Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Judgment pronounced on 27 July, 2015
+ C.S. (OS) No. 433/2009
SAP AKTIENGESELLSCHAFT & ANR. ..... Plaintiffs
Through Mr. Anshul Mittal, proxy counsel.
versus
M/S APPSONE CONSULTING INDIA (P) LTD. AND ANR.
..... Defendants
Through Defendants are ex-parte.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J.
1. The plaintiffs have filed the suit for permanent injunction
restraining infringement of copyrights, damages, delivery up and
rendition of accounts of profits against the defendants. Along with the
suit, plaintiffs also filed an application being I.A.No. 3024/2009 under
Order 39 Rule 1 and 2 CPC.
2. The suit along with said interim application was listed before
th
Court on 13 March, 2009. After hearing, detailed ex-parte order was
passed restraining the defendants and all others acting for and on
their behalf from directly or indirectly reproducing/installing and/or
using pirated/ unlicensed software programs of the plaintiff No.1.
3. The plaintiffs states that the present suit pertains to plaintiffs’
proprietary rights pertaining to its various softwares and violation
thereof by the defendants by infringing the plaintiffs’ softwares as well
CS (OS) No.433/2009 Page 1 of 12
as by imparting training programme of the plaintiffs’ softwares in an
illegal and unauthorized manner .
4. The plaintiffs’ claims that the plaintiffs’ ERP software has
assumed extreme importance with present worldwide emphasis
across industries being drastic cost cutting and the most efficient
utilization of available resources. The plaintiffs have developed the
following modules of the ERP software-
A. SAP-FICO (Finance and Control)
B. SAP-PP (Production Planning)
C. SAP-HR (Human Resource)
D. SAP-MM (Material Management)
E. SAP-SD (Sales and Distribution)
F. SAP- (Net Weaver)
G. SAP-ABAP
5. It is the case of the plaintiffs that the software products of the
plaintiffs are not available off the shelf or through authorized resellers.
Further, the SAP software products are not bundled with any
computer hardware vendors as an Original Equipment Manufacturer
(OEM) product.
6. The plaintiffs have purpose-specific versions of its software.
The plaintiffs enters into license agreement with customers for
specific use and the said license agreements expressly prohibits the
software from being used in any other manner or for any other
purpose. There is End User License Agreement’s (EULA’s) pertaining
to the specific use of the plaintiffs’ software programmes for internal
business purpose by the clients of the plaintiffs.
CS (OS) No.433/2009 Page 2 of 12
7. The plaintiff No.1 is claimed to be the sole and whole owner of
copyright in the software programs developed and marketed by it
including SAP R/3 Release 4.6B. It is stated that the software
programs are “Computer Programmes” within the meaning of Section
2 (ffc) of the Copyright Act, 1957 (hereinafter referred to as the ‘Act’)
and are included in the definition of a “literary work” as per Section 2
(o) of the Act. The plaintiff No.1’s computer programs are "works" that
have been first published in Germany and have also been registered
in Germany, apart from Copyright Registrations having been obtained
from the United States Copyright Office. These programs have been
created for the plaintiffs by their employees, in the course of their
employment with plaintiffs for valuable considerations. Under the
Indian Copyright Law, the copyright in a work created by an
employee belongs to the employer under the 'Work made for Hire'
doctrine. Both the computer program and the supplementary User
Instructions and Manuals are 'original literary works' as contemplated
under Section 2 (o) and Section 13 (1) (a) of the Act.
8. The plaintiffs have stated that in the month of September 2008,
the plaintiffs came across the defendants’ organization and they
offering training on the plaintiffs’ software programs. As the plaintiffs
have Education partners with only 57 entities, in India and that the
plaintiffs or any of their agents or representatives had not entered into
any such agreement with the defendants with any such SAP training
Program Agreement till date, the plaintiffs come across the
unauthorized actions of the defendants in imparting the Training
Program of the plaintiffs’ software. The suspicion of plaintiffs was
confirmed when such enquiries revealed that the defendants were
CS (OS) No.433/2009 Page 3 of 12
providing training upon the plaintiffs’ software SAP ERP on several
modules of the plaintiffs. The enquiries made by the plaintiffs further
revealed that the defendants were conducting the aforesaid
unauthorized training programs in batches of one hour with each
batch consisting of around 15-20 students. It is further stated that the
defendants charged a fees of Rs. 30,000-35,000/- per student per
module as against the fees of around Rs. 1.5 Iacs charged by the
plaintiffs.
