Legal Drama in “TheClubhouse”

If you search “Clubhouse” on Google, the Clubhouse: Drop-in audio chat app will be the first result. The app was created and released in March 2020 by Alpha Exploration Co. and gained major popularity throughout the year. It is now a 4-billion-dollar company! With 10 million users, the Clubhouse app is an invitation only social media app where users communicate in voice chat rooms. The topics of the chat rooms varies and gives users the opportunities to learn, listen, and voice their opinion on on various subjects. 

However, before the Clubhouse app, there was “TheClubhouse”. TheClubhouse was launched by SBS Consulting Group in November 2018, nearly two before the Clubhouse app. It is a small business, networking site for professional companies. TheClubhouse registered for a trademark in May 2019 which was granted in December of the same year. 

Although the Clubhouse app is a four-billion-dollar company, it has no registered trademark and has not applied for registration in the US. Ultimately, a lawsuit was filed by TheClubhouse against the Clubhouse app. You guessed it, that lawsuit centers around trademark infringement! TheClubhouse claims that the Clubhouse app infringed on the trademark it received in 2019 for “TheClubhouse”. TheClubhouse is seeking a trial, damages, and asks thatAlpha Exploration Co. be prohibited from using the name for its app.

The complaint also claimed there was an overlap in content and features between the two. On TheClubhouse website, there is over one hundred clients in pro sports leagues such as the NBA and MLB. In comparison, the Clubhouse app has chat rooms titled “Pro Sports Network and “Sports Biz Professionals”. 

The main issue of this case will be whether this is a case of “reverse confusion”. Reverse confusion occurs when a big company ignores the trademark rights of a much smaller company and uses its superior resources to saturate the market. It causes confusion as to the source of the first user’s goods. This can be harmful to the smaller company in many ways. It can be harmful to the value of the smaller company’s trademark, dilute its product identity, and prevent it from controlling its reputation with the public.

What Can We Learn

Now imagine growing your business to be valued at 4 billion dollars just to get hit with a trademark infringement lawsuit within a year! Although the Clubhouse case is in the beginning stages, other business owners can learn a lot from the Clubhouse’s mishap. 

 

  1. Do your research. A trademark search is the most basic consideration in using and registering a trademark, but it is often overlooked. One reason to conduct a trademark search is to avoid inadvertently infringing on another’s mark. Ignorance of an existing trademark is not a defense to a trademark infringement claim. So, hire an attorney to conduct a trademark search which can help you protect yourself from lost money, resources, and time!

  2. Protect your business. Your business is valuable and needs to be protected. In order to protect a business’s creations and ideas from unfair competition, infringement, and theft of designs and ideas, all business owners should trademark and copyright their businesses. A trademark registration is used to secure a business by identifying and distinguishing the goods of one company from those of another. Business names, product names, labels, and logos can all be trademarks! Trademarking your business is a layer of protection that can help you resolve legal issues in the future. 

Benefits of Trademarks 

Trademark registration should be one of the first things on a startup business to do list. When you trademark your ideas, you have official ownership of your ideas which comes with legal protections. Here are some benefits of trademarking your business and ideas.

  1.  Serves as evidence of exclusive ownership,

  2. Discourages other companies from using confusingly similar marks,

  3. Allows for a business owner to catch possible infringements problems early on,

  4. Grants the right to sue in federal court and can obtain damages and fees, and

  5. Grants the right to use the ® symbol when the mark is used for the goods and services listed in the registration, giving your products more marketing cachet.

Let The Styles Firm help you to secure the trademarks for your business today! Schedule a consultation and let’s get to work!

Sources:

Litigating Reverse Confusion Infringement Actions by Tal E. Dickstein (Article)

https://www.americanbar.org/groups/intellectual_property_law/publications/landslide/2019-20/november-december/reverse-confusion-trademark-doctrine-decline-rise/

https://sportsbeezer.com/india/clubhouse-sued-for-trademark-infringement-by-sports-company-sbs-consulting/

https://www.businessinsider.com/clubhouse-sued-trademark-infringement-sports-networking-firm-sbs-consulting-2021-5

https://www.law.cornell.edu/wex/trademark

https://www.gerbenlaw.com/blog/should-i-conduct-a-trademark-search-before-using-my-trademark/

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