In this Oct. 27, 2011, photo, a Gates Carbon Drive system is shown in Denver. (The Denver Post/ Hyoung Chang)
Gates Corp., the 113-year-old maker of many things that move, said that it’s being unfairly pressured to pay a bicycle manufacturer in Golden that has sued it in bad faith.
In a 46-page countersuit that it filed last week, the Denver-based company offered a vastly different version of events than Spot Brand, which sued Gates at the end of July, including that a supposed Spot invention was actually conceived of in Germany two decades earlier.
“Gates has shown repeatedly that it will say and do anything to escape its contractual obligations to Spot,” Drew Unthank, a lawyer for Spot, said of the allegations.
The eight-figure fracas between the two area businesses has its origins in the late 2000s, when Gates invented a belt-drive system for powering bicycles that it called Carbon Drive and Spot invented a way to install that belt-drive system on existing bike frames, which it called the Drop-Out design. A partnership was formed. Paperwork was signed in 2008.
“At that time, Spot was underfunded and needed financial support,” according to Gates.
Both sides recall that Spot gave a 50-percent interest in the Drop-Out design to Gates, which in exchange paid $25,000 and agreed to file patent applications for the Drop-Out. That all occurred as planned and the patent was approved in 2010. But this is where tales diverge.
A water tower with the Gates Rubber Co. logo stands atop the manufacturing plant, since demolished, at 999 S. Broadway in Denver on Nov. 13, 2002. (Jerry Cleveland/The Denver Post)
In Spot’s telling, the Drop-Out design has been wildly successful over the past 15 years and is used on more than 100 bicycle models from 30 manufacturers. And yet Spot has never been paid royalties for its invention, costing the Golden company at least $25 million.
In Gates’ telling, “the design of the Drop-Out made it very unattractive to potential users.” So, after Spot was purchased by Andrew and Wayne Lumpkin in 2009, the latter Lumpkin designed a better Drop-Out. A new patent was filed, a new agreement between Spot and Gates was signed, and the Lumpkins were paid millions of dollars under this new arrangement.
Five years later, in 2014, the agreement expired as “Spot and Gates began going in different directions and their relationship had run its course,” according to Gates’ countersuit. “There has been no formal relationship between Spot and Gates” since, the latter company said.
Then, “in bad faith and in an effort to pressure and improperly demand payment from Gates,” Spot sued the Denver company a decade later for not paying royalties on the initial, flawed Drop-Out design under an agreement that expired in 2009, according to Gates.
Furthermore, Gates alleges, Spot is seeking royalties for a patent that Spot never should have acquired. What came to be called the Drop-Out was actually designed by a German man, Hubert Coenen, in 1989 and patented in 1993, according to Gates. It is asking a federal judge in Denver to throw out Spot’s lawsuit and also invalidate its first Drop-Out patent.
Andrew Lumpkin of Spot Brand bikes displays a belt-drive bicycle in 2014. (BusinessDen file)
Unthank, the Spot attorney, said that the lawsuit he wrote was filed in good faith “and only after months of attempting to work with Gates to resolve this dispute.” He claims that Gates’ defenses have changed over time and it has alleged the patent is illegitimate only recently.
“The parties agreed to obtain and co-own the Drop-Out patent so they could mutually benefit from the commercialization of belt-drive bicycles,” Unthank said Wednesday.
“Gates now seeks to destroy the very patent it agreed to — and did — obtain pursuant to their contract,” he went on to say. “Gates’ conduct is fundamentally at odds with its contractual obligations and Spot’s rights, and Spot looks forward to proving its claims in court.”
Gates is represented by the attorneys Michael Dulin, Gregory Durbin, Richard Murray and Clement Asante in the Denver office of Polsinelli, a national law firm.
In this Oct. 27, 2011, photo, a Gates Carbon Drive system is shown in Denver. (The Denver Post/ Hyoung Chang)
Gates Corp., the 113-year-old maker of many things that move, said that it’s being unfairly pressured to pay a bicycle manufacturer in Golden that has sued it in bad faith.
In a 46-page countersuit that it filed last week, the Denver-based company offered a vastly different version of events than Spot Brand, which sued Gates at the end of July, including that a supposed Spot invention was actually conceived of in Germany two decades earlier.
“Gates has shown repeatedly that it will say and do anything to escape its contractual obligations to Spot,” Drew Unthank, a lawyer for Spot, said of the allegations.
The eight-figure fracas between the two area businesses has its origins in the late 2000s, when Gates invented a belt-drive system for powering bicycles that it called Carbon Drive and Spot invented a way to install that belt-drive system on existing bike frames, which it called the Drop-Out design. A partnership was formed. Paperwork was signed in 2008.
“At that time, Spot was underfunded and needed financial support,” according to Gates.
Both sides recall that Spot gave a 50-percent interest in the Drop-Out design to Gates, which in exchange paid $25,000 and agreed to file patent applications for the Drop-Out. That all occurred as planned and the patent was approved in 2010. But this is where tales diverge.
A water tower with the Gates Rubber Co. logo stands atop the manufacturing plant, since demolished, at 999 S. Broadway in Denver on Nov. 13, 2002. (Jerry Cleveland/The Denver Post)
In Spot’s telling, the Drop-Out design has been wildly successful over the past 15 years and is used on more than 100 bicycle models from 30 manufacturers. And yet Spot has never been paid royalties for its invention, costing the Golden company at least $25 million.
In Gates’ telling, “the design of the Drop-Out made it very unattractive to potential users.” So, after Spot was purchased by Andrew and Wayne Lumpkin in 2009, the latter Lumpkin designed a better Drop-Out. A new patent was filed, a new agreement between Spot and Gates was signed, and the Lumpkins were paid millions of dollars under this new arrangement.
Five years later, in 2014, the agreement expired as “Spot and Gates began going in different directions and their relationship had run its course,” according to Gates’ countersuit. “There has been no formal relationship between Spot and Gates” since, the latter company said.
Then, “in bad faith and in an effort to pressure and improperly demand payment from Gates,” Spot sued the Denver company a decade later for not paying royalties on the initial, flawed Drop-Out design under an agreement that expired in 2009, according to Gates.
Furthermore, Gates alleges, Spot is seeking royalties for a patent that Spot never should have acquired. What came to be called the Drop-Out was actually designed by a German man, Hubert Coenen, in 1989 and patented in 1993, according to Gates. It is asking a federal judge in Denver to throw out Spot’s lawsuit and also invalidate its first Drop-Out patent.
Andrew Lumpkin of Spot Brand bikes displays a belt-drive bicycle in 2014. (BusinessDen file)
Unthank, the Spot attorney, said that the lawsuit he wrote was filed in good faith “and only after months of attempting to work with Gates to resolve this dispute.” He claims that Gates’ defenses have changed over time and it has alleged the patent is illegitimate only recently.
“The parties agreed to obtain and co-own the Drop-Out patent so they could mutually benefit from the commercialization of belt-drive bicycles,” Unthank said Wednesday.
“Gates now seeks to destroy the very patent it agreed to — and did — obtain pursuant to their contract,” he went on to say. “Gates’ conduct is fundamentally at odds with its contractual obligations and Spot’s rights, and Spot looks forward to proving its claims in court.”
Gates is represented by the attorneys Michael Dulin, Gregory Durbin, Richard Murray and Clement Asante in the Denver office of Polsinelli, a national law firm.
