Invalidated IP Rights & Cost Liabilities: Lessons from Crocs v. Bata

Introduction

When a statutory intellectual property right gets wiped off the register mid-litigation, who bears the burden of the legal fees incurred along the way?

Recently in the case of Crocs Inc. USA v. M/s Bata India Ltd. & Ors.[1], the Delhi High Court examined whether a defendant can recover actual litigation costs under Section 35 of the Code of Civil Procedure, 1908 (CPC), as amended by the Commercial Courts Act, 2015, after a design infringement suit becomes infructuous following the statutory cancellation of the plaintiff's design registration.

Brief Facts & Background

• The Claim: Crocs Inc. USA (Plaintiff) instituted a commercial suit seeking a permanent injunction against Bata India Ltd. (Defendant) for alleged infringement of its registered footwear design and passing off.

  At the initial stage, an ex-parte ad-interim injunction was granted, and Local Commissioners were appointed to seize allegedly infringing goods. However, on February 8, 2018, a Single Judge of the Delhi High Court vacated the interim injunction on the ground that the design was not novel and pre-existed in the public domain, awarding actual costs against the Plaintiff.

• Appeal: The Division Bench affirmed the vacating of the injunction. Upon further challenge, the Supreme Court of India (via order dated September 23, 2019) clarified that the award of interim costs would be subject to final adjudication of the suit.

• Cancellation of Design: On May 9, 2019, the Deputy Controller of Patents & Designs officially cancelled Crocs' registered design due to prior publication and lack of novelty.

  
  

• Disposal of Suit: On July 12, 2023, the High Court observed that because the registered design had been cancelled and its statutory term had lapsed, the design infringement suit no longer survived and was disposed of as infructuous, while leaving open the Plaintiff’s right to seek restoration if the cancellation order was reversed on appeal.

  
  

• Application for Costs: Following the suit's disposal, Bata India Ltd. filed an application seeking actual litigation costs of ₹24,63,400 incurred in defending the design infringement action. The Plaintiff did not dispute the quantum but argued that awarding costs should not prejudice its parallel pending claims regarding passing off and shape trademarks.

Legal Issues

The Court addressed the following essential legal issues:

1. Whether an award of actual litigation costs under Sections 35 and 35A of the Code of Civil Procedure, 1908 (CPC) (as amended for commercial disputes) is payable to a defendant when an infringement suit becomes infructuous following the cancellation of the subject design.

   
   

2. Whether the omission of a specific direction on costs in the formal suit disposal order amounts to a waiver of the right to claim costs.

   
   

3. Whether the determination of costs in the design infringement suit would prejudice the parallel, pending proceedings concerning passing off and shape trademarks between the parties.

Decision

The Court allowed Bata India Ltd.'s application and directed Crocs Inc. USA to pay actual litigation costs amounting to ₹24,63,400 within three months.

The Court held that once the design registration was cancelled by the Controller for lack of novelty, the statutory foundation of the infringement suit ceased to exist. Further, the Court addressed the principle of "Costs Follow the Event", reaffirming the statutory scheme under Section 35 CPC and the precedent in Uflex Ltd. v. Government of Tamil Nadu, holding that the prevailing party is entitled to recover actual, indemnified costs when forced to defend against an unsustainable intellectual property claim.

It is also worth noting that the Court explicitly noted that the award of costs pertains exclusively to the design infringement suit and would not prejudice either party's rights or arguments in the separate proceedings concerning shape trademarks or passing off.

Conclusion

This decision reinforces the strict application of the "costs follow the event" rule in Indian commercial litigation. By granting actual expenses to the Defendant upon the cancellation of a non-novel design, the Delhi High Court has set a clear precedent that litigants asserting statutory IP rights bear financial liability for actual costs if those rights are ultimately invalidated.

 [1] CS(COMM) 625/2018; I.A. 25948/2023

Vrinda Sehgal

Associate | Attorney at Law

vrinda@iprattorneys.com