November 8, 2006-As some of you know by now, MTH and Union Pacific issued a joint press release late this afternoon stating UP's trademark infringement case against MTH has been amicably resolved. However, the settlement has broader beneficial implications for both the other model train manufacturers and hobbyists alike. First, today's agreement means that UP's case against MTH has been resolved and will be discontinued in the near future without anymore money being spent on lawyers. Thus, more money for research and development, new tooling and electronics. Secondly, the agreement is significant in that it means all model train manufacturers will be allowed to use UP logos and trademarks forever without having to pay a royalty. Mike Wolf confirmed to me today that this agreement also applies to Lionel despite its settlement and licensing agreement entered into almost two months ago. More about that later. At 4:25 this afternoon, I received a telephone from MTH's Mike Wolf informing me of the settlement, and that MTH and Union Pacific had issued an electronic press release to the model train hobby media. By way of background, when I was at the York PA Train meet three weeks ago on October 19, I asked Mike if his lawyers were still going to make a motion to dismiss UP's trademark infringement suit by the end of the year. (At April's York meet, Mike told me that was what his lawyers were going to do at the time). However, at October's York meet, Mike informed me he was meeting with Union Pacific's representatives on November 2 to try and resolve the trademark issue on behalf of both MTH and the entire industry. His goal was a long term resolution and an agreement where the model train makers would not have to pay a licensing fee for the right to use UP's logos in the future. My first thought was this was a rather ambitious undertaking. I called Mike on November 1 and asked him if he was still meeting with UP. He told me "yes". On November 3, Mike stated the parties were still talking. So after several days of negotiations, an agreement was entered into. Mike told me that UP previously offered MTH exclusively, the same deal as today's settlement, about 4 months ago. At that time, Mike rejected the offer, stating today, he "was determined to the get the same deal for the entire industry," so he would not have a "competitive advantage" against the other manufacturers. As part of the settlement, each of the model train makers will have to sign a written agreement respecting the integrity of Union Pacific's trademarks in exchange for the right to use them free of charge. For example, the model train companies have to agree that locos or rolling stock with UP logos will not have graffiti on them. The companies will not have to get UP's permission prior to using a trademark. I'm sure some of you are thinking how today's agreement affects Lionel since it entered into its own settlement (UP also previously sued Lionel for trademark infringement) and licensing agreement with UP whereby it agreed to pay " an annual royalty based on a percentage of annual gross sales." This was on September 13, less than two months ago. In a nutshell, Lionel will benefit from the same terms of today's agreement as the other train makers, and not have to pay a licensing fee although it previously agreed to do so. Lionel's CEO and President Jerry Calabrese told me late this afternoon that its prior settlement and licensing agreement with Union Pacific is the same as today's agreement with the other manufacturers, except for the licensing fee it previously agreed to. In the end, it's not surprising to me that UP resolved its trademark infringement case against MTH, but is surprising they settled with the entire model train community. In my article dated August 11, 2006, I stated UP claimed MTH had been violating 3 specific Union Pacific trademarks (one for UP, and fallen flags Southern Pacific Lines and the Western Pacific River Route) for over 20 years. However, based on UP's own complaint (the document filed with the court that starts a lawsuit), the 3 trademarks at issue were only registered anywhere from 2 months to 3 years before it filed suit in December 2005. Based on this set of facts, I did not see UP could claim MTH violated the 3 trademarks at issue for over 20 years when they had all been registered (thus owned by UP) for a much shorter period of time. This was my polite way of saying their case was frivolous. It was also clear that MTH was not going to settle. Fortunately, common sense prevailed, and UP entered into an agreement benefiting all. Although we may never know, UP may have settled with the entire model train community due to the bad press that it received after suing Lionel, MTH and train photographer Nils Huxtable. In closing, this is a great deal for all model train hobbyists, whether one is a fan of Lionel, MTH, Atlas O, Weaver, Williams, RMT or any of the other O gauge manufacturers, and those who make HO gauge trains like MTH, Atlas, Athearn and Bachmann etc. Ultimately, it means we will not have to pay higher prices for model trains with UP logos. It may also have a chilling effect on some of the other train companies like Norfolk Southern or CSX from pursuing any potential lawsuits against the model train companies. Back to Toy Train Legal Issues | 
