United States District Court, N.D. Illinois, Eastern Division
September 16, 2005.
AMERIPAY LLC, Plaintiff,
AMERIPAY PAYROLL, LTD., Defendant.
The opinion of the court was delivered by: RONALD GUZMAN, District Judge
MEMORANDUM OPINION AND ORDER
Ameripay LLC has sued Ameripay Payroll, Ltd., for
cybersquatting pursuant to the Anticy bersquatting Consumer
Protection Act, 15 U.S.C. § 1125(d), and trademark infringement
and unfair competition pursuant to the Lanham Trademark Act of
1946 ("Lanham Act"), 15 U.S.C. §§ 1114, 1125(a), as well as for
violating New Jersey laws, prohibiting unfair competition and
trademark infringement. Defendant has moved for summary judgment
based on laches. For the reasons set forth below, the Court
denies the motion.
Unless otherwise noted, the following facts are undisputed.
Defendant Ameripay Payroll, Ltd. is an Illinois corporation
located and doing business in Illinois. (Def.'s LR 56.1(a)(3) ¶
4.) It provides payroll and tax-payment processing and services
primarily to clients in Illinois and Wisconsin. (Id. ¶¶ 5, 35.)
Plaintiff Ameripay LLC is a New Jersey corporation located in New
Jersey that provides payroll-processing services primarily to
clients with headquarters in New York and New Jersey. (Id. ¶¶ 1, 2.)
In 1995, plaintiff adopted and first used the Ameripay mark in
New Jersey. (Id. ¶ 3.) In August 1997, defendant began
operating its business in Illinois using the name Ameripay
Payroll, Ltd. (Id. ¶¶ 6, 9.)
In July 1998, plaintiff first became aware of defendant when
one of plaintiff's employees advised Paul Bultmeyer, Executive
Director of Ameripay LLC, that he discovered defendant's name on
a chamber of commerce listing under payroll services while
searching the Internet. (Id. ¶ 12; Def.'s Ex. 2, Bultmeyer Dep.
of 9/1/04 at 70.) On August 7, 1998, Bultmeyer sent defendant a
cease-and-desist letter. (Def.'s LR 56.1(a)(3) ¶ 13.) The letter
stated: "It has come to my attention that your firm is using
`Ameripay' as a service mark for payroll processing services. . . .
Your firm's use of this service mark is an infringement of my
client's rights under this registration." (Id.; see Def.'s
Ex. 1, Schurin Decl. Ex. 7, Letter from Bultmeyer to Sarowitz of
Bultmeyer testified that when defendant did not respond to his
letter within a month or two, Bultmeyer called Steven Sarowitz,
President of Ameripay Payroll, Ltd. (Def.'s LR 56.1(a)(3) ¶ 15.)
He also testified that Sarowitz told him that defendant would
respond to his demand before the end of the year, after
consulting counsel. (Id. ¶ 16.) However, plaintiff now argues
that Bultmeyer so testified because at the time, he did not have
the benefit of a particular document, a facsimile cover sheet, to
refresh his recollection. The document, dated August 17, 1998,
contains Bultmeyer's handwritten statement that he spoke with
defendant's principal Steve Sarowitz, and that Steve said he was
willing to discontinue use of the mark but asked for some time to
use up his current letterhead. (Pl.'s LR 56.1(b)(3)(A) ¶ 15.) The
Court views these disputed facts in plaintiff's favor. Sarowitz then called plaintiff's principal, Arthur Piancentini.
(Def.'s LR 56.1(a)(3) ¶ 17.) Sarowitz did not state that
defendant would stop using the Ameripay mark, and Bultmeyer never
withdrew the allegations in his August 7, 1998 letter.
In March 1999, defendant purchased the domain name
ameripay.com from the previous registrant. (Id. ¶ 18.) The
web site became active shortly thereafter. (Id. ¶ 19.)
In October 1999, a law firm representing plaintiff sent
defendant a letter demanding that defendant stop using the
Ameripay mark. (Id. ¶ 20; see Def.'s Ex. 1, Schurin Decl. Ex.
