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Software Piracy – Indian Court Orders for Damages

The recent decision of the Delhi High Court in the case – Microsoft Corporation vs. Yogesh Papat & Anr., pertaining to “Piracy of Software”, has once again established the resolve of the Indian Judiciary to take-up Intellectual Property matters upfront. IP theft, which till recently was perceived as a petty white-collar crime owing to its economic milieu, finally seems to have come out of the dark shadows of archetypal criminal offences, which had prejudiced the mindset of Indian judicial and enforcement agencies (the prevalent notion being that the criminal offences are much more felonious and aberrant as compared to their IP counterparts, an argument to which some people still might subscribe).

This case concerns the infringement of copyright in the software and notably, the interpretation of Sec. 51 and 55 of the Indian Copyright Act, 1957. The Claimant, software giant – Microsoft Corporation, the registered proprietor of the trademark MICROSOFT, filed a suit praying for an order of permanent injunction restraining the defendants, its directors, and agents from copying, selling, offering for sale, distributing, issuing to the public, counterfeit/unlicensed version of the software programmes, in any manner, amounting to infringement of their copyright in the said computer programmes and related manuals and their registered trademarks, and also restraining the defendants from selling and distributing any product to which the plaintiffs’ trademark, or any deceptive variant thereof have been applied and further praying for delivery-up and rendition of accounts of profits.

The defendants choose not to enter appearance after being served the notice and were proceeded ex-parte. The suit was eventually decreed against the defendants who without a licence and in absence of any permission of the manufacturers of the software were downloading plaintiffs’ software on the hard disk of computers being sold by them.

In general, when the software is sold, purchaser has a license agreement setting out the terms for permissible user of the software, which is contained in a floppy. CD/floppies are handed over to the purchaser and term of the license agreement permits the use of the CD’s/floppies, as per condition. In the present case, as stated earlier, the defendants, without a license were loading the software and in this manner were causing financial loss to the plaintiff.

Court Proceedings – An insight:

The plaintiff led evidence by way of affidavits establishing their strong presence in the field of software and the ownership of computer programmes including various operating systems. Evidence by way of the ‘certificate of registration’ pertaining to the registration of the trademark ‘Microsoft’ in the name of the plaintiff was also put forward. Further, direct evidence establishing the culpability of the defendants was led by way of an affidavit of an employee of the plaintiff who has purchased a computer from the defendants loaded with the pirated software of the plaintiff, which in turn was authenticated by the examination report of a technical expert.

The plaintiff also filed an affidavit by way of evidence of a Chartered Accountant, which brought on record and proved the period for which the defendants were in business and the sale-price of the computer sold by them, based on which an assumptive number of the total number of computers sold by the defendant was computed to determine the estimated loss of business to the plaintiff.

These evidences on record established beyond doubt that the plaintiff was the registered proprietor of the trademark ‘MICROSOFT’ and that the copyright in the computer software programmes vests in the plaintiff. The evidences further established hard disk piracy practiced by the defendants.

Decision of the Court:

The court approached each of the evidence in turn and based on the assumption of the sale of 100 computers each year and on the basis of the popularity of the software upheld the computed loss of profit to the plaintiff in sum of INR 19.75 lacs and interest @ 9% from the date of decree till the date of payment along with the other relieves prayed for. With respect to rendition of accounts, the court observed, “…it may be true that the financial loss is based on certain assumptions, but it cannot be helped for the reason the defendant has chosen to remain ex-parte. It would be futile to direct the defendants to render accounts for the reason that the defendants have been carrying on business surreptitiously.”

The Hon’ble Court, stating the observation made by Mr. Justice Laddy of the High Court of Justice, Chancery Division in the case Microsoft Corporation vs. Electrowide Ltd. and Anr., (1997) FSR 580 held that “this constitutes a general threat to infringe the Copyright in the class of software.” In the words of Justice Predeep Nandrajog, who presided the case –

“…it stands established that the defendants have infringed the plaintiffs Copyright by making illicit copies of the operating systems software by openly copying whatever operating system is currently salable.”

Concluding statement:

One can only wait to see how this judgment would shape the Copyright jurisprudence in the country. From the above, it is clear that this judgment has paved the way for establishing an effective copyright enforcement regime in the country, which in turn would serve as a deterrent to all those who indulge in this ‘all-pervasive’ phenomenon – ‘software piracy’.

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Ihab Salloum