U.P. Drops Model Train Royalty Fees

By Stacie Hamel, Omaha World-Herald, Neb.

Nov. 11–Union Pacific has reversed its decision to charge model railroad manufacturers royalty fees, a practice the Omaha-based railroad began in 2003.

Model train makers now will be allowed a perpetual license to use U.P.’s trademarks and paint designs, the railroad said.

The change is a “clear victory” for hobbyists, one model train store owner said, because they can buy models without worry that manufacturers will lose the right to make U.P. items.

“People are still going to hold U.P. in a dear place in their heart because a lot of people love that railroad,” said Rick Becker, owner of Grand Central Ltd., a model train store in Lincoln. “What turned into a conflict wasn’t ever necessary.”

U.P. announced its decision as part of a joint statement with M.T.H. Electric Trains regarding a settlement reached in the federal trademark infringement case U.P. filed against M.T.H in January in U.S. District Court in Omaha.

In 2003, U.P. started licensing and charging model makers for use of its logo and the logos of railroads it purchased over the years as part of a larger brand- awareness program intended to place logos on a wider range of merchandise and result in significant revenue.

The move aroused emotional outcries by hobbyists and model manufacturers, who objected to the change after years of what they described as goodwill-building for railroads.

Union Pacific’s move in dropping the royalties for model trains is the right one, said Becker.

“U.P. was probably surprised with the publicity that it generated and the resistance put up by the toy train manufacturing industry,” Becker said. “They expected the toy train industry to just roll over. I think they were surprised by the tenacity of the response.”

Programs such as U.P.’s help protect a company’s brand, but the railroad didn’t need protection from the model industry, he said.

“The people in the model industry really want the items they buy to be accurate, so I don’t think there was any problem of anyone creating any sort of a negative image,” he said. “It was a foregone conclusion that their brand was going to be well-represented because the customers demand such perfection.”

U.P. also filed lawsuits against model-train makers Athearn Inc. and Lionel LLC in 2004. The case against Athearn also was settled. The case against Lionel was dismissed after that company filed for bankruptcy.

M.T.H. President Mike Wolf said in a statement that the U.P. lawsuit was a drain on M.T.H.’s resources but was worth the effort.

“For 70 years, Union Pacific and the other railroads have worked with our industry to develop and nurture the model railroading hobby. The U.P. license that had been in effect did not properly reflect that mutually beneficial and rewarding relationship.”

Bob Turner, U.P.’s senior vice president of corporate relations, said Wolf helped U.P. find a solution “that will better reflect the positive relationship that Union Pacific and the model train industry have enjoyed for many years.”


Copyright (c) 2006, Omaha World-Herald, Neb.

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