Tsubo sues Tsubi, and Ksubi is born

What's in a name? Well, it depends on whether you are talking about the first letter or the last.

The designer jeans label Tsubi will be no more - at least outside Australia - after settling a trademark infringement dispute with the US shoe label Tsubo.

Tsubi, which was formed by George Gorrow, Dan Single and Gareth Moody in a Sydney northern beaches studio, and which gained publicity for a series of stunts such as releasing rats on a fashion catwalk, was sued by Tsubo over the similarity of their names.

Tsubo argued that sharing the first four letters of its name was a breach of its trademark, which was established in 1998 and was registered in Australia in March 2000, two years before Tsubi.

Now the dispute has been settled out of court. While Tsubi will keep its name in Australia, it will be known as Ksubi in the rest of the world. "It's a great result for Tsubi," Mr Single said in a statement.

But the two-name scenario posed a branding "nightmare", said Sam Osborn, the chief executive of the Australian branch of Interbrand, a marketing consultancy.

"Global brands is what it's all about," Mr Osborn said. "It doesn't make sense to operate different brands representing the same thing."

While Tsubi may be legally able to operate under its original name in Australia, he said, the business viability of doing so was a moot point. The cost of the trademark changeover alone could be up to $1 million, Mr Osborn said.

Tsubo's lawyer, Jack Douglas, said it was important for his client to have a "clear field" around its trademark. "We got what we wanted in this settlement," he said. Early on in the dispute, he said, Tsubi realised it had a problem. "I think the reason it took as long as it did was for them [Tsubi] to think about what trademark they wanted to use." Mr Douglas said it was not worth his clients contesting the name Tsubi in Australia. "It was important to them, it's their home country … That was our compromise."

Mr Osborn, when asked about the business impact of the Ksubi name, said: "Only time will tell."

He added: "They may lose traction … Fashion typically has a short life-cycle, so it could be that by the time they're up and running and have established this new strategy … the kids are buying something else."

One of Australia's most successful beauty industry exports, the Melbourne-based Aesop, was founded in 1987 under the name Emeis Cosmetics. In 1994, a British company with a similar name threatened action and Emeis spent more than $150,000 registering the new Aesop trademark and changing labels.

Although initially trading in Australia under both old and new names, the company eventually weaned local customers off the Emeis name.