Yep, standard operating procedure, such contracts are required everywhere: You sign away your rights, such that any invention conceived while employed belongs to the employers. That's not just in the bike industry, that's ANY industry. I've signed several of these in the semiconductor industry, for instance.
Yes, but whether they signed one, whether whatever they did sign is enforceable under California law, whether they breached the actual terms of whatever they signed, or whether they violated some statute in California is what we don't know and don't know even half of the facts necessary to form an even partially educated opinion about.
Just from glancing at the court's docket they started a 2 week jury trial on 1/3/2012, Specialized filed close to 200 pleadings, motions, responses, etc since the case was filed in October 2010, and Volagi filed over 150 motions and pleadings. Specialized has spent over a $1,000,000 just in attorney fees and Volagi has spent over $300,000 in attorney fees (I assume that includes the fees for representing the individual defendants as well since they are all represented by the same firm).
Unless someone is watching the trial (Superior Court of California, Santa Cruz) and/or has access to the all the pleadings and discovery in the case, any conclusions about the actual merits of the case are not likely to have much merit.