I just read the words “worm poop” in the Wall Street Journal. This is slightly disturbing for a number of reasons, some that have to do with journalistic integrity and others that have to do with general business practices. But mainly because it’s raised my interest in a classic underdog story. “What does this have to do with the Internet?” you ask. In this case, everything. Here’s the story:
Tom Szaky, the 25-year-old CEO of TerraCycle has gotten some good press over the last few years. He’s part of a growing green movement that is looking to offer improved products made with organic materials and marketed to convince you to open your wallet. In this case, the company’s main product is an organic plant food made from worm droppings. Last year, the company posted revenue of $1.5 million dollars and is on the path of profitability. So far, so good.
Enter the evil villian of the story, 139-year-old Scotts Miracle-Gro Co. Seems they’ve taken issue with TerraCycle’s packaging, product claims and advertising practices. So much so, in fact, that they’ve filed a lawsuit against TerraCycle seeking damages to include that TerraCycle destroys all existing labels and signage and asking that “all gains, profits and benefits generated from the alleged infractions be awarded to Scotts,” essentially wiping out tiny TerraCycle.
For it’s part, TerraCycle insists that their natural product is superior to “a leading synthetic chemical fertilizer” and claims that Scott’s hold on yellow-and-green packaging is flimsy, at best. A point that would be easily demonstrated with a walk through your local lawn and garden store, says TerraCycle.
So what do you do if you’re a four-year-old start-up, struggling to find profitability, and you’re getting sued to extinction by a venerable market leader with 139 years of experience and annual sales of $2.7 billion? Panic, probably. But after you’ve calmed down, you might look to the Internet as the battlefield of choice. The barriers to entry, as we all know, are low; the distribution speed is simply unmatched; and the relevancy is paramount. So that’s exactly what TerraCycle did. They launched a blog called “Sued By Scotts”.
One goal of the site is to raise funds to help TerraCycle mount a legal defense, but the primary purpose is to win in the court of public opinion. Szaky clearly understands this, and uses the blog to support his product claims, provide details on the suit, and persuade visitors to join the fight.
The site contains such gems as a “David and Goliath” portrayal of the battle, delineating TerraCycle’ corporate perks (unlimited worm poop) vs. the CEO of Scotts (use of the company-owned jet), photos of company headquarters (Trenton, NJ vs. Marysville, OH), and market share (infinitesimal vs. 59%.) It also does a great job of helping TerraCycle make their case. (One classic quote from Scotts CEO Jim Hagedorn sets the stage brilliantly: “If people don’t want to fight, and you want something bad enough, they’ll let you have it. Without even fighting you.” Touché.)
The Journal does a fine job of making the point that waging a public battle could be a dangerous tactic that might only serve to bolster Scotts’ case. They also make the point that there are other ways to deal with issues such as these, including working with the company that’s suing you to find a mutually-agreeable solution. While true, I say, “Worm poop!” TerraCycle is being attacked and is responding exactly as they should.
The site notes that, as part of the discovery process, Scotts wants documentation from TerraCycle including everything related to new product development, strategic business plans, details on what they’re feeding the worms, among other things. So even if TerraCycle manages to win the suit, the damage may be done, as they’ll have already turned over a great deal of their intellectual property.
So far, the site has only generated about $500 in legal donations, but product sales are up 122% since the site launched. Of course, this may just turn out to be part of the “profits and benefits” that may be forfeited to Scotts. On behalf of little guys everywhere, I hope not.