9, Letter from Radin to Sarowitz of 10/21/1999.) In the letter,
plaintiff stated, "if we do not receive a response to this letter
indicating that you will comply with the above demands or if you
are not willing to voluntarily proceed as requested, our
clients will be forced to initiate suit against you for willful
trademark infringement and for monetary damages and attorney's
fees once our client has completed its plans to offer its
services in Illinois." (Def.'s LR 56.1(a)(3) ¶ 20.) Defendant
again called plaintiff's principal, Piancentini, and stated that
defendant would not cease using the Ameripay mark. (Pl.'s LR
56.1(b)(3)(A) ¶ 22.) Defendant never complied with the letter.
(Def.'s LR 56.1(a)(3) ¶ 22.)
When plaintiff's counsel sent the October 1999 letter,
plaintiff provided payroll services to a New Jersey client that
had an office in Illinois, which required mailing checks to
Illinois. (Id. ¶ 21; see Pl.'s LR 56.1(b)(3)(A) ¶ 21.)
Further, plaintiff admits that it was not in fact prepared to
bring suit against defendant because plaintiff and defendant were
not competing at the time. (Def.'s LR 56.1(a)(3) ¶ 23.) Instead,
plaintiff waited for defendant to be more directly competitive before bringing suit. (Id. ¶ 24.) Plaintiff did not
contact defendant again until four years later upon service of
plaintiff's Complaint in July 2003. (Id. ¶ 22.)
Summary judgment "shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." FED. R. CIV. P.
56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A "genuine issue of material fact exists only where `there is
sufficient evidence favoring the nonmoving party for a jury to
return a verdict for that party,'" Dribeck Imps., Inc. v. G.
Heileman Brewing Co., Inc., 883 F.2d 569, 573 (7th Cir. 1989)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986)). In considering such a motion, the court must view all
inferences in the light most favorable to the nonmoving party.
See Regner v. City of Chi., 789 F.2d 534, 536 (7th Cir. 1986).
Although the district court's role on summary judgment is not to
sift through the evidence and decide whom to believe, the court
will enter summary judgment against a party who does not come
forward with evidence that would reasonably permit a finder of
fact to find in his or her favor on a material questions.
Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 920 (7th Cir.
Defendant argues that plaintiff's claims are barred under the
doctrine of laches. Plaintiff argues that: (1) laches does not
bar its cybersquatting claim; (2) the doctrines of progressive
encroachment and unclean hands prevent defendant from asserting
laches as to the rest of plaintiff's claims; (3) even if the
Court were to find that its claims for damages are barred by
laches, the delay in bringing suit was not so egregious as to
warrant barring injunctive relief. The Court addresses these arguments in turn.
I. Laches is Inapplicable to Cybersquatting Claim
Although defendant originally moved for summary judgment based
on laches as to all counts, defendant concedes in its reply brief
that laches does not apply to plaintiff's claim brought pursuant
to the Anticybersquatting Consumer Protection Act (Count I).
(See Def.'s Reply Mem. Supp. Mot. Partial Summ. J. at 1 n. 1.)
Therefore, the Court denies defendant's motion for summary
judgment as to Count I.
"The equitable doctrine of laches is derived from the maxim
that those who sleep on their rights, lose them." Hot Wax,
191 F.3d at 820. "For laches to apply in a trademark infringement
case, the defendant must show that the plaintiff had knowledge of
the defendant's use of an allegedly infringing mark, that the
plaintiff inexcusably delayed in taking action with respect to
the defendant's use, and that the defendant would be prejudiced
by allowing the plaintiff to assert its rights at this time."
Chattanoga Mfg., Inc. v. Nike, Inc., 301 F.3d 789, 792-93 (7th
Cir. 2002) (citations omitted). "Laches is generally a factual
question not subject to summary judgment." Jeffries v. Chi.
Transit Auth., 770 F.2d 676, 679 (7th Cir. 1985). Courts refer to the analogous state statute of limitations to
determine whether a presumption of laches should apply. Hot
Wax, 191 F.3d at 822-23. If the presumption of laches arises, it
"must be rebutted . . . with specific evidence excusing the
delay. . . ." A.C. Aukerman Co. v. Miller Formless Co., Inc.,
693 F.2d 697, 699 (7th Cir. 1982). The "plaintiff? bear[s] the
burden of explaining [its] delay in bringing suit." Miller v.
City of Indianapolis, 281 F.3d 648, 653 (7th Cir. 2002).