9. It is the case of the plaintiffs that the plaintiff No. 2 through its
Agents EIPR India Limited, immediately on becoming aware of the
defendants’ activities lodged a criminal complaint with the Police in
st
Navi Mumbai, on 1 October, 2008. The Police Team, accompanied
by representatives of the plaintiff No. 2, carried out investigations at
the Navi Mumbai premises of the defendant No. 1. During the search
operations, the Police team was able to recover hard disks, servers,
containing pirated software SAP R.3 Release 4.6B of the plaintiffs,
SAP Brochures, SAP Study materials, record book of SAP certificates
issued to the students, 12 nos. of SAP loaded CDs, which were being
used for providing training on SAP software. The Police team
st
thereafter seized these servers. Thereafter, FIR No. 119/08 dated 1
October, 2008 was registered in this regard for offences committed
under the provisions of Sections 51, 52, and 63 of the Act and also
under Section 420 IPC.
10. It is alleged that the defendants are not spending any amount
for the research work of softwares and the defendants are merely
doing illegal activity without any investment therefore the profit margin
of the defendants is very high.
CS (OS) No.433/2009 Page 4 of 12
11. Despite the defendants being served by way of publication in
st
newspaper dated 21 November, 2011, neither the defendants have
entered the appearance nor have the written statement been filed
and hence, the defendants were proceeded ex-parte vide order dated
th th
27 April, 2012. By the same order the interim order dated 13
March, 2009 was made absolute and the interim application being
I.A.No.3024/2009 was disposed of.
12. In ex-parte evidence, the plaintiffs have filed affidavit of Mr.
Somanath Ballari, it is stated that the plaint was signed, verified and
instituted by Ms. Madhu Kohli in her capacity as the Constituted
Attorney of the plaintiffs. However, Ms. Madhu Kohli is no more
associated with the plaintiffs and thus, he is now being a Constituted
th
Attorney of the plaintiffs. The copy of the Power of Attorney dated 24
th
July, 2008 and 29 August, 2008 in favour of Ms. Madhu Kohli has
been exhibited as Exhibit PW-1/1 and Exhibit PW-1/2 respectively. A
th
copy of Power of Attorney dated 30 January, 2013 executed by
th
plaintiff No. 1 and Power of Attorney dated 12 May, 2011 executed
by plaintiff No. 2, in his favour has been exhibited as Exhibit PW-1/3
and Exhibit PW-1/4 respectively.
13. It is also deposed in the affidavit that the EULA’s pertain to
specific use of the plaintiffs' software programs, and does not grant
license for third party training. A sample copy of an EULA has been
exhibited as Exhibit PW-1/5 (colly). The plaintiffs have specific license
agreements to govern comprehensive and continuing
education/training programs essential to make effective and
meaningful use of SAP software products. A copy of the
CS (OS) No.433/2009 Page 5 of 12
Education/Training License Agreement ("SAP Academy Program")
has been exhibited as Exhibit PW-1/6.
14. The software of the plaintiffs requires specially trained software
professions to load, execute, access, employ, utilize, store and
display integrated end-to-end solutions derived from such software
products. Only a formal Training Agreement with the plaintiffs renders
a training license in respect of SAP software. The plaintiffs have
entered into several specific arrangements with third party software
specialists (known as 'Partners') the world over, for the provision of
professional training on working of the plaintiffs' software programs.
Unless specifically authorized through the said training agreements
with the plaintiffs, no individual or entity would become eligible or
authorised to act as partner. In India, for the purpose of providing
education training services upon the plaintiffs' software, the plaintiffs
have entered into partnership with specific entities. The list of
Partners authorized to render training in India has been exhibited as
Exhibit PW-1/7 (Colly).
