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A trademark lawsuit filed against audio-chat app Clubhouse raised questions about whether the company sought to protect its name via a US trademark.
"It is interesting that Clubhouse, a company valued at $4 billion, has no registered trademark and appears not to have even applied for registration in the US," said Christine Haight Farley, a professor at American University Washington College of Law.
Alpha Exploration Co., which launched the invite-only Clubhouse app last spring, was issued a summons last week, according to court documents.
SBS Consulting Group said in its complaint that the Clubhouse app infringed on the trademark it received for "TheClubhouse," a networking site for sports business professionals.
The complaint sought a trial and damages. It also sought to bar Alpha Exploration Co. from using the name for its app.
The complaint, filed in US district court in Arizona, said the overlap between the two services included both content and features.
The sports consulting firm's website listed more than a hundred clients at the NBA, MLB, NHL, and other pro sports leagues. Its complaint included screenshots of the Clubhouse app, which had rooms titled "Pro Sports Network" and "Sports Biz Professionals."
"Included in AEC's 'CLUBHOUSE' topics of interests and clubs are a variety of networking, career growth, and sports business categories selections," the complaint said.
The Chicago law firm representing SBS Consulting Group declined to comment on the complaint. Clubhouse didn't respond to a request for comment.
Florence Lo/Illustration/RuetersClubhouse downloads skyrocketed this year, hitting 9.6 million in February, before declining in the months since, according to Sensor Tower. Last week, it launched an Android version of its app.
It's common for a quickly growing company like Clubhouse to attract lawsuits, some of which may be opportunistic or without merit, said Michael Atkins, a Seattle trademark lawyer, who teaches at the University of Washington School of Law.
SBS Consulting Group launched its "TheClubhouse" site in November 2018. It filed its registration for "THECLUBHOUSE" in May 2019 and the trademark was granted in December of that year. On its website, the name is styled as "theClubhouse."
Because the Clubhouse app was the second to the market with its Clubhouse name, the case will center on whether there was the possibility for "reverse confusion." That's when a smaller company trademarks its name, which subsequently gets confused by consumers with a newer, bigger rival.
"By flooding the market with advertising and superior name recognition, it really deprives the first mover of the ability to exploit and grow their trademark, because everyone now is thinking that their trademark is the more well-known company's trademark," Atkins said via phone from Spain, where he's waiting out the COVID-19 pandemic.
SBS Consulting Group websiteThe complaint noted that Alpha Exploration Co. hadn't submitted an application for its name. It added that the company's executives would have found SBS Consulting Group's trademark if they had searched the government's trademark database.
In addition, the complaint said Alpha Exploration Co. seemed to have either "willfully blinded itself" or "acted willfully and intentionally" to infringe on the trademark.
Experts who spoke to Insider were undecided on whether the complaint from SBS Consulting Group had merit.
"On the one hand, these two companies seem like they have some plausible overlap in terms of their services," said Mark P. McKenna, a professor at Notre Dame Law School.
He added: "On the other hand, 'TheClubhouse' seems like a pretty weak mark to me — there are a lot of companies using some version of 'clubhouse' for different kinds of things, so we'd need to think the conflict between these two was pretty significant for there to be a claim."
Haight Farley, of American University, said the SBS Consulting Group's trademark was the "most problematic" of several "clubhouse" trademarks, because their products had the most in common with the Clubhouse app.
"Essentially, each company provides a digital space for users to meet," she said. "But beyond that the similarities end."
Atkins compared the lawsuit with a landmark "reverse confusion" case from the 1990s, when A&H Sportswear Co. successfully sued bigger rival Victoria's Secret. The smaller company made Miraclesuit swimwear. It argued that Victoria's Secret had infringed on its trademark with products like The Miracle Bra.
"They might be hoping for a payday to make that problem go away for Clubhouse," Atkins said. "Also, it could be legitimate in terms of that reverse confusion scenario."
It's not too late for Clubhouse to file for its own trademark, he added.
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