Fertilizer foes settle fight.

CEO Chronicles has been following a legal dispute between Scotts Miracle-Gro, the $2.7 billion plant food company, and TerraCycle, whose CEO appeared on CE's cover earlier this year. Here's the latest update in this case study of an entrepreneur entering a mature market:

Trenton, N.J.-based organic plant food maker TerraCycle settled its legal dispute with Marysville, Ohio-based industry leader Scotts Miracle-Gro, which had charged the industry newcomer with false advertising and trade dress infringement. "I am glad it's over, and I put this experience behind me," Tom Szaky, CEO of the tiny upstart, told CEO Online, noting that the lawsuit was a massive distraction from running the business.

The settlement terms dictate that TerraCycle will modify its packaging to a green and orange theme and stop claims that its fertilizer products are superior. In a TerraCycle release about the settlement, Szaky was uncharacteristically conciliatory. "We recognize that Scotts filed this lawsuit based on a legitimate need to uphold the accuracy of advertising claims and protect its trademark rights," he said in a statement that was a clear departure from the combative stance the company took in its Internet-based PR campaign about the case. "We also regret certain statements that were made about Scotts in the heat of litigation."

Legal pundits suggest that the publicity generated by TerraCycle during the battle may have helped its case. "It is possible that Terra-Cycle's media campaign brought Scotts to the negotiating table," says Laura Lee Norris, an intellectual property rights expert based in Los Gatos, Calif. "We will never know whether Scotts would have been willing to settle on similar terms in the absence of TerraCycle's media strategy."

Tom Szaky adds that the lawsuit gave lots of brand recognition to TerraCycle. "In the end, that was a big win," he says. "Sales for 2006 were $1.5 million ... and by the end of the year, we can finish off with at least $4 million in sales."

Observers, however, disagree about who came out ahead in the dispute. "Scotts clearly won," asserts Robert Dilenschneider, CEO of strategic communications firm Dilenschneider Group. "They did not get the money, but they did achieve just about everything else."

"While Scotts won the legal battle, TerraCycle won in the court of public opinion," counters Ken Makovsky, president of the investor relations firm Makovsky & Company. "TerraCycle greatly expanded its awareness to an extent that money can't buy. Scotts will not gain any customers as a result of this agreement, but TerraCycle undoubtedly will."

Who won the battle remains under dispute, but the war is not over. "Neither company is going to go away," says Dilenschneider. "Both have dug trenches and are prepared for all-out warfare."

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