15. It is deposed that plaintiff No. 1 is the sole owner of Copyright in
the software programs developed and marketed by it. The software
programs are "computer programs" within the meaning of Section 2
(ffc) of the Act and included in the definition of a literary work as per
Section 2(o) of the Act. A copy of the copyright registration certificate
issued by the United States Copyright Office has been exhibited as
Exhibit PW-1/8 (Colly). The plaintiff No. 1 is the owner of copyright in
the aforesaid 'literary work' within the meaning of Section 17 of the
CS (OS) No.433/2009 Page 6 of 12
Act and is thus, entitled to all the exclusive rights flowing from such
ownership as set out in Section 14 of the Act inter alia:-
(a) The right to reproduce the work in any material form, including
storing it in any medium by electronic means,
(b) The right to issue copies of the work,
(c) The right to make an adaptation or translation of the work,
(d) The additional right to, for a computer program, to sell or give
on commercial rental, or offer for sale or commercial rental,
any copy of the computer program,
(e) The right to authorize the doing of any of the aforesaid acts .
16. The plaintiff No.1’s computer programs are “works” that has
been first published and registered in Germany. Further, Copyright
Registrations have also been obtained from the United States
Copyright Office. These programs have been created for the plaintiffs
by their employees, in the course of their employment with plaintiffs.
The computer programs and the supplementary user instruction
Manuals supplied by the plaintiffs are 'original literary works' as
contemplated under Section 2(o) and Section 13(1) of the Act. The
plaintiff No.1's works are protected in India under Section 40 of the
Act read in conjunction with the International Copyright Order 1999,
by virtue of the fact that both India and Germany are signatories
(hence members) to the Berne and Universal Copyright Convention,
the said Conventions, on a reciprocal basis, recognize the copyright
in a work created in any member country .
CS (OS) No.433/2009 Page 7 of 12
17. It is the admitted position in law that the Act prohibits and
accordingly punishes the very use of unauthorized computer
program, since the use of a computer program would necessarily
involve inter alia , the making of an unauthorized reproduction of the
same, at the time of installation of the computer program. During
'use', unauthorized temporary/ephemeral copies of the computer
program are made on Random Access Memory (RAM) of the
computer, thereby amounting to additional unauthorized reproduction.
It has come on record that in September, 2008, the plaintiffs came to
know about the defendants and they offering training on the plaintiffs'
software programs. The plaintiffs in evidence has established that the
plaintiffs conducted further enquiry in the business of the defendants
and came to know that the defendants are providing training on SAP
software and are charging a fee ranging from Rs.30,000 to Rs.35,000
for each SAP module from each student. The defendants offered to
provide training to the plaintiffs' agent on SAP FICO module towards
which the defendants took advance payment of Rs. 5,000 from the
said Agent and provided a cash receipt. A copy of the said cash
receipt has been exhibited as Exhibit PW-1/9. As per searching the
record available with the plaintiffs, their database yielded not a single
valid license in favour of the defendants and hence the defendants
have illegally obtained, installed and are using pirated/infringing
software products of the plaintiffs. The defendants were providing
training on the plaintiffs' software establishes the fact that they have
illegally obtained the plaintiffs' software titles and made an
unauthorised reproduction of the same and therefore used the
CS (OS) No.433/2009 Page 8 of 12
infringing copies of the plaintiffs’ software for rendering unauthorized
training on the plaintiffs' Software Programs.
18. It is stated that upon verification of the defendants' infringing
activities, the plaintiffs filed criminal complaint and an FIR bearing
st
Nos. 119/08 dated 1 October, 2008 was lodged before Vashi Police
Station, Navi Mumbai. On the basis of the said complaint, the Police
conducted investigation at the defendants' premises and recovered
hard discs containing the illegal and infringing copies of the plaintiffs'
software and fee receipt books from the defendants. A copy of the
FIR lodged at the Vashi Police Station, Navi Mumbai has been
exhibited as Exhibit PW-1/10 (colly).
19. During the pendency of the suit, the plaintiff filed an application
being I.A No. 15662/2014 for allowing the change of attorney/for
substituting the new attorney i.e. Mr. Yogesh Goyal as the previous
attorney left the plaintiff company. The same was allowed by order
nd
dated 22 August, 2014.
20. In the affidavit of Mr. Yogesh Goyal, the plaintiffs have proved
the authenticity of Ms.Madhu Kohli who has signed and verified the
plaint and affirmed the evidence of Mr. Somanath Ballari’s affidavit.
