In the annals of David and Goliath battles, the recently settled litigation brought by lawn-care giant Scotts Miracle-Gro Co. against tiny Trenton, N.J.-based fertilizer maker TerraCycle Inc., may go down as a lawsuit that probably helped the defendant a lot more than the plaintiff. Thanks to the Internet and the blogging community, TerraCycle was able to turn the lawsuit from a time and money-sapping nuisance into a publicity advantage.

On March 7, TerraCycle, which makes fertilizer from liquefied worm droppings, was sued by Scotts for, among other things, infringing on the yellow-and-green trade dress of Scotts’s Miracle-Gro brand. Scotts also claimed that TerraCycle was falsely advertising its products as superior to others, including Scotts’s. The settlement calls for TerraCycle to knock it off on both fronts and to change its packaging to avoid the green-and-yellow color combination.
Scotts Miracle-Gro
Tying up TerraCycle in litigation for months could have cost the smaller company its life. But it fought back, and the media, the Journal included, picked up on the battle. Everyone loves a good fight, and TerraCycle’s efforts were noted widely, from Inc. Magazine and the New York Times to the robust online gardening community, much of which sided with the smaller firm.

TerraCycle’s main weapon was a Web site called suedbyscotts.com. You can’t see it in its full glory now — TerraCycle agreed to take down its old missives as part of the settlement and post the terms of the agreement instead — but in past months the site pulled no punches. One tidbit: A chart titled “David vs. Goliath” that compared executive perks (for TerraCycle’s CEO Tom Szaky, “unlimited free worm poop”; for Scotts Chairman and CEO Jim Hagedorn, “personal use of company-owned aircraft”).

The tone was different in a joint press released Friday by Scotts and TerraCycle — something noted by bloggers following the case. In it Mr. Szaky said his company recognized Scotts’s “need to uphold the accuracy of advertising claims and protect its trademark rights” adding that “we regret certain statements that were made about Scotts in the heat of litigation.”

Language in the settlement agreement suggests how well TerraCycle’s PR stategy worked. TerraCycle was ordered to post the exact mea culpa wording of the settlement press release on its corporate Web site.

Additionally, TerraCycle was prohibited from making any reference to the size or financial strength of the two companies as a reason for settling the action. In other words — it couldn’t play the David vs. Goliath card. (Last year, the four-year-old TerraCycle had revenue of $1.5 million — it’s not yet profitable — while 139-year-old Scotts had $2.7 billion.) Plus, TerraCycle must deactivate suedbyscotts.com in three months.

Still, the brand recognition garnered by TerraCycle throughout this suit will sustain it a lot longer than any traditional advertising it could have afforded.

What are interesting ways smaller companies can fight back in litigation? What risks do they run?