"BikeE's demise and ensuing legal problems provide a cautionary tale for small manufacturers that are trying to stay competitive by using overseas contractors to make their products," says a report from Associated Press.
"Faced with a cash crunch several years ago, BikeE made the fateful decision to reduce costs by outsourcing all of its production to Giant. Three product recalls and a dip in worldwide bicycle sales followed. So did a series of legal claims and counterclaims, alleging shattered contracts and money owed."
In August 2002, Giant sued BikeE, alleging that BikeE owed $370,549, plus interest. In July 2004, a US District Judge found in favour of Giant.
BikeE has now counter-claimed in a separate lawsuit that Giant was only interested in investing in BikeE as "a way to gain access to BikeE's customer list, trade secrets and sales projections."
The lawsuit claims that Giant then used that information to secretly create its own semi-recumbent bike and to take BikeE's market share.
Giant had made bikes for BikeE since 1998.
The Associated Press reports that Giant's Portland-based lawyer, Richard Urrutia, said that BikeE's own documents and testimony show that BikeE went out of business because of "a tarnished reputation after several product recalls and a weak market after the Sept. 11, 2001, terrorist attacks."