CS(OS)No. 255/2005 Page 1 of 19

THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment Reserved on: 29.04.2011

Judgment Pronounced on: 03.05.2011

+ CS(OS) No. 255/2005

SAP AKTIENGESELLSCHAFT & ANR. ..…Plaintiff

- versus -

MR. SADIQ PASHA

PROPRIETOR, M/S. NEOLOGIK INDIA ....Defendant

Advocates who appeared in this case:

For the Plaintiff: Mr. Rahul Beruar and Mr. Subhash

Bhutoria

For the Defendant: None.

CORAM:-

HON’BLE MR JUSTICE V.K. JAIN

1. Whether Reporters of local papers may Yes

be allowed to see the judgment?

2. To be referred to the Reporter or not? Yes

3. Whether the judgment should be reported Yes

in Digest?

V.K. JAIN, J

1. This is a suit seeking permanent injunction

restraining infringement of copyright of the plaintiffs,

delivery up of infringing material and rendition of accounts

of profits, etc. Plaintiff No.1 is a company incorporated in

Germany, whereas plaintiff No.2 is its Indian subsidiary, 2011:DHC:2472

CS(OS)No. 255/2005 Page 2 of 19

responsible for sales of SAP solutions, implementation,

post-implementation support, training and certification of

its customers and partners in India. Plaintiff No.1 claims to

be global leader in developing application software products

for real time business developing process and also claim to

be world‟s largest inter-enterprise software company and

world‟s third largest overall independent supplier. It

employs nearly 30,000 people in 50 countries including

India. It is alleged that in early 70s plaintiff No.1 developed

RF System, an automatic accounting and transaction -

processing programme that featured standard software and

real-time computing and later came to be referred as R/1.

It is alleged that the software title solutions developed by the

plaintiffs, enables organizations to document, plan and

deploy the resources available to them, in the most efficient

manner, so as to achieve the maximum productivity.

Plaintiff No.1 also claims that it developed SAP R/2 in the

year 1979 and SAP R/3 in the year 1992. SAP R/3 is a new

architectural paradigm by combining three-tier client-server

architecture with the business concept of enhanced process

integration. It is claimed by the plaintiffs that their

products are not available off the shelf or through e-stores 2011:DHC:2472

CS(OS)No. 255/2005 Page 3 of 19

or resellers nor are they bundled with any computer

hardwares as an OEM product. Due to high levels of

customization of plaintiffs‟ software products they have

purpose-specific versions of their software license

agreements which are licensed for particular stream of use

and cannot be used in any manner or for any other

purpose. Besides End User License Agreements (ELUAs),

the plaintiffs also claim to have specific license agreements

to govern comprehensive and continuing education/training

programmes required for effective and meaningful use of its

products. This is also the case of the plaintiff that their

software title requires specially trained software

professionals to load, execute, access, employ, utilize, store

and display integrated end-to-end solutions derived from

such software products and towards this purpose the

plaintiffs have entered into several specific arrangements

with third party software specialists all over the world,

known as „Partners‟, for provision and execution of the

aforesaid functions. In India, the plaintiffs have such

partnerships with only two companies Siemens Information

Systems Ltd. and Genovate Solutions (I) Pvt. Ltd. and those

partners have only six training centers which are located in 2011:DHC:2472

CS(OS)No. 255/2005 Page 4 of 19

major cities of commercial importance.

2. This is also the case of the plaintiff that the

software programme developed and marke ted by them are

„computer programmes‟ within the meaning of Section 2 (ffc)

