A Summary on the Union Pacific MTH Trademark Infringement Case
By Erol Gurcan August 11, 2006-Over the last several months, there has been a lot of discussion on the OGR on line forum about the validity (or lack thereof) of Union Pacific's three trademark infringement lawsuits (against Lionel, MTH and train photographer Nils Huxtable), but little information concerning the specifics in each lawsuit. There was also plenty of discussion last week because of a UP press release on its web site regarding its trademark licensing program. That memo stated in part; Omaha, Neb., August 1, 2006 – Union Pacific's trademark licensing program protects the integrity of the names and trademarks owned by Union Pacific by controlling commercial use of those marks. As a result of growth in the program and in response to suggestions from model railroaders and railroad historical societies, Union Pacific will allocate income generated by the licensing program to support UP's Heritage programs, including the railroad's steam program, heritage passenger fleet and museum…………… Union Pacific has licensed dozens of manufacturers to produce and distribute items bearing the company's trademarks, including Union Pacific products that are available at retailers including Urban Outfitters, Wal-Mart and Target. For those of you unfamiliar with the legal proceedings, Union Pacific (the largest railroad in North America) has separately sued both Lionel and MTH for trademark infringement. The lawsuit against Lionel was filed in the United States District Court for the District of Nebraska on May 27, 2004. The case was stayed on November 15, 2004 when Lionel filed for chapter 11 (reorganization) bankruptcy. It has since been transferred to the United States Bankruptcy Court for the Southern District of New York, the court where Lionel's bankruptcy proceeding has been pending. Two recent court conferences scheduled for July 13 and 25, 2006 have been adjourned. The next court conference is scheduled for August 29, 2006. At this point in time, it is safe to say that nothing much of any importance is happening in this case. However, plenty is happening in Union Pacific's trademark infringement lawsuit against MTH, thus meriting discussion. On December 30, 2005, UP sued MTH for trademark infringement, trademark dilution (unauthorized use of a trademark which weakens its status) and unfair competition etc. in the United States District Court for the District of Nebraska. The 9 page complaint (the document a plaintiff files with the court to start a lawsuit and then serves on the defendant, usually by a process server) alleges infringement of 3 specific trademarks involving 1) Union Pacific, 2) Southern Pacific Lines and 3) Western Pacific Feather River Route logos. In its complaint, UP seeks lost profits as a result of MTH's unauthorized use of the 3 trademarks at issue, as well as treble damages (the tripling of any actual damages due to the alleged intentional and willful unauthorized use). The above information for this article was obtained from UP's complaint. Prior to the three current lawsuits, in December 2002, UP announced a model railroad licensing program whereby its trademarks had to be licensed by model train manufacturers under a rate structure. Since the licensing program was announced, HO model train companies including Atlas and Bachmann, and G scale manufacturer LGB (a scale larger than O gauge) have signed on to the licensing program. Obviously, Lionel and MTH have not. Specifically, Union Pacific's complaint alleged that it offered MTH a license to use the three trademarks in question prior to suing, but that MTH declined. Attached to UP's complaint as exhibits A-C are the 3 trademarks at issue and the dates they were filed with the Patent and Trademark Office. The Union Pacific logo at issue was first registered on December 24, 2002 (the month UP announced its licensing program), the Southern Pacific Lines logo registered on May 17, 2005 and the Western Pacific trademark registered on October 4, 2005 (two months before it filed suit against MTH). In its answer, (the legal document filed by a defendant in response to a plaintiff's complaint), MTH admitted it has used the Union Pacific, Southern Pacific and Western Pacific trademarks at issue on model trains and related items for over 20 years, but denies that UP owns valid trademarks for the 3 logos. Additionally, MTH denies that UP did not authorize them to use the trademarks on model trains or accessories. Moreover, MTH contends that a license from UP is not necessary, because among other things, the trademarks are invalid and unenforceable, abandoned through uncontrolled use by one or more third parties and/or through nonuse by UP, and/or the dilution claims are barred in whole or in part by the retroactivity doctrine (a law or laws which take away or impair vested rights acquired under existing laws). Lastly, MTH's position is also that UP actively encouraged model railroad manufacturers to use the trademarks without any license, payments, restrictions, or quality controls for over 70 years. In other words, it acquiesced to the use for such a long period of time that it is now barred from seeking redress in court for it. In addition to the above defenses, MTH is seeking a declaratory judgment that it did not infringe and is not infringing the 3 trademarks, has not diluted them, and has not engaged in an unfair method of competition and deceptive trade practice in violation of UP's rights Moreover, MTH has counterclaimed against Union Pacific (asserted its own claim as a defendant against plaintiff as if it were a plaintiff) requesting the court cancel the 3 trademarks at issue as they were fraudulently registered in the Patent and Trademark Office, and based on false statements made to it. Also as part of its counterclaim, MTH has asked the court to cancel the 3 trademarks as they have been deemed abandoned with regard to model train sets because of uncontrolled use of the marks by one or more third parties or by non-use by UP, hence becoming generic with regard to toy train sets. The rationale for the counterclaims is also based on the acquiescence factors discussed above. This case is now in the discovery phase. Over the last several months, each side has been serving written demands to obtain documents from the other. For example, MTH's lawyers have attempted to obtain documents which would show that UP has been allowing other model train makers, like Lionel to have used its trademarks for a long period of time, thus validating MTH's position. The parties will also have to schedule depositions (a deposition occurs when a witness, who has first been sworn in, is asked questions by an opposing parties attorney, and the questions and answers are recorded by a stenographer . A written record in the form of a booklet is then prepared by the stenographer. One of the reasons a record is prepared is that if the same witness later testifies at trial, he has the opportunity to review what he said previously, and if his answer if different than the one he gave at his deposition, he can be impeached at trial).
In an effort to make this article current, I contacted Union Pacific's Director of Media Information, James Barnes (whose name appeared as the contact person at the bottom of the UP August 1 press release) and its Director of Corporate Relations, Brenda Mainwaring to get their comments. Neither was willing to discuss the case as it involved pending litigation. I also emailed MTH's president Mike Wolf on August 7 to get his opinion and feelings on the merits of the UP lawsuit, and if MTH's lawyers were still going to make a motion for summary judgment in the near future. As of the completion of this article on August 10, I had not heard back from him. If Mr. Wolf contacts me, I will post his comments. In April, Mr. Wolf told me he expected this case to be completed by the end of the year as MTH's lawyers were going to make a motion for summary judgment. In laymen's terms, a motion for summary judgment is a motion to dismiss a case. The party who makes it, usually a defendant, will attempt to convince the judge, there is no legal theory upon which plaintiff can recover, and the moving party is entitled to judgment as a matter of law, without the need for a jury trial. Ultimately, if MTH's lawyers make the motion and it is granted, Union Pacific's case would be dismissed. Lastly, one final thought. While I was reviewing the legal documents in the case and writing this article, one thing above all else stood out at me. As I stated above, the three trademarks at issue in this case were registered as follows; the Union Pacific logo on December 24, 2002 (the month UP announced its licensing plan), the Southern Pacific Lines on May 17, 2005 and the Western Pacific Feather River Route mark on October 4, 2005 (two months before it filed suit), based on Union Pacific's own complaint that started this lawsuit. Clearly, all 3 trademarks were registered anywhere from less than one year ago to as long as less than three years ago. Since this information is undisputed, I do not see how Union Pacific can claim MTH has infringed these trademarks for decades when they have all been registered for less than three years. It's at least something to think about anyway. | 
