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Primepoint, L.L.C. v. Primepay

February 29, 2008

PRIMEPOINT, L.L.C., PLAINTIFF/COUNTER-CLAIM DEFENDANT,
v.
PRIMEPAY, INC., DEFENDANT/COUNTER-CLAIM PLAINTIFF.



The opinion of the court was delivered by: Bumb, United States District Judge

[Docket No. 27]

OPINION

Introduction

This matter comes before the Court upon Plaintiff/Counter-Claim Defendant, Primepoint, L.L.C.'s (hereinafter "Primepoint"), motion for summary judgment. For the reasons set forth below, Primepoint's motion will be granted in part and denied in part.

Factual and Procedural Background*fn1

Primepoint is a New Jersey company with its principal place of business in Bordentown, New Jersey. Parties' Rule 56.1 Statements at ¶ 3.*fn2 Primepoint provides payroll processing and payroll tax services using the "Primepoint" trademark (hereinafter the "Primepoint mark"). Primepoint was founded in 2000 by Alexander and David Bothwell who, at that time, were working in their family's payroll and bookkeeping company, Delaware Valley Payroll. Id. at ¶ 5.

Primepoint offers payroll processing and payroll tax services via four types of products and services: 1) Full payroll processing, which includes processing payrolls and accounts for payroll taxes for business customers; 2) Branded payroll processing solutions, offered to banks and financial institutions, which allows Primepoint's bank customers to offer branded payroll processing solutions with Primepoint providing all of the payroll processing; 3) Bank product/services marketing - offered by Primepoint to assist banking and financial institution customers to market their products to their own customers; 4) Human Resource Information Services ("HRIS") system, which provides customers with Human Resource information such as OSHA reports and benefits-related information. Id. at ¶¶ 20-23.

Primepoint's customers are mainly businesses including banks in New York, New Jersey, Pennsylvania and Delaware. Id. at ¶ 36. Primepoint utilizes a person to person method of sales and its sales and marketing efforts include payroll presentations to banks and other businesses. Parties' SOF at 37-38.*fn3

Primepoint avers that prior to choosing the name, its team members performed an internet search to determine if that name was in use by any other business and the search revealed no competing uses. Id. at ¶ 11. In 2000, Primepoint designed a logo which depicts "Prime" in blue and "point" in green. Id. at ¶ 16. The logo includes an "arc-like design element extending to the letter 'i'." Id. Later, Primepoint began using the "lead-in" line "powered by Primepoint" to describe its role in the payroll process; this lead-in line is currently used in almost all promotional activities. Id. at ¶¶ 16-17. The Primepoint logo is used on a variety of promotional materials and Primepoint owns and operates an internet website including www.eprimepoint.com. Since 2000, Primepoint has spent approximately $7,000-10,000 per year on marketing, and utilizes a public relations firm to promote its brand, including targeted activities to promote its brand to banks. Id. at ¶¶ 32-34. Alexander Bothwell testified that in December 2000, Primepoint approached hundreds of potential investors about a private placement stock offering and used the "Primepoint" name and logo. Id. at ¶ 29. PrimePay alleges that Primepoint's alleged use of the mark in the context of private placement in December 2000, was not open and notorious and not directed at the general public. Defs.' Counter SOF at ¶¶ 28 & 77.

On August 7, 2001, Primepoint filed an application to register the Primepoint trademark with the U.S. Patent and Trademark Office ("PTO") for "financial services." Parties' SOF at 41. On October 1, 2001, the PTO informed Primepoint that there were no conflicting marks, but required Primepoint to revise the rendering of its logo and specify the services it provides more specifically as "[t]he wording 'financial services' in the recitation of services is unacceptable as indefinite."

Id. at 42; Pl.'s Ex. 7. Primepoint revised its drawing and amended its characterization of services to "Financial Services, namely banking and payroll services in international class 36." International class 36 encompasses: 'Insurance; financial affairs; monetary affairs; real estate affairs." Id. at 44. On February 18, 2003, Primepoint's mark was published for third-party opposition, and none was filed. The PTO issued registration to Primepoint for its mark in May 13, 2003, (No. 2,715,127). Id. at ¶ 46. Also, in 2003, Primepoint began using the mark "Primetax" for its payroll tax services and did not seek to register the mark. The Primetax mark already had been registered to Defendant, PrimePay, Inc., ("PrimePay"). Id. at ¶ 26.

