Specialized Goes Nuclear

[Moose McKnuckles]

Venga, Venge, Volagi, Rosetti, Ritte, etc. The endless stream of mass-produced Chinese crap stamped with European-sounding names is annoying.

That said, if these guys started their business while at Specialized and used any of the Specialized intellectual property, they're going to have issues. But, DW is correct. The idea is to overwhelm a start-up with legal bills.

Volagi will show up anyway whatever happens. It'll just be made by Deng Fu.

 

[BroDeal]

Specialized is smart to keep quiet while a trial is going on. If only Choi could be convinced to do likewise.

Specialized wants things kept quiet because they are being hammered on Facebook and other social media.

It may not help his case, but Choi speaking out helps his marketing. If Volagi stays in business then the company will get a huge jump start from all the publicity. It would be hard to pay any amount of money and get the coverage that they have received.

 

[DirtyWorks]

That said, if these guys started their business while at Specialized and used any of the Specialized intellectual property, they're going to have issues.

They both claim they did no work on bikes. If that's true, then Specialized has no legitimate case.

The story is a nice example the sorrowful state of the regulatory environment in the U.S. Intellectual property has been weaponized to the detriment of just about everyone except the two or three largest competitors in any given industry. Most patent and trademark and copyright and 'trade secret' regulations need to be voided.

 

[Moose McKnuckles]

Specialized wants things kept quiet because they are being hammered on Facebook and other social media.

It may not help his case, but Choi speaking out helps his marketing. If Volagi stays in business then the company will get a huge jump start from all the publicity. It would be hard to pay any amount of money and get the coverage that they have received.

Reminds me a of a little company called Terracycle who was sued by Scott's for their plant food. They received such great publicity that it was a real boost to their company. Scott's was hammered.

 

[BroDeal]

Decision by Friday and a sales boost for Volagi.

http://www.bicycleretailer.com/news/newsDetail/6358.html

Meanwhile, some California retailers say they are selling more Volagis because of publicity over the lawsuit, according to Bohemian.com, a Sonoma County, California, website.

Andrew Nelson, manager of the Trek Bicycle Store in Santa Rosa, told the Bohemian that he's sold at least two Volagis a day since the story broke. "That's pretty high volume for something like this," he said.

I bet if Volagi loses this it will come down the Choi's unwise and probably unnecessary actions, like getting dealer info from Specialized and using a fake name.

 

[BroDeal]

http://www.bicycleretailer.com/news/newsDetail/6361.html

Also on Wednesday, the defense called Sean Sullivan, a former product manager and executive vice president at Specialized. Sullivan was asked about the development of the Specialized Roubaix bike. Sullivan said its inspiration was a custom Seven Cycles bike that a Specialized employee rode, and which caught the eye of Specialized's founder and president Mike Sinyard. The Seven had a tall headtube and a relaxed geometry that the Roubaix later featured, Sullivan said.

Maybe Seven should be suing Sinyard.

The article also says Specialized claims the royalties owed should be $41K. If that is based on a couple hundred bikes then that is a hell of a royalty per bike.

 

[Moose McKnuckles]

The article also says Specialized claims the royalties owed should be $41K. If that is based on a couple hundred bikes then that is a hell of a royalty per bike.

Not really.

$41,000 divided by 365 bikes sold = $112.33

MSRP of a Volagi frame is $2195

So, that's about a 5% royalty on each frame. That figure doesn't stand out that much. Seems fairly reasonable.

 

[BroDeal]

Not really.

$41,000 divided by 365 bikes sold = $112.33

MSRP of a Volagi frame is $2195

So, that's about a 5% royalty on each frame. That figure doesn't stand out that much. Seems fairly reasonable.

The company is not getting MSRP. And we don't know the number of units sold, but I have seen figures as low as 175 reported.

 

[Moose McKnuckles]

The company is not getting MSRP. And we don't know the number of units sold, but I have seen figures as low as 175 reported.

I don't know what the company is getting. Do you?

If Volagi sold 180 units, they'd get somewhere around 10%-11% royalties.

On what are you basing your claims that this is unreasonable?

 

[BroDeal]

I don't know what the company is getting. Do you?

If Volagi sold 180 units, they'd get somewhere around 10%-11% royalties.

On what are you basing your claims that this is unreasonable?

We can guess what they are getting. It is probably around $1100. The landed cost of the frames may be around $250. An increase over that of 50% is a huge increase. It severely affects their gross margin. Maybe they can make up for it by increasing their MSRP but over the long term the "disk endurance" segment is likely to get very large and attract a lot of competitors that will not have a $100-200 albatross hanging around every frame.

