I agree it's unsustainable, but this seems to miss the point: while the business model of the idea in question does not revolve around win-lose deals and trademark infringement, something ethically questionable has happened here.
This is reminiscent of the AirBNB brouhaha - while the service itself may be valuable, the means by which the company chose to market and launch itself was sketchy to the extreme. If AirBnb's core offering was not compelling, spamming people on Craigslist would've been unsustainable, as it would be here - but the fact that the product doesn't suck is not justification for questionable behavior such as this.
Some material harm (thankfully it would seem, not much) has come to at least one business involved, and had it continued in that format (i.e., vague text that doesn't seek to distance Loopt from these unaffiliated merchants) it would certainly have caused more damage.
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