MTH Files Patent Infringement Lawsuit Against Lionel By Erol Gurcan June 12, 2006-On June 7, 2006, I reported that Lionel had filed a motion in its bankruptcy court, requesting it be allowed to obtain discovery with respect to MTH's 17 million dollar patent infringement claim involving synchronized puffing smoke and sounds effects in relation to the speed of the model train. Specifically, the discovery sought involved infringement related documents from both MTH and Train America Studios, and depositions of persons from both companies. (A deposition occurs when a witness, who has first been sworn in, is asked questions by an opposing party's 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 and can be used at trial to impeach the witness). The depositions of MTH persons would at least involve owner Mike Wolf and David Kriebiehl, its Vice President of Research and Development, as both are allegedly listed as inventors according to Lionel's motion. On June 12, 2006, MTH filed opposition papers to Lionel's motion, and more importantly, has now sued Lionel for patent infringement. By way of background, in August 2005, MTH filed a 17 million dollar patent infringement claim (not a lawsuit) against Lionel in the United States Bankruptcy Court for the Southern District of New York, the court where its bankruptcy proceeding has been pending since November 15, 2004. The infringement claim also alleges inequitable conduct on Lionel's part in its dealings with the US patent and Trademark Office, rendering Lionel's patent for the "Smart Smoke Unit" invalid. Also in my June 7, 2006 article, because Lionel had filed the motion, I stated that MTH owner Mike Wolf stated he may have no other choice but to file a lawsuit against Lionel for patent infringement, so the federal rules of discovery will apply, instead of the broader "fishing expedition" standard allowed when there is just a claim pending. Mr. Wolf also stated that he thought it would be best if the parties waited for a decision in the unrelated MTH Lionel trade secrets appeal which was heard on June 7, before more money is spent on lawyers and litigation in the patent infringement claim. However, MTH contends Lionel has refused its request to delay any discovery until 30 days after there is a decision in the unrelated trade secrets case. As a result, On June 12, 2006, MTH filed a patent infringement lawsuit against Lionel in the United States Bankruptcy Court for the Southern District of New York, the court where Lionel's bankruptcy proceeding its pending. The complaint (the document that is filed with the court to start a lawsuit) was sent to me today by Mike Wolf. The 11 page, 7 count document alleges that Lionel has willfully and deliberately infringed 3 of MTH's patents, seeks a permanent injunction against future infringement of them, and seeks treble damages (tripling of the actual damages) for the infringement pursuant to the federal patent statute. The complaint also alleges a declaratory judgment that four other patents purportedly owned by Lionel are invalid, unenforceable, and not infringed by MTH. The complaint does not set forth a specific amount claimed as damages. However, its opposition papers to Lionel's motion for discovery lists the damages as $17.5 million dollars, when the trebling of damages is included. Although the lawsuit was only filed today, it was most likely not served on Lionel yet. Once served, Lionel will have 20 or 30 days to file an answer (the document filed by a defendant that either admits or denies the allegations in a complaint) depending on the method of service. The purpose of this article was to inform all of the lawsuit being filed, and curb any speculation and rumor that may result. I will provide a more detailed summary of the lawsuit and the reasons for/behind it, within a few days. | 
