To get the full scoop on TerraCycle, check out the June 2007 Maclean's article, The Worm Wrangler.

Everything was going well for TerraCycle, the small eco-friendly start-up that makes plant food and fertilizer out of worm waste and packages it in recycled pop bottles. Until it got slapped with a lawsuit by competitor Scotts Co. in March, that is. “We were shocked and worried,” says TerraCycle’s spokesman, Albe Zakes. “When the largest company in your industry sues you, you’ve made a very powerful enemy.”

It was TerraCycle’s packaging and advertising claims that first caught Scotts' eye. The industry giant complained that TerraCycle’s yellow and green bottle, designed by the company’s CEO, Tom Szaky, looked too similar to their own Miracle-Gro brand. But Szaky, who founded the company in 2001 after dropping out of Princeton, wasn’t trying to look like the more established brand at all, says Albe, who adds the colours aren’t exactly uncommon in the business. “We found over a hundred different commercial fertilizers that use the colours yellow and green,” he says. “Yellow is the colour of the sun, and green is the colour of plants.”

Scotts also accused TerraCycle of making false claims about the superiority of their products over synthetic brands—claims that Zakes says were based on research specifically conducted by two plant pathologists at Rutgers University for the New Jersey-based company. Scotts demanded to see the research, but the proposition didn’t sit well with TerraCycle. “As a young start-up making a very unique formulation of a product, why would you give your number one competitor all of your proprietary information?” When TerraCycle refused to hand over the research findings to their rival, Scotts took the matter to the courts.

Faced with a battle that could easily have buried their fledgling business, TerraCycle decided to fight back, grassroots-style. Positioning itself as the underdog in a classic David and Goliath battle, they created a website, suedbyscotts.com, which compared the two companies’ numbers of employees, sales and CEO benefits (“unlimited use of corporate jet versus free unlimited worm poop”). The stunt garnered significant media coverage, and many of the top blogs took notice, including EcoSherpa and reddit. “I think public opinion was on our side completely,” says Zakes. But although TerraCycle asked for online donations to help with legal fees, they only received a few hundred dollars from a handful of supporters.

So after racking up legal costs of $30,000 a month, TerraCycle was happy to reach a settlement with Scotts a few weeks ago. They’ve agreed to change their packaging, something they were planning to do before the litigation, says Zakes. This time around, they’re going for something “less corporate America,” with a “New Age, funky, tie-dyed swirl kind of design” that will replace yellow with orange. And though the settlement stipulates that they can’t make any comparative claims based on the Rutgers research, they can make claims based on future, independent studies. In fact, several universities, including Ohio State, have offered to conduct the analysis. It’s something TerraCycle is thinking about pursuing, but for the moment, they’re content to bring the focus back to their own products. “Let’s not worry about synthetic fertilizers. Let’s just talk about what’s good about our products,” Zakes says. “Let’s focus on the fact that we’re organic, let’s focus on the fact that we’re eco-friendly, let’s let the product speak for itself.”

The settlement agreement also stipulated that TerraCycle had to remove the tongue-in-cheek statements on its Sued by Scotts website with a copy of the settlement agreement. Still, Zakes is confident that the small “worm poop” company came out on top. “I think the Sued by Scotts website was a huge success” says Zakes, who adds that the company’s sales spiked during the lawsuit. “I don’t think we ever wanted to get sued, but the publicity we got out of it was simply priceless.”