PrimePay provides several services to business owners throughout the U.S. including, but not limited to, the following:

1) Payroll services under the mark "PrimePay"; 2) Tax services under the mark "PrimeTax"; 3) Retirement plan administration and investment services under the mark "PrimePlans"; 4) Flexible benefit plan administration under the mark "PrimeFlex"; and, 5) Workers' compensation insurance under the mark "PrimeComp." Id. at 68. PrimePay also provides "unemployment cost control services, customer referral and information resources services, COBRA administration services, [and] electronic pay stub services." Docket No. 29-2, Pellicano Decl. at ¶ 4. PrimePay's various services are marketed to clients through sales personnel, the internet, referrals from clients, accountants, banks, national affinity programs, and strategic partnerships with software companies. Parties' SOF at ¶ 71.

PrimePay has offices in Newark, Philadelphia, Baltimore, Washington, D.C., Hartford, Albany, Long Island and Manhattan and can handle payroll and related services in all 50 states. Pellicano Decl. at ¶¶ 2&4. "PrimePay primarily serves and targets small to medium sized local businesses including retail banks." Id. at ¶ 5. PrimePay distributes its services via direct and remote sales, including referrals and its sales methods include face to face presentations, its web site, and distribution of PrimePay memorabilia. Id. at ¶¶ 11-12.

The "PrimePay" mark has been used since 1995. The PrimePay mark, when fully stylized in color, includes a gradation from blue to green in which the top of each letter is blue and the bottom is green. Parties' SOF at ¶67. PrimePay avers that it spent between $200,000 and $550,000 per year on marketing and advertising using its marks between 1995-2005. Defs.' Resp. SOF at ¶ 32. PrimePay has two separate trademark registrations of its "PRIMEPAY" mark: 1) international trademark class 35, which encompasses "advertising, business management, business administration, office functions," and, 2) international trademark class 9, which encompasses, inter alia, electrical and scientific apparatus such as calculating machines, data processing equipment and computers. While the parties dispute the exact date that Primepoint became aware of PrimePay, the parties agree that there were several instances where Primepoint made presentations to potential customers who were customers of PrimePay. See id. at ¶¶ 48-51.

On February 10, 2006, PrimePay's counsel sent a cease and desist letter to Alexander Bothwell, Primepoint's CEO, alleging that Primepoint's use of "Primepoint" and "Primetax" infringed on PrimePay's "PrimePay" and "PrimeTax" marks. Id. at ¶ 55. In response, Primepoint's counsel contacted PrimePay's counsel and advised that Primepoint would cease using the "Primetax" mark. Id. at ¶ 57. PrimePay's counsel then wrote directly to Primepoint (PrimePay avers it had misplaced counsel's name and address) and stated that PrimePay would seek legal remedies if Primepoint did not cease using the Primepoint trademark. Id. at ¶ 58.

On April 3, 2006, Primepoint filed a Complaint for Declaratory Relief with this Court. Pursuant to its Complaint, Primepoint asks for declaratory judgment that its use of the mark "Primepoint": 1) does not infringe on the alleged trademark rights of PrimePay under 15 U.S.C. § 1114(1)(a); 2) does not constitute false designation of origin under 15 U.S.C. § 1125(a); and, 3) does not constitute unfair competition under state law. Primepoint's Complaint also asks the Court to declare that equitable estoppel prohibits PrimePay from enforcing its alleged trademark rights. Id. ¶ 1.

PrimePay filed a counter-claim asking this Court to declare that Primepoint's use of "PRIMEPOINT" and "PRIMETAX" marks infringes on PrimePay's trademarks and that Primepoint's use of these marks infringes on PrimePay's family of marks. Moreover, PrimePay avers that Primepoint's registration of its Primepoint trademark is invalid "because it was procured through fraud on the United States Patent and Trademark Office in that [Primepoint] filed a declaration with the patent and Trademark Office to the effect that [Primepoint] had been engaged in, was engaged in, and intended to be engaged in banking services." [Docket No. 4 at ¶ 85].

