The ‘"XL" Ticker Lawsuit’ is going to be the best theater ETF investors can watch all year.

In our story Select Sector Sues PowerShares Over Tickers, it's pretty clear State Street & Alps are really annoyed. There's no “alleged” involved here: PowerShares simply added an "S" to the end of all the well-known Select Sector SPDRs products and launched its own small-cap versions (XLF becomes XLFS).

A quick survey of opinion seems to find people firmly entrenched, either convinced the thing gets tossed out as frivolous, or that Invesco PowerShares loses in a landslide. I actually don't think the case is as cut and dried as many people seem to think. I encourage you to go read the actual lawsuit and see if you don't think there's actually some nuance here.

A few things are very clear: PowerShares knew exactly what it was doing. It didn't "accidentally" stumble across random four-letter combinations. It's also clear why it did this—marketing.

ETFs are tricky beasts, and I have some sympathy for issuers. They're nearly impossible to sell. Sure, you can market them, take out ads, sponsor conferences and hold webinars. You can even hire wholesalers to go door-to-door at big financial advisory firms and pimp your wares. But there are no commissions, and no accounts that can be tracked back at the home office. There's no way to actually incentivize someone to buy your product, or even track whether or not your particular marketing efforts have been successful.

Ultimately, the consumer is only going to interact with your product through one thing—the ticker symbol. We make jokes about ticker symbols around here. A few months ago in the Journal of Indexes, we even ran a page of mock-ETF ticker symbols in a piece called “The Future Of ETFs,” and I still get emails about it. But the jokes are funny because ticker symbols are so important. There's no question in my mind that part of the success of MINT or GLD has to do with the familiarity of its symbol.

PowerShares gets this. That's why it went after ticker symbols that would be familiar to every sector investor out there. State Street gets it, and that's why the company’s angry. Will it win?

I'm not a lawyer, so I'm not going to place bets on this one. The nice thing about this case is that, assuming it does go to court, it will settle once and for all the issue of whether a ticker is truly a protectable piece of branding. And if it is, the impact on industry could be quite serious. There are only so many tickers to go around.

Will Xilinx (NYSEArca: XLNX) have to change its name, so as not to be confused with some new sector product? Will Altria (NYSE: MO) get into a fist fight with Van Eck over its agribusiness ETF (NYSEArca: MOO)? Or perhaps more ironically, will Invesco (NYSE: IVZ) go after iShares for its S&P 500 ETF (NYSEArca: IVV)?

I can see a court going either way. Clearly PowerShares is coattailing SSgA's hard-built brand. But to make them change it puts the courts in the business of protecting brands, three letters at a time.