of the Indian Copyright Act, 1957 and are also included in

the definition of a „literary work‟ as per Section 2(o) of the

Copyright Act. It is also alleged that both India and

Germany are signatories of the Berne Convention, Universal

Copyright Convention and WTO Agreement and, therefore,

rights of the plaintiff companies are protected in India under

Copyright Act. Defendant Sadiq Pasha is stated to be the

proprietor of M/s. Neologik India and is stated to be

engaged in the business of providing ERP/eCRM training

services to its clients and also providing training programme

in ERP software at Bangalore. It was found by the plaintiffs

that on its website www.neologikindia.com the defendant

was making offer for providing various training programmes

in relation to plaintiffs‟ software products and had also been

regularly advertising the training programmes offered by it

with respect to the software programmes of the plaintiffs,

especially on SAP R/3 and ABAP/4. It is also alleged that

only a formal training agreement with the plaintiffs renders 2011:DHC:2472

CS(OS)No. 255/2005 Page 5 of 19

training license in respect of SAP software products and

training packages are prohibited from being implemented as

commercial industry solutions. It is claimed that there is

not a single valid license granted by the plaintiffs to the

defendant and, therefore, he has illegally obtained/installed

and is using pirated/infringing software products belonging

to the plaintiffs. It is further claimed that during the search

operation on 19

th

October 2004 the police was able to

recover two servers containing pirated software SAP R/3

Version 4.7 IDES which were being used for providing

training on SAP software. Thereafter an e-mail was sent by

the defendant to the plaintiff wherein he not only

acknowledged use of plaintiffs‟ unlicensed software

programmes but also admitted that despite raid by police he

continue to conduct unauthorized training programme in

SAP software. The plaintiffs have accordingly sought an

injunction restraining the defendant from

reproducing/installing and/or using pirated/unlicensed

software programmes of plaintiff No.1, including SAP R/3

and ABAP/4 for the purpose of training or otherwise. They

have also sought delivery up of the infringing material

besides seeking rendition of accounts. 2011:DHC:2472

CS(OS)No. 255/2005 Page 6 of 19

3. The defendant was proceeded ex parte vide order

dated January 18, 2008.

4. The plaintiffs have filed affidavit by way of ex parte

evidence of one witness namely Ms. Madhu Kolhi, which

was adopted by Mr. Yogesh Goel since Madhu Kohli the

constituted attorney left the services of the plaintiff

company. In the affidavit by way of evidence Ms. Madhu

Kohli, attorney of the plaintiff company has affirmed on oath

the averments made in the plaint and has stated that the

plaintiff company developed and introduced SAP R/2 in the

year 1979 and SAP R/3 in the year 1992. She has further

stated that the products of the plaintiff company are tailored

to meet the specific needs of each customer and are not

available off the shelf or through e-stores, etc. and are not

bundled with any OEM computer hardware. She has

further stated that the software programmes of the plaintiffs

require specially trained software professionals to load,

execute, access, employ, utilize, store and display integrated

end-to-end solutions derived from such software products

and the plaintiffs have entered into several specific

arrangements with third party for imparting professional

training to work on plaintiffs‟ software programmes. She 2011:DHC:2472

CS(OS)No. 255/2005 Page 7 of 19

has also stated that the plaintiffs‟ company computer

programme works were first published in Germany and are

registered there and these programmes were created for the

plaintiff company by their employees and are original

literary works as contemplated in Section 2(o) and Section

13(1) of Copyright Act, 1957. It is also stated that India and

Germany are both signatories to Berne and Universal

Copyright Convention. She has further stated that a

thorough search of the database of the plaintiffs revealed

that not even a single valid license subsists in favour of the

defendant. She has claimed that in the raid carried out by

police on 19

th

October 2004, the police recovered two

servers having pirated version of the plaintiffs‟ computer

programme SAP R/3 Version 4.7 IDES. According to her

within three months of police action, the defendant again

resumed his illegal activities of imparting unauthorized

training in plaintiffs‟ software products.

5. Ex.PW-1/1 (Colly) are the documents evidencing

registration of the software programme R/3 system ,

Employee Self Service Applications for R/3 in Germany.

Thus, plaintiff No.1 is the copyright holder in respect of

software programme R/3 as also the Employee Self Service 2011:DHC:2472

CS(OS)No. 255/2005 Page 8 of 19

Applications.

