Ameripay v. Ameripay Payroll

Citation: Ameripay LLC v. Ameripay Payroll, Ltd., 2005 U.S. Dist. LEXIS 20453 (N.D. Ill. Sept. 16, 2005).

Factual Background
Both plaintiff and defendant provided payroll-processing services under the mark AMERIPAY. Plaintiff, located in New Jersey, primarily served clients in New Jersey and New York, whereas defendant, located in Illinois, served clients in Illinois and Wisconsin. Plaintiff first used AMERIPAY in 1995, while defendant first used AMERIPAY in August 1997. In July 1998, plaintiff became aware of defendant and promptly sent a cease-and-desist letter to defendant. Plaintiff's executive director, Paul Bultmeyer, testified that a month or two after sending the letter he contacted defendant's president, Steven Sarowitz, who informed him that defendant would respond by the end of the year after consulting counsel.

After finding his notes from the telephone conversation, Mr. Bultmeyer later testified that during their telephone call Mr. Sarowitz had actually agreed to discontinue using the mark after defendant exhausted its current letterhead supply. Mr. Sarowitz later called plaintiff's principal, Arthur Piancentini, but never stated that defendant would stop using the mark. In March 1999, defendant purchased the domain name "ameripay.com" and began operating a website shortly thereafter. Plaintiff sent a letter to defendant in October 1999, threatening legal action for trademark infringement when plaintiff completed plans to offer services in Illinois.

Defendant called plaintiff's Mr. Piancentini to inform him that defendant did not intend to stop using the mark. As of October 1999, plaintiff's only contact with Illinois was that it served a New Jersey client that required plaintiff to mail checks to Illinois. Plaintiff did not sue defendant in 1999 because the parties did not compete in the same geographic market at that time. Plaintiff waited until July 2003 to sue defendant, when plaintiff believed that defendant competed more directly with plaintiff. Plaintiff sued for cybersquatting, infringement, and unfair competition.

Trial Court Proceedings
The court denied defendant's motion for summary judgment on all claims based on its defense of laches, i.e., plaintiff knew of defendant's use of the AMERIPAY mark since 1998 and inexcusably delayed taking action against defendant until 2003, thereby prejudicing defendant. Defendant ultimately conceded that laches did not apply to cybersquatting.

Regarding the claims for infringement and unfair competition, the parties agreed that the three-year statute of limitations in the Illinois Consumer Fraud and Deceptive Business Practices Act applied to determine whether a presumption of laches existed. The court held there was a presumption of laches because plaintiff knew of defendant's activities in August 1998 but did not file suit until July 2003, a delay of nearly five years.

Plaintiff responded that laches was not applicable under the doctrine of progressive encroachment, which allows a trademark owner to tolerate low-level infringements and still retain the right to act when an infringer causes serious harm, suddenly expands, or changes its mark. Here, plaintiff alleged that circumstances changed because defendant began aggressively marketing itself on the Internet and defendant's website was now highly interactive and enabled defendant to deliver products and services into plaintiff's geographic market. Viewing the facts in plaintiff's favor as it must on a motion for summary judgment, the court agreed with plaintiff and held that a jury could reasonably excuse plaintiff's delay in taking legal action until defendant encroached on plaintiff's geographic market. The court therefore denied defendant's motion.

This page uses content from Finnegan’s Internet Trademark Case Summaries. This entry is available under the GNU Free Documentation License.