This news is already a month old, but not everyone is aware.
November 8, 2006
MTH negotiates Union Pacific licensing deal for industry
Mike Wolf, president and owner of MTH Electric Trains, has negotiated a new royalty-free licensing deal with the Union Pacific Railroad (UP) that covers to all model railroad manufacturers and their products in all scales.
"It was the right thing to do," Wolf said in an exclusive interview with Kalmbach Publishing Co., publisher of Model Retailer. Wolf said the deal, reached November 2, 2006, allows the royalty-free manufacture of UP-related model railroad products in perpetuity. "It's the best thing for the long-term health of the hobby," Wolf said.
Bob Turner, Senior Vice President Corporate Relations for UP, said, "Mike Wolf is to be commended for his commitment to the model railroad industry. His energy and passion helped us find a solution that will better reflect the positive relationship that Union Pacific and the model train industry have enjoyed for many years."
Union Pacific had sued MTH in 2005, stating MTH continued to produce Union Pacific-branded trains in violation of the railroad's 2002 licensing program. That program demanded a 3% royalty on all model railroad products bearing Union Pacific and merged-road logos or a 1/2% payment based on total sales of model railroad products. The program also required manufacturers to reveal to Union Pacific their business strategies for Union Pacific models, including marketing budgets, manufacturing details, distribution channels, and sales goals.
Rather than give in, MTH chose to defend itself on principle. "It was wrong. They [Union Pacific] had supported us in our manufacturing efforts, and we spent $5 million in tooling just for their trains, like the Big Boy, Challenger, and turbines," Wolf said.
The new agreement covers all model railroad manufacturers, including MTH rivals Lionel and Broadway Limited. Companies making model trains will need to contact UP to learn specifics and to be covered under the new program, Wolf said. Under the terms of the agreement, manufacturers must continue to use professional materials and maintain high standards when creating Union Pacific-branded trains.
The agreement covers not only historic road names, such as the Southern Pacific and Chicago North Western, but all future Union Pacific logos and slogans.
Wolf said that sales of MTH locomotives and cars in Union Pacific colors had dropped noticeably as negative publicity toward the licensing program grew. He now foresees sales of Union Pacific branded model trains returning to their pre-licensing levels.
- Neil Besougloff, Editor, Classic Toy Trains magazine