On August 15, 2007, Primepoint filed the instant summary judgment motion as to Count I (declaration of non-infringement under the Lanham Act), Count II (declaration of no false designation of origin under the Lanham Act), and Count III (declaration of no unfair competition under state common law). Primepoint is not moving for summary judgment as to Count IV (the declaration of equitable estoppel prohibiting enforcement), because, according to Primepoint, "the claims raised in Count IV will be moot because there will be no infringement." Pl.'s Br. at 1. Primepoint also asks this court to dismiss Primepay's counterclaim "unless [PrimePay] can show genuine issues of material fact that would allow it to meets its burden of showing by clear and convincing evidence that Primepoint's mark was fraudulently obtained." Id. at 4-5.

Applicable Standard

Summary judgment shall be granted if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c); Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986). "In making this determination, a court must make all reasonable inferences in favor of the non-movant." Oscar Mayer Corp. v. Mincing Trading Corp., 744 F. Supp. 79, 81 (D.N.J. 1990) (citing Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983) cert. dismissed, 465 U.S. 1091 (1984)). "At the summary judgment stage the judge's function is not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

DISCUSSION

I. Infringement, Unfair Competition, False Designation of Origin

Plaintiff, Primepoint, has moved for summary judgment and argues that its use of the "Primepoint" mark does not infringe on PrimePay's marks, does not falsely designate the origins of its services, and does not constitute unfair competition under either federal or New Jersey law.*fn4

Federal trademark infringement*fn5 and federal unfair competition/false designation of origin*fn6 claims are measured by identical standards, as are New Jersey claims for infringement and unfair competition. A&H Sportswear, Inc. v. Victoria's Secret Stores, Inc., ("A&H V"), 237 F.3d 198, 210 (3d Cir. 2000); see Apollo Distrib. Co., v. Jerry Kurtz Carpet Co., 696 F. Supp. 140, 143 (D.N.J. 1988) (noting that the analysis of New Jersey law claims for trademark infringement and unfair competition are the same as the federal analysis). Trademark infringement is defined as "use of a mark so similar to that of a prior user as to be 'likely to cause confusion, or to cause mistake, or to deceive.'" Kos Pharms., Inc., v. Andrx Corp., 369 F.3d 700, 711 (3d Cir. 2004) (quoting 15 U.S.C. § 1114(1)). "To prove either form of Lanham Act violation, a plaintiff must demonstrate that (1) it has a valid and legally protectable mark; (2) it owns the mark; and (3) the defendant's use of the mark to identify goods or services causes a likelihood of confusion." A&H V, 237 F.3d 198.

PrimePay has set forth two separate theories of infringement: 1) that the "Primepoint" mark is likely to be confused with the "PrimePay" mark individually, and 2) that the "Primepoint" mark is likely to be confused with PrimePay's family of marks containing the "Prime" prefix. Def.'s Br. at 4. Only the second theory depends on the establishment of a family of marks. Id.

As an initial matter, Primepay argues that "Primepoint does not assert that it would not infringe on PrimePay's family should PrimePay establish the existence of a family." Def.'s Br. at 4. Accordingly, PrimePay argues that the existence of PrimePay's family is the only issue regarding this theory of infringement. Primepoint's moving brief, however, clearly states that no family of marks has been established and, also, that PrimePay cannot demonstrate a likelihood of confusion as to those marks. Pl.'s Br. at 5 (stating that Primepoint "has not infringed on PrimePay's marks because PrimePay has no valid 'family of marks' . . . and because PrimePay has failed to demonstrate a likelihood of confusion between Primepoint's and PrimePay's respective marks.") (emphasis added). This Court finds that Primepoint has opposed PrimePay's second theory of infringement on both establishment of a family of marks and likelihood of confusion grounds. Primepoint avers that "irrespective of whether the purported family of marks or simply the PrimePay mark is considered, PrimePay has not shown any evidence, based upon the ten well-settled factors, that there is a likelihood of confusion between the marks." Pl.'s Br. at 1. This Court will first address the family of marks arguments and proceed to the likelihood of confusion analysis, relevant to both theories of infringement.

a) Family of Marks

A "family of marks" is defined as a group of marks having a recognizable common characteristic, wherein the marks are comprised and used in such a way that the public associates not only the individual marks, but the common characteristic of the family, with the trademark owner.

