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Fight Time
By Rathe Miller

(FORTUNE Small Business) – When Donald Gaffney sued Wal-Mart for trademark violation in 1996, he never pictured himself at the Supreme Court. But when Wal-Mart lost two lower-court rulings for what a judge called "willful piracy," the giant retailer appealed all the way to the top. Gaffney began hoping that his little case might make a little history.

Instead, the Supreme Court last month handed Gaffney and his children's clothing company, Samara Bros., a big disappointment. It reversed the decision against Wal-Mart, which had included a $1.2 million judgment. And, responding to years of conflicting signals from lower courts, the justices sent a message not only to Samara but also to bigger firms, such as Nike and Tommy Hilfiger, who have won millions from Wal-Mart: A company has lots of leeway in knocking off your design.

This story dates back to 1996, when Gaffney got a call from JCPenney, a customer, reporting that Wal-Mart was selling copies of Samara seersucker outfits under a house label. For Gaffney, filing suit was about principle--and "protecting our livelihood." At trial, the evidence seemed compelling: Samara labels were visible in the photos Wal-Mart used to copy the garments. Samara argued that the designs belonged to it exclusively. But the Court said even a "distinctive" design will not be deemed the exclusive property of a company unless the consumer recognizes it as the company's.

But the story isn't over. The justices sent the case back to the lower courts, and intellectual property lawyers say Samara could still win on several related issues and reclaim its award. The ruling doesn't "negate" Wal-Mart's "pattern" of infringement, says a spokesman for Nike. Other companies should realize that "there's more than one way to skin a cat," says Chicago trademark attorney Jerome Gilson. If they are used correctly, trademark and similar laws can offer companies the protection they need. A Wal-Mart spokesman says the company is heading for the appeals court with "a lot of enthusiasm."

For the moment, Samara has survived. And Gaffney has had the ride of his life. "Going to the Supreme Court was something to be part of," he marveled in a recent interview. "I'm a golfer, and it was like teeing off at the Masters."