Both parties assume that the three-year statute of limitations
found in the Illinois Consumer Fraud and Deceptive Business
Practices Act, 815 ILL. COMP. STAT. 505/10a(e), applies. (See
Def.'s Mem. Supp. Summ. J. at 6; Pl.'s Mem. Law Supp. Opp'n
Def.'s Mot. Summ. J. at 13); see also Chattanoga,
301 F.3d at 793. Accordingly, so shall we. Harter v. Iowa Grain Co.,
220 F.3d 544, 560 n. 13 (7th Cir. 2000) (stating that where parties
agree on law governing dispute, and there is a reasonable
relation between dispute and forum's law chosen by parties, the
court applies the parties' choice and does not undergo its own
analysis of the choice-of-law issue).
There is no dispute that plaintiff had knowledge of defendant's
use of the Ameripay mark at the very latest in August 1998, when
plaintiff sent a cease-and-desist letter to defendant. (Id. ¶
13.) Plaintiff filed the instant suit on July 24, 2003. (Compl.)
The Court holds that plaintiff's nearly five-year delay in filing
suit creates a presumption of laches.
However, the Court finds that plaintiff has created a factual
issue regarding whether the progressive encroachment doctrine
applies in this case to overcome the presumption of laches.
"[T]he doctrine of progressive encroachment . . . allows a
trademark owner to tolerate de minimis or low-level
infringements and still have the right to act promptly when a
junior user either gradually edges into causing serious harm or
suddenly expands or changes its mark." AM Gen. Corp. v. DaimlerChrysler Corp., 311 F.3d 796, 823 (7th
Cir. 2002) (quotations omitted). "Under this doctrine, where a
defendant begins use of a trademark or trade dress in the market,
and then directs its marketing or manufacturing efforts such that
it is placed more squarely in competition with the plaintiff, the
plaintiff's delay is excused." Chattanoga, 301 F.3d at 794
Again, it is undisputed that plaintiff became aware that
defendant was using the Ameripay name to market payroll services
at the very latest August 1998. (Def.'s LR 56.1(a)(3) ¶¶ 12-13.)
It is undisputed that defendant began its website shortly after
March 1999. (Id. ¶ 18.) Bultmeyer testified that once he became
aware of defendant's website, he would take a look at what
defendant was doing "every now and again." (Def.'s Ex. 2,
Bultmeyer Dep. at 226.) Bultmeyer also testified that when
plaintiff sent the October 1999 cease-and-desist letter to
defendant, he "was unaware of any change" in defendant's
business. (Id. at 212.) At the time when plaintiff sent the
cease-and-desist letters to defendant, it appears that neither
plaintiff nor defendant considered each other a competitor in the
same geographic marketplace. (Id. at 217; Pl.'s Ex., Ravin
Decl., Ex. A, Sarowitz Dep. of 8/17/2004 at 17.) However,
Bultmeyer states that defendant has entered plaintiff's
geographic market by aggressively marketing itself on the
Internet, Pl.'s Ex., Bultmeyer Decl. ¶ 24, and that defendant's
website is now highly interactive and enables defendant to
deliver goods and services into plaintiff's geographic market,
id. ¶ 28. Viewing all of these facts in plaintiff's favor, a
reasonable jury could conclude that defendant changed the way in
which it marketed its services via its website between October
1999 and the filing of the instant lawsuit such that defendant is
now placed more squarely in competition with plaintiff. Further,
a reasonable jury could find, based on these facts, that it was
reasonable for plaintiff to delay taking legal action. Because
the Court holds that plaintiff has created a triable issue as to the material fact regarding whether its delay in
suing defendant is excused, the Court denies defendant's motion
for summary judgment based on laches. Accordingly, because
plaintiff has raised a genuine issue regarding laches that, in
and of itself, is sufficient to withstand defendant's summary
judgment motion, the Court need not address plaintiff's other
arguments, i.e., whether the doctrine of unclean hands applies
or whether the delay in bringing suit warrants barring injunctive
For the reasons set forth above, the Court denies defendant's
motion for summary judgment based on laches [doc. no. 53-1]. The
parties shall be prepared to set a date for the filing of the
final pretrial order and for trial at the next status hearing.
© 1992-2005 VersusLaw Inc.