 

[Moose McKnuckles]

We can guess what they are getting. It is probably around $1100. The landed cost of the frames may be around $250. An increase over that of 50% is a huge increase. It severely affects their gross margin. Maybe they can make up for it by increasing their MSRP but over the long term the "disk endurance" segment is likely to get very large and attract a lot of competitors that will not have a $100-200 albatross hanging around every frame.

I don't think you can make a judgment by guessing. RR are set as either a percentage of gross sales or gross margins or profits. If they are getting, as you suggest $1,100 in profits per frame, then they still fall short of the "25% rule" that is often the starting point for such negotiations and is applied to profits.

I don't know their financial data, but from what you are saying, the $41k figure doesn't jump out at me as being unreasonable. I don't follow why you think it is so unreasonable.

 

[BroDeal]

I don't think you can make a judgment by guessing. RR are set as either a percentage of gross sales or gross margins or profits. If they are getting, as you suggest $1,100 in profits per frame, then they still fall short of the "25% rule" that is often the starting point for such negotiations and is applied to profits.

I don't know their financial data, but from what you are saying, the $41k figure doesn't jump out at me as being unreasonable. I don't follow why you think it is so unreasonable.

Just to clarify I did not mean $1100 profit per frame. I am thinking that is around what they would sell the frame for if the retailer's MSRP is double that. Maybe they get more than that in the bike biz.

Anyway, I think that unless Choi has been misleading in his interviews Volagi wins on the bike development issue but gets dinged for use of Specialized sales and marketing info.

 

[User Guide]

I fail too see what is royalty worthy anyway, there is nothing intrinsically new about the volgari frame.Discs have been seen before on road bikes and the single top tube/stay longbow has been around for a couple of years too in mtn bikes.All they did was put a few concepts on the same frame.

 

[Moose McKnuckles]

Anyway, I think that unless Choi has been misleading in his interviews Volagi wins on the bike development issue but gets dinged for use of Specialized sales and marketing info.

I agree. I don't think they'll get the royalty payment.

 

[BroDeal]

http://www.mercurynews.com/crime-courts/ci_19729601

Specialized has had to back off some of its most potent claims of trade secret theft in the trial because a judge's curtailed the scope of their suit.

They've now asked the jury to order Choi and Forsman to pay at least $41,500 in damages to send a message about employees setting up a rival company on their boss's time.

This article has a different take than the most recent BRAIN article. The post I got this link from on Slowtwitch says that all claims but breach of contract have been dropped, but I wonder whether this news article is poorly worded so that the curtailing of the suit referred to is the curtailing that happened before trial.

EDIT: Volagi's Facebook page says that the trade secrets part of the suit was dropped.

 

[BroDeal]

http://www.bicycleretailer.com/news/newsDetail/6364.html

On Thursday, the judge dismissed Specialized's intellectual property claims against Volagi, a company founded by two former Specialized employees in 2010. Now the jury is considering just one charge of breach of contract against the two co-founders, Robert Choi and Barley Forsman.

It does not look good for Specialized if the only thing that they can point to is the Volagi two using company time to take phone calls or send/receive email involved with setting up a new company. Will Specialized sue people for taking phone calls from their wives or surfing ESPN's website to check the previous night's game scores?

 

[BroDeal]

Specialized won $1. Seriously. Robert Choi has to pay $1 for breach of contract.

Volagi keeps their bike design and patent.

-----

EDIT: http://www.bicycleretailer.com/news/newsDetail/6366.html

Sinyard spinning like mad. Yeah, sure he is satisfied with $1.

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 $1.00. We really want to put all our passion and time into growing the sport of cycling.”

Volagi's twitter: "Best dollar we ever spent."

 

[Moose McKnuckles]

Specialized won $1. Seriously. Robert Choi has to pay $1 for breach of contract.

Volagi keeps their bike design and patent.

-----

EDIT: http://www.bicycleretailer.com/news/newsDetail/6366.html

Sinyard spinning like mad. Yeah, sure he is satisfied with $1.

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 $1.00. We really want to put all our passion and time into growing the sport of cycling.”

Volagi's twitter: "Best dollar we ever spent."

Excellent.

Specialized spent over $1.5M in legal fees on this case.

LMAO.

Time to grab some ankles, Specialized fans. The price on that Venge just went up.

 

[richwagmn]

Specialized won $1. Seriously. Robert Choi has to pay $1 for breach of contract.