6. A Local Commissioner was appointed by this Court

vide order dated 25

th

February 2005 to make an inventory of

software programmes titled as SAP R/3 and ABAP/4 being

used by the defendant for the purpose of training or

otherwise and to seize the discs containing unlicensed

versions of the plaintiffs‟ software. A perusal of the report of

the Local Commissioner would show that three servers and

twelve desktop computers in the premises of M/s Neologik

India were found loaded with:

1. SID: FUN

SAP Release: SAP R3 46C

2. SID: TEC

SAP Release: SAP R3 IDES 46C

3. SID: NEO

SAP Release: Business warehouse, 30B.

The hard discs were got removed by the Local

Commissioner from those machines and were thereafter

delivered on Superdari to Mr. N. Sarvesha, Incharge of GVS

Complex where Neologik India was functioning.

7. It would thus be seen that pirated software of the

plaintiffs was found being used by the defendant in its

servers and other hardware. The advertisement published

by the defendant in „Education Times‟ of January 31, 2005 2011:DHC:2472

CS(OS)No. 255/2005 Page 9 of 19

would show that the defendant has been imparting training

in SAP R/3 and claimed to be real-time consultants in SAP

and implementation. Similar advertisement was published

in February 14, 2005 issue of „Career Profile‟. A perusal of

the print out taken from the website of the defendant shows

that it was offering packaged application solutions covering

implementation and roll out, integration, support and

maintenance of SAP. It further shows that the services

being offered by the defendant included training on ERP

products such as SAP R/3 AND ABAP/4. A perusal of the

e-mail dated 16

th

February 2005 sent by Neologik India

would show that even after receipt of notice from the

plaintiffs and seizure of their servers, the defendant

continued to conduct SAP training very freely and also

continued advertising his services on a regular basis.

8. Section 51 of the Copyright Act, to the extent it is

relevant, provides that copyright in a work shall be deemed

to be infringed when any person without a licence granted

by the owner of the copyright or the Registrar of Copyrights

under the Act or in contravention of the conditions of a

licence so granted or of any condition imposed by a

competent authority under the Act does anything, the 2011:DHC:2472

CS(OS)No. 255/2005 Page 10 of 19

exclusive right to do which is by the Act is conferred upon

the owner of the copyright.

Section 14 of the Copyright Act, to the extent it is

relevant, provides that copyright means the exclusive rights

subject to the provisions of the Act, to do or authorize the

doing of specified acts in respect of a work or any

substantial part thereof, which in the case of a computer

programme would include to reproduce the work in any

material form including the storing of it in any medium by

electronic means. It has come in evidence that no license

has been issued by the plaintiffs to use the above referred

software. Had any such license been issued and had the

same been valid, it would have been found in the database

maintained by the plaintiff company. In any case, the

defendant has not come forward to claim that the software

found loaded on his hardware was licensed software and

was not by pirated version. Therefore, by using pirated

versions of the softwares, copyright of which vest in the

plaintiff companies, the defendant infringed their copyrights

in those softwares.

9. A perusal of the Standard SAP Software End User

Value Licence Agreement filed by the plaintiffs would show 2011:DHC:2472

CS(OS)No. 255/2005 Page 11 of 19

that such licence does not entitle the licensee to provide

training to any third party except to the extent provided in

the agreement, nor can the licensee use the software and

third party database for a Service Bureau Application.

