Soon after the messy 2002 demise of US recumbent firm BikeE, a new company appeared: BiGHA. This $3000-a-piece recumbent company is funded by a multi-millionaire and one of its bikes has just been picked by Time magazine as a 'luxury product of the year'.
BiGHA spent a reported $500 000 on advertising in mainstream US magazines during its launch phase. When BikeE collapsed, it owed Giant $370k.
BikeE and BiGHA share a sugar-daddy exec, John Acres. He made his fortune from selling a gambler tracking system to casinos around the world.
How are BikeE and BiGHA related?
"Both are in Corvallis, Oregon and several BiGHA employees worked for BikeE at one time. I was also a BikeE investor. Yet thats where much of the similarity ends," Acres told BentRider.com last year.
Giant started suing BikeE in 2002. It won its case in July of this year. However, BikeE has lodged a $2m suit against Giant claiming 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 and to take BikeE's market share.
Giant's Bonnie Tu is dismissive of this claim. Earlier this week she told BikeBiz.com:
"The semi-recumbent bike which BikeE claimed that Giant has unlawfully used BikeE technology is Revive. This was originally developed at Giant Europe based on the concept of 'Sofa Bike' plus the sitting construction pattern of Andy Gasstra. We have all the documentation of product development of Revive."
The demise of BikeE wasn't because of intellectual property theft, it was BikeE's shoddy workmanship, said Tu.
Before outsourcing production to Giant, BikeE had a US manufacturing facility.
BikeE's bikes were subject to two CPSC recalls.
"Talking about the recalls, it was the products they made in USA in their own small work-shop," said Tu.
"BikeE run out of cash and cheated Giant to ship more bikes to them, then lost sight. They unlawfully transferred all assets of BikeE to BiGHA and left with traceable track. That is the reason why we could sue them and also why a US District Judge found in favour of Giant."
Tu pours scorn on BikeE's claim that Giant wanted BikeE's customer base.
"Giant USA has been in business for more than fifteen years. We have a much bigger dealer base than BikeE. Any people with common-sense will understand BikeE simply made up false accusation that Giant need BikeEs customer list."
Critical of 'phoenix' companies, Tu said:
"The main reason why Giant sues BikeE is simply to remind the industry that people cannot just walk away and start again with a different name without paying for the products. BikeE did not even have bother to file for Chapter 11 bankruptcy.
Impartial observers have also questionned BiGHA's provenance.
The editor of BentRiderOnline.com, said:
"From the outside looking in, it certainly did appear that BikeE closed its doors with little or no warning after having a rash of warrantee problems and that BiGHA very quickly rose from its ashes."
In an open letter on BentRiderOnline.com, John Acres said:
"Though founded in the early 1990s, I didnt encounter BikeE until 1997 when, on a friends recommendation, I made a minor investment in the company. In the fall of 2000, BikeE developed an aggressive growth plan requiring significant additional investment. The company had shown steady growth and I liked that it was a local company with local manufacturing. Along with others, I agreed to fund the BikeE plan.
"By May 2001, an economic downturn brought the company to financial difficulty. Through price increases and reduction of staff, BikeE briefly reached profitability. But fall 2001 brought disaster [recalls] and sales plummeted.
"In spring 2002, BikeE slashed its remaining staff and moved to smaller quarters. The crisis lessened but cash remained dangerously low. I agreed to buy a portion of BikeEs excess inventory with the hope that BikeE would be able to buy it back as its situation improved. That was not to be.
"The vendors whose components had caused the recalls promised to reimburse BikeE for its costs but failed to make timely payment.
"Closure was unanticipated and tragic. Employees lost jobs, dealers and consumers were denied warranty coverage and shareholders lost investment. Investors, including me, lost millions."
Founding BiGHA soon after BikeE's demise was Acre's way of trying to "create the Apple Macintosh of bicycles."
However, BiGHA bikes are not available through a dealer network.
In a January 2003 letter to Bicycle Retailer magazine, Mike Librik owner of Easy Street Recumbents of Austin, Texas, said this was because "no knowledgeable retailer would touch this company's product with a barge pole."
Bicycle Retailer had reported that Acres was spending $5m of his own money to launch BiGHA.
BiGHA's $3000 semi-recumbents are packed with features: Avid disc brakes, 3 inches of rear wheel travel and an in-house designed package of electronic gadgetry, including an alarm, horn, indicator and brake lights. There's also a handlebar-mounted display with an altimeter, compass and computer that measures speed, elapsed distance, humidity and temperature.
The brand was advertised in large-circulation magazines Atlantic Monthly, Backpacker, Discover, Outside, Utne Reader and Wired.
"Retailers are really good at customer service, but we couldn't expect them to do our customer research and education," Acres told BRAIN.
"That would have been difficult for everyone. We can't ask retailers to commit until we can informatively tell them that there is a market for our product. And there may not be."
Most US recumbent retail specialists will remain wary of BiGHA because of the DNA shared with BikeE.
This is unfortunate, said Acres, because the recalls were not o BikeE's making.
"Defects in product components provided by outside vendors caused BikeE to undertake two separate product recalls. Those efforts were costly in time, money and market image," said Acres.
But this attempt to shift blame on to Giant doesn't wash with Bonnie Tu:
"We must understand that during a court case, people always try to portray that he been unfairly treated and the opposite side is ugly and mean."