Is Clubhouse in the doghouse?

I’m sure by now you’ve heard of Clubhouse - the latest and greatest of social media networks. It gained its popularity toward the end of 2020 when the word got out about its existence, and its exclusivity to iPhone users and membership by invite only made it an app that everyone was trying to be a part of. Just last month, Clubhouse opened its reign to Android users all while failing to seek protection in its intellectual property.

Apparently, the owners failed to perform one of the basic steps in starting and launching a new business – having a business name search conducted and securing a federally registered trademark. Chances are if they had, they wouldn’t have found themselves in the predicament that they are currently facing, which is a trademark infringement lawsuit.

SBS Consulting Group filed a complaint alleging infringement upon their trademark for “TheClubhouse”, which is a social networking site for professionals in the sports business industry. Plaintiffs are seeking both legal and equitable remedies – meaning money and an injunction from further use.

Although SBS Consulting Group’s social networking app is limited to the sports business realm, the Clubhouse app is all encompassing and includes groups and topics that overlap with plaintiffs. The people want to know – is this a viable claim? Clubhouse owners wouldn’t be the first fast grossing company that was the target of lawsuits, but let’s look at the facts here:

  • SBS launched its theClubhouse site in November 2018
  • SBS sought trademark registration in May 2019 and the trademark was granted December 2019
  • Clubhouse initially launched in April 2020, almost a year after SBS sought registration and a year and a half after theClubhouse launched its site

Based on these facts, Clubhouse was the second to market and still has not sought any state of federal trademark registration. SBS’s main premise of its suit is based on reverse confusion, which is when a smaller company obtains federal protection but is out shadowed by a second and bigger competitor. The bigger competitor essentially floods the marketplace with its brand recognition and essentially deprives the trademark owner from exploiting its mark and growing its brand. SBS alleges Clubhouse owners were willful infringers meaning they were aware of plaintiff’s brand and ran with it anyway, but there has been no evidence to substantiate that fact yet.

But is there an actual likelihood of confusion between the 2 social networking sites? The main premise of trademark infringement is whether there is a likelihood of confusion present whereby consumers mistakenly think that the origin of goods come from the same source. Are people likely to believe that the owners of “theClubhouse” are also that of “Clubhouse”? Will the buying public be duped into subscribing to “theClubhouse” when they really meant to sign up for “Clubhouse” or vice versa?

Also, in analyzing likelihood of confusion issues, courts look at the terms and just how common they are. Clubhouse is a widely used term in registered marks and may be given less protection. I mean if you think about it – what is a clubhouse? A place where people meet for socializing or recreation. In the digital era, most socializing happens to be done online. One thing the trademark law is clear on is that while it provides exclusivity to brand owners for their marks, it will not provide exclusive protection for marks where business owners in the same or similar industries will need to use the same or similar terms when marketing their products or services.

While the trademark laws are set in stone, the application of those rules is very fact specific and is decided on a case-by-case basis, so it’s hard to tell whether SBS’s reverse confusion claim is viable or if Clubhouse is a valid non-infringing use of its own mark. SBS may have gone into this looking for a payday and might end up having their trademark invalidated. Or, Clubhouse may have to rebrand altogether. Time will tell...