“It was so frustrating to negotiate the settlement due to all the moving parts,” said MTH Electric Trains president Mike Wolf.
Terms of the settlement, announced Aug. 12, include a payment by MKT to MTH of $950,000, the transfer of some HO tooling from the Broadway Limited product line and Lionel HO product line (both manufactured by MKT), the granting to MTH of a sub-license from Precision Craft Models for the DCC patent held by Real Rail Effects, and dismissal of a QSI patent infringement case against MTH and Real Rail Effects’ case against three other manufacturers.
A previously published version of this story made additional references to Precision Craft Models and Broadway Limited without clear attribution to MTH.
New products for Broadway Limited
Broadway Limited announced that it was pleased to learn of the settlement of a
long-running lawsuit between MKT, its primary manufacturer, and MTH. Broadway Limited stated that as part of the settlement, it will receive five new tools for model railroad products to be delivered at a future date.
“We are never pleased to lose old tooling, but we felt we had sold as many of these products as the market wanted, and we are excited at the opportunity to have five sets of new tools at no additional cost,” said Bob Grubba, Broadway Limited’s president and owner. “From our manufacturer’s perspective, I am sure they are thrilled to settle the long-running legal dispute and will now concentrate on supplying Broadway Limited with new products and tooling.”
The Broadway Limited HO model tooling that now moves into MTH’s hands includes the Union Pacific die-cast metal Big Boy steam engine, Pennsylvania die-cast metal GG-1 electric, Alco PA diesel, Alco FA diesel, and EMD F3 and F7 diesels. Also included were the tools for Lionel’s HO Union Pacific die-cast Challenger and Union Pacific die-cast Veranda Turbine. MTH plans to use the models in its own HO line once changes are made to incorporate MTH’s sound and control electronics and external body details are modified.
DCC with sound lawsuit
Real Rail Effects had filed patent infringement lawsuits against QSI, Atlas, and American Hobby Distributors in federal court in Florida. These suits alleged violations of Real Rail Effects’ patent for combining DCC with a sound decoder. MTH stated that it felt it needed a license with Real Rail Effects to prevent a possible lawsuit between Real Rail Effects and MTH at a future date.
According to Wolf, “I wanted to wrap up all of this litigation in one big settlement even though some elements of the resolution would have benefited my competitors, so I insisted that the QSI suit be resolved as well as the Real Rail Effects suits against the other named parties. This was one of the reasons this thing took so long, but in the end it was worth the wait.”
The settlement stems from a federal trial in U.S. District Court in Michigan in 2004 that ended with a verdict in favor of MTH. Korea Brass and its co-defendant, Yoo Chan Yang, were found liable of misappropriating MTH’s trade secrets. After the verdict, Korea Brass transferred assets and purchase orders to a new Korean entity named MKT, according to MTH.
In 2006, MTH filed a lawsuit to contest the transfer of assets from Korea Brass to MKT. In April 2008 MKT was ordered to make good on Korea Brass’ debt.