21. On the aspect of relief of damages , the plaintiffs have stated
that they have suffered irreparable harm and injury and losses in
terms of revenue and goodwill. An appropriate figure can be
determined on the basis of the following criterions:-
(a) The Investigating officer found one computer hard disc
containing illegal and infringing copies of the plaintiffs'
CS (OS) No.433/2009 Page 9 of 12
software. Further, the officer found twelve compact discs
loaded with infringing copies of SAP HELP program, which
is a proprietary material of the plaintiffs and Twenty Four
cash receipts issued to the students towards the payment
of fee for the unauthorised training. The partnership fee for
the plaintiffs education program costs Rs.12,00,000/-.
Further, the plaintiffs charge certification fee for SAP ERP
at Rs. 35,000/-, per student and assuming that minimum
Twenty Four students were trained by the defendants, the
plaintiffs would have lost about Rs.16,20,000/- towards the
training program.
(b) The Investigating officer further found seventy five
advertising letters for illegal training on plaintiffs SAP R/3
software. The defendants considerably promoted their
unauthorised training, which was not imparted by trained
SAP professionals. The plaintiffs have no quality control
over the illegal training provided by the defendants nor any
means to ascertain the content of the training imparted
thereof. The plaintiffs have also suffered a loss in terms of
reputation which is quantified at Rs. 20,00,000/-.
(c) The defendants enrolled at least Twenty Four students for
training as per the cash receipt books which were
recovered during the Police investigations. The plaintiffs
charged a fee ranging from Rs. 30,000/- to Rs. 35,000/- for
providing training on the plaintiffs' software. The plaintiffs
suffered the damages of about Rs. 7 Lakh and
CS (OS) No.433/2009 Page 10 of 12
Rs.7,80,000/-, due to the wrongful gain of the defendants
by providing unauthorised training to the said students.
Punitive damages
22. With regard to the relief of damages as claimed by the plaintiffs,
this Court has previously granted both exemplary and punitive
damages against the defendants in ex-parte matters of similar nature.
In Time Incorporated Vs. Lokesh Srivastava & Anr., 2005 (30)
PTC 3 (Del.) while awarding punitive damages of Rs. 5 lakhs in
addition to compensatory damages also of Rs. 5 lakhs, Justice R.C.
Chopra observed that “time has come when the Courts dealing in
actions for infringement of trademarks, copyrights, patents etc.,
should not only grant compensatory damages but also award punitive
damages with a view to discourage and dishearten law breakers who
indulge in violation with impunity out of lust for money, so that they
realise that in case they are caught, they would be liable not only to
reimburse the aggrieved party but would be liable to pay punitive
damages also, which may spell financial disaster for them.”
23. Further, this Court in Microsoft Corporation Vs. Rajendra
th
Pawar & Anr. , 2008 (36) PTC 697 (Del.) decided on 27 July, 2007
has held “Perhaps it has now become a trend of sorts, especially in
matters pertaining to passing off, for the defending party to evade
court proceedings in a systematic attempt to jettison the relief sought
by the plaintiff. Such flagrancy of the Defendant’s conduct is strictly
deprecatory, and those who recklessly indulge in such shenanigans
must do so at their peril, for it is now an inherited wisdom that evasion
of court proceedings does not de facto tantamount to escape from
CS (OS) No.433/2009 Page 11 of 12
liability. Judicial process has its own way of bringing to tasks such
erring parties whilst at the same time ensuring that the aggrieved
party who has knocked the doors of the court in anticipation of justice
is afforded with adequate relief, both in law and in equity. It is here
that the concept of awarding punitive damages comes into
perspective.”
24. Having gone through the evidence on the issue of damages, no
doubt, some of the figures stated in the affidavit appears to be
reasonable. However, the statements made in the affidavits are
merely oral and these have not been proved by documentary
evidence in accordance with law. However, I am of the view that the
plaintiffs are entitled for punitive damages and costs of the suit along
with the relief of permanent injunction. The suit is also accordingly
decreed by allowing prayer (a) and (e) of para 28 of the plaint. The
other reliefs are rejected.
25. In view of the facts of the present case, this Court is of the
opinion that in the present case Rs.3 lac as punitive damages be
granted in favour of the plaintiffs and against the defendants in terms
of para 28(b) of the plaint. Ordered accordingly.
26. Decree be drawn accordingly.
(MANMOHAN SINGH)
JUDGE
JULY 27, 2015
CS (OS) No.433/2009 Page 12 of 12