How the battle for the Clubhouse name became a war
This post is an update to my original coverage of the Clubhouse trademark lawsuit.
If you think that well-funded tech startups can’t have trademark issues, think again. Underneath all of the success, popular audio app Clubhouse has been waging a trademark war of epic proportions. Every tech entrepreneur can learn something from this story. Read on to learn about the legal battle between four different companies and across two continents over one seemingly innocent word: clubhouse.
The Original Clubhouse
It all started on July 29, 2015 when Clubhouse Software, Inc. (“Clubhouse.io” from now on) of New York filed two trademark applications for the name CLUBHOUSE. Clubhouse.io is a project management software company started in 2014 by Kurt Schrader and Andrew Childs. While you may not be familiar with Clubhouse.io unless you use their software, the company has been making waves in the project management space and has raised millions during its funding rounds.
Clubhouse.io wanted to register its trademark in two different classes: Class 9 for apps and Class 42 for PAAS and SAAS. In the end, the Class 42 application was approved, but the Class 9 application was rejected because they failed to turn in the requisite paperwork. This single mistake would eventually come back to haunt them.
Four years later, an unrelated company named Sports Business Solutions (“SBS” from now on) filed a trademark application for THECLUBHOUSE in Class 35. Despite the similarity to Clubhouse.io’s trademark, the application was approved since SBS is in a different industry - focusing on “providing networking opportunities for individuals seeking employment” and “education services”.
By all appearances, Clubhouse.io and SBS peacefully coexisted… until one year later.
Three’s a Crowd
In March 2020, audio app Clubhouse (“Clubhouse App” from now on) founded by Paul Davison and Rohan Seth entered the scene. By early April, people were already confusing Clubhouse App with Clubhouse.io, which was causing a massive headache for Scharder and Childs’ company. Even though Clubhouse.io was first and was successful in its own right, its brand was quickly being consumed by Clubhouse App. Things that should have been an advantage, like owning the @clubhouse handle on Twitter, turned into a nightmare with users constantly tweeting at the wrong company. As Clubhouse App became not only popular but also controversial, (e.g. via highly publicized incidents of racism on the App), Clubhouse.io found itself battling to preserve its reputation. These incidents prompted Schrader to comment on Twitter “I’m angry that they haven’t changed their name yet to stop the confusion” and “ . . . remind people to stay away from Bad Clubhouse until they fix their problems (and hopefully change their name).”
As if that weren’t enough, our fourth and final player had yet to enter the scene. On July 28, 2020, Alexander Frederiksen of Sweden filed an application for the trademark CLUBHOUSE in Class 9. According to Frederiksen, he independently developed and launched his own audio-app in mid-2020 and indeed he currently owns a registered CLUBHOUSE trademark in the European Union. In the United States however, it proved to be too little too late - both Apple and Google soon kicked his app off of their stores in favor of the US-based Clubhouse App. By November of 2020, his US trademark application had been rejected as well.
Last One Standing
Meanwhile, Clubhouse.io was making moves of its own. Remember that Clubhouse.io already owned a Clubhouse trademark, but only in Class 42 for PAAS and SAAS. On September 5, 2020, Clubhouse.io decided to re-apply for Class 9 (for apps) and also to try to trademark its logo. While the company’s motivation for doing so is unknown, it can be speculated that they believed a Class 9 registration would definitively shut out Clubhouse App.
Unfortunately for Clubhouse.io the mistakes of 2015 came back to haunt them. On January 15, 2021, both of their trademark applications were rejected because yet another company already owned a trademark for “CLUBHOUSE WHERE TECHNOLOGY MEETS INNOVATION”. While they certainly could have kept fighting, they decided to throw in the towel. On April 21, 2021, Clubhouse.io sold both their registered trademark in Class 42 and both of their pending trademark applications to Alpha Exploration Co. (the parent company behind Clubhouse App). Three months later, Clubhouse.io went public with their decision to rebrand as Shortcut.
For Clubhouse App, the timing of their purchase of Clubhouse.io’s trademark could not have been better. In May of 2021, news broke that Alpha Exploration had been sued by SBS for trademark infringement. With both Clubhouse.io and Alexander Frederiksen out of the way, SBS is the last one standing against Clubhouse App. While it remains to be seen what will happen with the litigation, it seems likely that Clubhouse App will try to use its newly purchased trademark to its advantage.
What can tech entrepreneurs learn from this?
1. The best time to trademark an app is before it launches
While Clubhouse App seems determined to (eventually) win this trademark war, it is safe to assume that it has not been cheap. All of this time and expense could have been avoided had the company done due diligence on its business name and secured all trademarks before launch.
2. Missing a trademark class can come back to haunt you
Trademarks are not generic. Trademark owners have to specify which classes they want to apply for in the application. Each good/service category is a different class. Since the USPTO charges $250-$350 for each additional class, it can be tempting to just settle for one and get that ® as cheaply as possible. However, we saw here that Clubhouse.io’s decision to secure a trademark in the PAAS/SAAS space, but not for apps specifically, came back to haunt it.
3. Don’t forget about reverse infringement
Clubhouse.io arguably had a very good case for reverse infringement here. Reverse infringement is when you own a federally registered trademark, but someone comes along after you and becomes so popular that your brand is in danger of being drowned out. For whatever reason, Clubhouse.io did not choose to pursue this path, but reverse infringement can be the best tool available to a smaller brand being threatened by a new kid on the block.
Thanks for reading the Bevel Law Blog! While this information is hopefully helpful to you, nothing in this blog is intended to be legal advice. Always consult a lawyer before making any legal decisions based on topics in this blog.
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