Licensee is also precluded from sub-licensing or renting the

software, documentation or third party database. It further

shows that such a licence is granted to install the software

and third party database only on designated units intranet

servers, internet servers or third party front ends, as

identified by the licensee pursuant to the agreement and the

designated units cannot be shared for the purpose of

software for the companies who are not defined as licensee

or authorized affiliates and who have not been previously

approved by SAP in writing or otherwise officially made

known to the public as appropriate for use or interoperation

with the software and third party database. The maximum

number of persons licensed to use the software is specified

in the appendices to the agreeme nt. Thus even if the

defendant was to obtain an End User L icense from the

plaintiffs, it could have been used for the purpose of

imparting training in SAP R/3 or any other programme

copyright in which vests in the plaintiff company. 2011:DHC:2472

CS(OS)No. 255/2005 Page 12 of 19

10. A perusal of the standard Education License

Agreement of the plaintiff company would show that the

plaintiffs Authorized Training Centres utilize such part of

SAP products as are shown in the appendix which SAP may

in its discretion deem necessary as part of SAP Academics

taught by TP-SAP training centre under the Education

Partner Programme in the territory. It further shows that

user would mean employees of TP-SAP training centre, who

are required to carry out the obligations of the training

centre under the agreement and the students who require

access to software pursuant thereto. The training centres

are required to register its qualified employees participating

in any of the published SAP educational services training

centres. SAP is required to handle the registration of

students to its database registration system and training

centre is required to declare and provide and actual number

and relevant data of participants to SAP. The training

centre is required to ensure that only suitably qualified

employees of the centres are selected to attend the SAP

academy courses they also rapidly acquire and maintain a

comprehensive and fundamental knowledge of SAP

products. The training centres are also required to ensure 2011:DHC:2472

CS(OS)No. 255/2005 Page 13 of 19

that they have sufficient number of qualified staff and

instructors.

11. The defendant does not have any education license

agreement with the plaintiffs. Therefore, he has no right to

impart training in the programme R/3 or any other SAP

programme to any person. Any such act on the part of the

defendant would amount to infringement of the copyright

which the plaintiffs have in the aforesaid software

programme under Section 14 of Copyright Act.

12. Section 40 of the Copyright Act, 1957, to the extent

it is relevant, provides that the Central Government may, by

order published in the Official Gazette, direct that all or any

provisions of the Act shall apply to work first published in

any territory outside India to which the order relates in like

manner as if they were first published within India.

13. Para 3 of International Copyright Order 1999

issued vide S.O. 228(E) dated 24

th

March, 1999 published in

the Gazette of India, Extra Part II would show that vide

aforesaid order, all the provisions of the Copyright Act, 1957

except those in Chapter VIII and those other provisions

which apply exclusively to Indian works have been extended

to any work first made or published in a country mentioned 2011:DHC:2472

CS(OS)No. 255/2005 Page 14 of 19

in Part I, II, III, IV or VI of the Schedule in like manner as if

it was first published in India. Germany is included as one

of the countries mentioned in Part I of the Schedule and its

name appears at number 131 of the list. Paragraph 2 of the

aforesaid order provides that “Berne Convention Country”

means a country which is a member of the Berne Copyright

Union and includes a country mentioned either in Part I or

in Part II of the Schedule. Therefore, Germany is a member

of the Berne Copyright Union and all the provisions of the

Copyright Act, 1957 except those contained in Chapter VIII,

and those other provisions which apply exclusively to Indian

works are applicable to the copyrights in respect of any

work which has been published first in Germany.

14. Clause (d) of Section 3 of the International

Copyright Order, 1999, to the extent it is relevant, provides

that the aforesaid provisions shall apply to any work first

made or published by a body corporate incorporated under

any law of a country mentioned in Part I, II, III, IV or Part VI

of the Schedule, in like manner, as if it was incorporated

under a law in force in India.

15. Thus, in view of the provisions contained in

Section 40 of the Copyright Act read with International 2011:DHC:2472

CS(OS)No. 255/2005 Page 15 of 19

Copyright Order, 1999, the provisions of Chapter XI of the

Copyright Act including Section 51 which deals with

infringement of copyright would apply to the copyright

registrations obtained by the plaintiffs in respect of the

software found to be installed in the compu ters of

defendant.

16. For the reasons given in the preceding paragraphs,

I am of the view that the defendant infringed the copyright

of the plaintiffs by using the pirated software R/3 and by

imparting training using the aforesaid software. During the

course of arguments the learned counsel for the plaintiffs

confined his prayers to grant of permanent injunction and

punitive damages. Regarding punitive damages in the case

of Time Incorporated v. Lokesh Srivastava & Anr. , 2005

(30) PTC 3 (Del), this Court observed that punitive damages

are founded on the philosophy of corrective justice and as

such, in appropriate cases these must be awarded to give a

signal to the wrong doers that the law does not take a

breach merely as a matter between rival parties but feels

concerned about those also who are not party to the lis but

suffer on account of the breach. In the case of Hero Honda

Motors Ltd. v. Shree Assuramji Scooters , 2006 (32) PTC 2011:DHC:2472

CS(OS)No. 255/2005 Page 16 of 19

117 (Del), this Court noticing that the defendant had chosen

to stay away from the proceedings of the Court felt that in

such case punitive damages need to be awarded, since

otherwise the defendant, who appears in the Court and

submits its account books would be liable for damages

whereas a party which chooses to stay away from the Court

proceedings would escape the liability on account of the

failure of the availability of account books.

