After more than a week in court, just one charge was left today in the legal battle between Specialized and two of its former employees, who'd left to form rival bike company Volagi: breach of contract. Just before noon, local time, the verdicts came in: Robert Choi was found liable; Barley Forsman was not.
But the message may have been in the award of damages; Choi was ordered to pay just US$1 to Specialized. Volagi (@Volagi) tweeted the verdict via Twitter – “Specialized gets ONE dollar!”, also noting that theyre allowed to keep the Long Bow flex design, and "the color red".
“We just got out of the courtroom and we’re heading back to our lawyers’ [offices], to celebrate,” said Choi, when BikeRadar reached him by phone. “When it was read, ‘for Robert Choi we award on behalf of Specialized,’ of course my heart dropped, and then they said the damage award of $1. We hope that the jury is sending a message to Specialized that this was unjust in a way.”
Specialized offered BikeRadar the following prepared statement from company president Mike Sinyard: “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. We really want to put all our passion and time into growing the sport of cycling.”
According to Choi, he was found to be liable due to his actions after putting in for resignation from Specialized. “We formed the company right at the time Barley and I told them we quit,” said Choi. “But they enticed me to stay and work, and finish my work; I did that on their behalf, and they used that against us. At the end of the day there was this overlap in the written contract saying that I was still employed.”
Forsman left Specialized at time of resignation and before co-founding Volagi; therefore he was found not liable for breach of contract. Choi was content with the verdict. “More than anything else, we can tell the world that we didn't do anything wrong,” he said. “They told us that I breached my contract by staying on to work for them at their request. It was a good-faith gesture and they used that against me.”
The future of Volagi
Choi said he just wants to get back to building his company and Volagi bikes. “We want to go back to running our company, and let the world know that we have something so special that even a company like Specialized were willing to spend that kind of money to stop us from competing,” he said. “The truth will be told in the market place by people testing out bikes.”
The pair will, however, explore the possibility of recouping some of their own legal expenses. “Because they completely dropped the trade secret part of the suit, it allows us to go and potentially file suit for malicious prosecution,” said Choi. “We'd obviously like to get our legal fees back and the damages that have been caused.”
He’s proud of the brand too. “Given the resources and the size of the company that went after us, and the fact that we actually were able to weather through this and we stood up for our rights, it’s just a tremendous boost,” said Choi.
Leading to the verdict
Specialized brought suit to Volagi's co-founders in October 2010, soon after the duo left Specialized to found their own carbon bicycle company. In 2011 Volagi's single product, the Liscio road bike, gained acclaim for its swooping lines and use of disc brakes. In May of 2011, the company received a patent for their ‘long-bow’ seatstay design.
Morgan Hill based Specialized originally sought damages for the misappropriation of intellectual property. As of this morning, however, Bicycle Retailer, covering the event from the courthouse, reported that just the single claim of breach of contract against the two former employees was still in play.
According to the Mercury News, Specialized had to put aside their most serious claims of trade secret theft when the judge curtailed the scope of the suit. Instead, they settled on an amount of at least $41,500 in damages to send a message about employees setting up a rival company while already in employment.
In closing arguments, as reported by the Mercury News, Volagi’s lawyer told the jury the case was about stifling competition. His opposite number countered that Specialized, one of the world’s largest bike manufacturers, didn’t need to worry about rivals the size of Volagi and the case was about “two employees who breached their contract with us".
The duo, who both worked in Specialized’s equipment department rather than in bike design, deny the claims of the original lawsuit, filed last year, and say the suit was an attempt by a large company to wipe out a competitor.
Supporting the theory that all publicity is good publicity, Californian website Bohemian.com say sales of Volagi bikes have rocketed since news of the case broke. Staff at the Trek Bicycle Store in Santa Rosa say they've sold at least two Liscios every day in the past week.
Thanks to James Partridge of www.bikelaw.com for help with the legal terminology used in this article.