McDonald's Corp. v. Druck & Gerner, DDS., P.C., 814 F. Supp. 1127, 1131 (N.D.N.Y. 1993) (quoting J & J Snack Foods Corp. v. McDonald's Corp., 932 F.2d 1460, 1462 (Fed. Cir. 1991)). However, "[s]imply using a series of similar marks does not of itself establish the existence of a family. There must be a recognition among the purchasing public that the common characteristic is indicative of a common origin of the goods." Id. (quoting J & J Snack Foods Corp., 932 F.2d at 1462; AM General Corp. v. DaimlerChysler Corp., 311 F.3d 796, 814 (7th Cir. 2002) (stating that a family of marks "exists only if and when 'the purchasing public recognizes that the common characteristic is indicative of a common origin of the goods.'") (quoting Han Beauty, Inc. v. Alberto-Culver Co., 236 F.3d 1333, 1336 (Fed. Cir. 2001)).

In examining the family of marks issue here, this Court is mindful that "[m]erely adopting and using -- and even registering -- a group of marks with a common feature does not create a family of marks, even if the user intended to create a family." AM General Corp., 311 F.3d at 816. "Whether a family of marks exists is an issue of fact based on the common formative component's distinctiveness, the family's use, advertising, promotion, and inclusion in party's other marks." Id. at 815; see J & J Snack Foods Corp., 932 F.2d at 1463 (stating that it is "necessary to consider the use, advertisement, and distinctiveness of the marks, including assessment of the contribution of the common feature to the recognition of the marks as of common origin.").*fn7 Likelihood of confusion may also enter into the analysis of whether a family of marks exists. Id.

It is undisputed that at the time Primepoint began using its mark, PrimePay was only using four of its fourteen currently registered marks. Those four marks are PrimePay, PrimeTax, PrimeFlex, and PrimeLink. Primepoint avers that in order to survive summary judgment, PrimePay must show that it had established a family of marks at the time Primepoint began using the Primepoint mark. Primepoint argues that PrimePay cannot show that customers identified the origin of PrimePay's services by the use of the prefix "Prime" and, therefore, cannot show that the public viewed PrimePay's marks as part of a larger family.

In response, PrimePay agues that the common element of its marks, the prefix "Prime" is "inherently distinctive of the payroll processing and associated services it brands" because "Prime" neither describes nor suggests these services. As such, PrimePay argues that "Prime" is arbitrary or fanciful and should be afforded a higher level of distinctiveness. Furthermore, PrimePay asserts that it has "used its suite of marks in a manner designed to create an association of common origin for all marks containing the Prime prefix and has expended significant resources and sales efforts in doing so." Def.'s Br. at 6. Finally, PrimePay avers that "the evidence shows that the common elements of PrimePay's marks as encountered in the marketplace . . . create a recognition of common origin of the common elements."

Despite these conclusory assertions, however, PrimePay has presented this Court with no evidence whatsoever in support of its contention that it has established a family of marks. All this Court knows is that PrimePay has spent between "$200,000 and $550,000 per year on marketing and advertising between 1995-2005" - there is no evidence before this Court as to what type of consumer recognition, if any, has resulted. See EMSL Analytical, Inc., v. Testamerica Analytical Testing Corp., No. 05-5259, 2006 U.S. Dist. LEXIS 16672 at *21-22 (D.N.J. Apr. 4, 2006) (finding that the amount of money spent on advertising and marketing is not necessarily indicative of the strength of a mark especially where there has been no showing that the expenditures resulted in actual consumer recognition of the mark); see also 7- Eleven, Inc. v. Wechsler, 2007 TTAB LEXIS 58 at * 13, 83 U.S.P.Q.2d 1715 ...


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