Both sides declare victory in costly affair
Editor’s note: At the author’s request, the editorial notes at the bottom of this story were rewritten. They did not reflect the opinions of VeloNews.com.
The lawsuit brought by Specialized against Volagi is over, and the tiny startup company is obliged to pay Specialized one dollar in damages for breach of employment contract by Volagi co-founder Robert Choi. Specialized had also claimed in the lawsuit that the two former Specialized employees who had founded Volagi Bicycles, Choi and Barley Forsman, used Specialized trade secrets to create the Volagi Liscio high-performance suspension road bike. In a big victory for Volagi, the judge threw out that claim, leaving Choi’s and Forsman’s ownership of the intellectual property undisputed in their disc-brake-equipped carbon road bike with suspension features. In total, eight of Specialized’s nine claims were thrown out, leaving only the breach of contract claim to be decided by the jury, and it found a breach only in the case of Choi, not Forsman.
Choi said, “We’re doing a little bit of celebrating. The second biggest bike company in the world hired the biggest law firm in the world and threw everything at us. Despite that, I feel that justice prevailed; it was vindicating completely.”
Mike Sinyard, president and founder of Specialized Bicycle Components, released this statement: “This lawsuit was a matter of principle and about protecting our culture of trust and innovation. We respect the ruling of the court in our favor. We are very satisfied with the outcome and the damages set at $1.00. We really want to put all our passion and time into growing the sport of cycling.”
Specialized claimed in the suit that Choi and Forsman had breached their employment contract by working on their Volagi business while they were still employed at the company and by not informing Specialized that they were planning to create a business that competed with it.
Specialized attorney Robert Shwarts claimed that Choi had emailed Specialized sales reports to other Volagi principles. He made the argument that other Specialized employees could do what Choi and Forsman had done, thus threatening the company’s very existence. He also argued that Choi had intentionally delayed terminating his employment in order to gain more access to Specialized sales information and while being paid for a job he was not performing adequately due to his attention to Volagi. He claimed that developing the bike while in Specialized’s employ was a violation of the non-compete agreement that both Choi and Forsman had signed.
By awarding one dollar in damages, the jury brushed off Shwarts’ request to either award damages of $41,500 to Specialized representing royalties on the sale of Volagi bikes, or for a portion of Choi’s and Forsman’s salaries from Specialized while they were also working on Volagi. It is unclear whether the fact that the jury found in favor of Specialized on the breach of contract claim could lead to Specialized suing for reimbursement of its legal fees, which, according to court documents, were already at a million and a half dollars at the beginning of the trial.
Volagi attorney Charles Smith argued that Specialized had brought the suit to stifle competition. Smith argued, using a section of the California labor code, that as long as employees are dutiful to their employers, they are free to work on other projects on their own time. In a direct rebuke to Sinyard’s claim on the stand of being the “Apple Computer of bicycles,” Smith completed his statements with the words, “Mike Sinyard, you are no Steve Jobs.”
Choi said, “They were accusing us of things that I never did or would do. That was more hurtful than anything.” Specialized had claimed that Choi had delayed his departure from the company in order to steal trade secrets while still drawing a salary.
Choi is particularly incensed on this point, as he resigned on April 12, 2010, and claims to have explained fully at the time that he was leaving in order to start his new bike business. He claims that it is Specialized that delayed his departure; he was working on developing the Purist bottle, and his superiors requested that he stay on to finish that project, which he did.
“Barley had quit (to work full time on Volagi), and I stayed on to help them,” says Choi. “Then they turned that against me.” He also claims that he has been completely transparent throughout, and other efforts he made to resolve this peacefully were also turned against him. For instance, in response to Specialized claiming that he had stolen trade secrets (he and Forsman both worked in accessory design, not bicycle design), he gave them a complete backup of his laptop that he kept at home to show that there was nothing in it that belonged to Specialized. “I didn’t have to tell them I had a backup or give it to them,” he says. “They spent two million dollars just to stifle us.”
On Wednesday, the defense had called Sean Sullivan, former executive vice president and second in command to Sinyard at Specialized. According to Choi, he said that Sinyard had told him that that loyalty is a one-way street. Sullivan also testified that the Specialized Roubaix bike design came from a Seven Cycles custom bike that a Specialized employee had bought because the company’s product line did not include a relaxed-geometry comfort bike with a tall head tube.
Specialized not only claimed that Volagi’s comfort endurance bike takes sales away from the Roubaix, but it also claimed that the look of the bike was copied from its bikes, a point rejected by the court. “We can actually still keep our red color,” Choi chuckled. “Specialized doesn’t own that. It bordered on ridiculous their claim that they owned that color.”
Choi is hopeful that the legal battle will end now, but he is afraid that Specialized will not stop in its efforts to crush his little company. “Seven months ago, they fought for a preliminary injunction to stop us from selling our bikes,” he says, “and when that failed, they just kept going. But we kept fighting back, like the motto of our company, ‘By Endurance.’ At least for this moment, we can savor this victory and continue the good fight. The bike industry is all about the small amount of innovation that brings new people in. We should all celebrate that. Between them and us, we spent 2.5 million dollars on this. It’s just so silly. Think of what we could have done with all of that (to improve bicycles).”
Specialized has built a powerful company offering a wide range of great products and very good service. Taking on a small company that refused to fold was a miscalculation. It has the right to protect its trade secrets, but when theft of those secrets has not occurred, as the court decided in this case, then it can live and let live. As a great company, it can be magnanimous enough in the future to allow former employees who have behaved honorably to pursue their own dreams outside of the company and wish them well.
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