In Microsoft Corporation v. Deepak Raval MIPR

2007 (1) 72, this Court observed that in our country the

Courts are becoming sensitive to the growing menace of

piracy and have started granting punitive damages even in

cases where due to absence of defendant, the exact figures

of sale made by them under the infringing copyright and/or

trademark, exact damages are not available. The

justification given by the Court for award of compulsory

damages was to make up for the loss suffered by the

plaintiff and deter a wrong doer and like -minded from

indulging in such unlawful activities.

In Larsen and Toubro Limited v. Chagan Bhai

Patel MIPR 2009 (1) 194, this Court observed that it would

be encouraging the violators of intellectual property, if the 2011:DHC:2472

CS(OS)No. 255/2005 Page 17 of 19

defendants notwithstanding having not contested the suit

are not burdened with punitive damages.

Also, the Court needs to take note of the fact that a lot

of energy and resources are spent in litigating against those

who infringe the trademark and copyright of others and try

to encash upon the goodwill and reputation of other brands

by passing of their goods and/or services as those of that

well known brand. If punitive damages are not awarded in

such cases, it would only encourage unscrupulous persons

who actuated by dishonest intention, in the case of a

trademark use the well -reputed trademark of another

person, so as to encash on the goodwill and reputation

which that mark enjoys in the market, with impunity or in

the case of a software use the pirated software thereby

depriving the copyright owner of the revenue to which he is

entitled by sale of license to use that software and then

avoid payment of damages by remaining absent from the

Court, thereby depriving the plaintiff an opportunity to

establish actual profit earned by him from use of the

infringing mark/pirated software, which, if he is using the

infringing mark/pirated software for business purposes, can

be computed only on the basis of his account books. This 2011:DHC:2472

CS(OS)No. 255/2005 Page 18 of 19

would, therefore, amount to putting premium on dishonesty

and give an unfair advantage to an unscrupulous infringer

over those who have a bona fide defence to make and

therefore come forward to contest the suit and place their

case before the Court.

17. The companies which invest heavily in

development of such highly useful software, will be

discouraged from making further investments in designing

new softwares and improving the existing ones, if they are

deprived of license fee which they get on sale of licenses,

since it is only from that money that they can develop new

softwares by making substantial investments in research

and development. Also, use of pirated software by a

commercial enterprise needs to be dealt with more strictly

than use by an individual for his personal purposes.

Since defendant has been found using the pirated

software of the plaintiff company for its commercial

purposes, there is likelihood of the defendant persisting

with the use of these pirated softwares. In fact, the

defendant has been persistent in imparting training using

the pirated software of the plaintiffs as is evident from the e-

mail sent by him. 2011:DHC:2472

CS(OS)No. 255/2005 Page 19 of 19

18. It is true that the plaintiffs have not specifically

claimed damages in the prayer clause but in para 26 of the

plaint, they have valued the suit at Rs.6 Lacs for the

purpose of damages and have also paid the requisite Court

fee on it. Therefore, the relief of damages in such

circumstances can be granted to the plaintiffs in the

residual prayer contained in para 27 of the plaint.

19. For the reasons given in the preceding paragraphs,

the defendant is restrained from using any

pirated/unlicensed software of the plaintiff company

including R/3 and is further restrained from imparting

training in the aforesaid software programmes of the

plaintiffs without requisite license in this regard from the

plaintiffs. In the facts and circumstances of the case, I also

award punitive damages amounting to Rs.1 Lac to the

plaintiffs, against the defendant. No other relief is granted

to the plaintiffs.

Decree sheet be drawn accordingly.

(V.K. JAIN)

JUDGE

MAY 03, 2011

Ag 2011:DHC:2472