As 2strokebuzz noted a couple weeks ago, the new Schwinn Scooters bear more than a casual similarity to the TNG Venice and Milano models, and as promised, we’ve dug a little deeper into the situation and our findings are rather startling. Tom Lynott, president of CMSI, makers of the TNG scooters, had no comment on April 4th, but since then, a source outside CMSI confirmed that CMSI were preparing legal action against Pacific Cycle, the parent company of Schwinn, Mongoose, and GT bicycles. A complaint, which alleges that Pacific Cycle effectively “stole” TNG’s product and business model after a proposed collaboration was abandoned, was submitted to the United States District Court in Seattle on April 6, (two days after our original story), listing six charges against Pacific Cycle: False Designation of Origin, Violation of Washington’s Consumer Protection Act, Common Law Unfair Competition, Intentional Interference with Contract, Intentional Interference with Prospective Economic Relations, and Breach of Contract.
In the complaint, CMSI alleges that Pacific Cycle requested a meeting with CMSI in January 2004 regarding cooperation between the two companies. A meeting was held in February at which time CMSI revealed their exclusive contract with a undisclosed Chinese supplier, their business model, and their marketing plans to Pacific. According to the court papers, Pacific then notified CMSI they were pursuing a “different direction.” CMSI later discovered that Pacific had located CMSI’s Chinese manufacturer and persuaded them to violate their contract with CMSI, and instead manfacture the same scooters for Pacific, to be sold under the Schwinn name (while no longer selling them to CMSI).
The scooters in question are the TNG Venice, Venice LX, and Milano models, sold by Schwinn as the Campus, Collegiate, and Graduate, respectively. The TNG models were based on the design of the Yamaha Vino range. While similar-looking scooters abound in the Chinese marketplace (as well as the shadier end of the American market) TNG had set the Venice and Milano apart by custom-designing many components and styling elements. These components are proprietary to the TNG scooters and were manufactured with tooling paid for by CMSI, yet appear on the Schwinn models, some (notably the headlight) even bearing an embossed “CMSI” in plain view. CMSI, in the meantime, claims to have been forced to scramble to find new parts manufacturers. TNG rebounded from some early missteps by carefully building their reputation via a quality product and a reliable dealer network and parts supply. CMSI alleges that the rapid switch to new suppliers resulted in production and quality-control problems, costing them a loss of market reputation.
According to the CMSI filing, TNG business information was disclosed only after Pacific Cycle orally agreed to, and promised to sign, non-disclosure and non-circumvention agreements. It appears that these documents were never actually signed, and CMSI probably has a slim chance of legal recourse against their Chinese supplier, considering the Chinese disregard for trademark and copyright law. But aside from those points, CMSI’s complaint certainly makes a good case for themselves, we will attempt to contact Schwinn tomorrow during business hours for their response.
Props, by the way, to 2sb reader mythdraug, who originally pointed out to us that the Schwinn was indeed a TNG lookalike and not just another Vino clone, sparking our interest in what turned out to be a rather interesting story.
What’s the problem here??? they’re totally different…one’s a champagne/Ti colour and the other is white. TOTALLY DIFFERENT.
It’s a shame that the owners of Schwinnn have religated such classic bicycle names to POS Chinese made scooters.
ooops…I meant silver not white.
Myk, that’s sort of missing the point. Schwinn still makes some good high-end bicycles, and still sells through a dealer network, though they seem to have been focusing on selling cheaper, asian-manufactured products through the “big box store” market lately. Their reputation in bike circles has suffered in recent years (which probably matters little to their profit sheet, as Stingrays are presumably selling well at Wal-Mart). It’s an interesting story that’s been told elsewhere. But that’s how the market works and there’s nothing illegal about that.
The point is not that they’re selling cheap Asian scooters, that would just be boring and typical (for that matter, they’ve *been* selling electric scooters for a couple years now). CMSI alleges they plotted a full-scale theft of the TNG product and brand image, an image and product which TNG put lots of effort and money into developing. So, allegedly, they’re not selling “cheap asian scooters,” or even TNG knockoffs, they’ve hijacked TNG’s scooters and they’re selling them under a different brand name. Diluting your brand image is not a crime, but corporate malfeasance is.
When will the Chinese companies learn how to do business here? Bryan I see your point about Schwinn and TNG having their own legal issues but I still feel there is a more serious underlying issue. The scooter community needs to stop doing businesses with companies that don’t establish dealer sales territory and exclusivity agreements with a manufacturer. It’s kind of a seperate point but even in the Schwinn/TNG situation, I still think a huge amount of blame should be placed on the factory for thinking its ok to work with as many distributors as they can establish in the U.S. Unfortunately it looks like TNG’s only recourse here is to go after Schwinn.
Honda and Yamaha got where they were in the U.S. by setting up proper dealer networks and supporting their dealers and not allowing some other distributor to sell their same vehicle in overlapping territories. This lousy situation forces dealers to compete against their own product. I hear a lot of people griping about scooters sold over the internet and bad warrenty and parts support but to me, lack of proper exclusive U.S. distributors is the fundamental source of the problem with Chinese bikes. This seems so basic to me. Even the Taiwanese companies (as far as I know) like Kymco and TGB get this basic business principle. I know it’s old news but it needs to be said.
Maybe the answer is for the DOT to stop letting bikes in the country unless there is a clearly established manufacturer who can be held accountable for product liability issues? (Yes, I know that that will never realistically happen.) We all know many Chinese companies are dumping scooters here without having to deal with the support issues of other manufacturers. The cool things about TNG is that they appear to be a company that has taken much of this on on their own even though they continue to be undersold buy under supported copies of what they sell. It’s not fair.
Blah, blah, blah. Anyway, thanks for sharing the good gossip Bryan. Hope I don’t start a flame war.
Hu Jintao just landed in Seattle a few hours ago. He’s supposed to be meeting Bill Gates and touring Boeing. But I wonder if he’s really here to meet in Preston to discuss this pressing matter.
Oddly, he’s meeting with Kissenger and Scowcroft here as well. Maybe their services have been retained by Mr. Lynott.
There is quite a bit of irony in a knockoff scooter maker sueing another knockoff scooter maker…
I’m not sure how much of a knock off that milano is. Is it more or less of a knock off of the vino 125 than the metro is of the vino (or the other way around depending on which one was produced first)? It’s very similar but it has lots of significant differences. Also, I was under the impression that TnG was the first with that style (i.e. responsible for the ‘design’ and tooling, only later to be copied even more). That along with their no-one-in-their-right-mind-would-knock-off Baja, I’d think they may have 2 semi original designs. And that’s even considering that they copied my full tilt rat honda Aero 80 to make the Baja. That was my favorite scooter ever.
(No, DeVries, I haven’t been drinking)