Volagi keeps their bike design and patent.

-----

EDIT: http://www.bicycleretailer.com/news/newsDetail/6366.html

Sinyard spinning like mad. Yeah, sure he is satisfied with $1.

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 $1.00. We really want to put all our passion and time into growing the sport of cycling.”

Volagi's twitter: "Best dollar we ever spent."

Good news for Volagi. Big black eye for specialized though.

 

[ustabe]

Bloody but still standing. Well, $300,001 poorer. Good for Volagi, and a hip-hip for the California Civil Code.

 

[BroDeal]

http://www.bikerumor.com/2012/01/13/specialized-wins-lawsuit-volagi-wins-freedom/#comments

Forsman says now they’re likely to go after Specialized for attorney’s fees.

“We’ve been dodging bullets for the last year and a half,” he said. “Everytime we showed up for mediation (we had to) wonder what they’d sue us for that time. I think it’s pretty clear the trial was wrongful.

“Our next step is start filing some paperwork to get our money back. It might take a year or more, but we expect it to happen because we can show plenty of evidence of it being a wrongful suit. Most importantly, we won yesterday. Yesterday is when the judge made the ruling that there were no damages and no wrong doing for Volagi. None of the trade secrets or intellectual property stuff held up. So we came into (Friday) knowing we still had our jobs on Monday.”

 

[aphronesis]

This is going back to the earlier pages of the thread and at a tangent to the main topic, but when I was messengering in New York as an undergraduate, I picked up an end of the year sale on Specialized Langster Pro, which was a higher end version, near the S works (in terms of workmanship, welds and components) of the crap fixed gears with which they eventually flooded the market.

After I cracked the frame and tried to warranty it, they sent me some lower end model--the Comp--saying that they didn't make the Pro anymore and couldn't send me any of their reserves. I fought with them for a couple of weeks and offered to pay the difference for an S works frame (the twitchiness of their upper end aluminum frames was good for NY traffic--far better than classic steel rides) and they refused that as well. Eventually they withdrew some of their available online warranty information and changed what remained

 

[ultimobici]

This is going back to the earlier pages of the thread and at a tangent to the main topic, but when I was messengering in New York as an undergraduate, I picked up an end of the year sale on Specialized Langster Pro, which was a higher end version, near the S works (in terms of workmanship, welds and components) of the crap fixed gears with which they eventually flooded the market.

After I cracked the frame and tried to warranty it, they sent me some lower end model--the Comp--saying that they didn't make the Pro anymore and couldn't send me any of their reserves. I fought with them for a couple of weeks and offered to pay the difference for an S works frame (the twitchiness of their upper end aluminum frames was good for NY traffic--far better than classic steel rides) and they refused that as well. Eventually they withdrew some of their available online warranty information and changed what remained

SO you bought a bike on sale and despatched on it for a couple of years before cracking it? Then Specialized offer you a replacement bike that has the same tubing with brand new kit rather than the usual replacement frame? No wonder they said no when you wanted more.

BTW the geometry on the Comp, Pro & S-Works was the same.

 

[aphronesis]

No, I probably cracked it riding from Mendocino to SF. And "dispatched on it for a year."

Geometry on the Comp and Pro may have been the same, but the materials and ride were not. The pro rode closer to an S-Works, the comp rides like a pig.

Regardless of how you want to argue it the fundamentals are as follows: the Pro sold for one price, the S works higher, the Comp eventually lower. Components aside, these were the frame alone prices.

Moreover, you want to seize on the sale, that's fine, but Specialized doesn't control the sale rates of one's LBS, they ship product and thenwarranty the frame through said dealer.

So I'm not clear what you're telling me. A moral?

And just to go a little further and give you the benefit of the doubt, the component kit on the comp was significantly less than on the pro (ask around) --fixed market having taken off--they graciously allowed me to keep and swap the components that I saw useable

SO you bought a bike on sale and despatched on it for a couple of years before cracking it? Then Specialized offer you a replacement bike that has the same tubing with brand new kit rather than the usual replacement frame? No wonder they said no when you wanted more.

BTW the geometry on the Comp, Pro & S-Works was the same.

 

[BroDeal]

If you are in the area then you can help Volagi pay the judgement.

"@volagi
We need 100 cyclist!
We need a one hundred cyclist and each one must bring a penny. Planning a ride come with us
Starting at Cotati warehouse riding down to Morgan hill to settle our debt. Next Saturday. Start at 7am"