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U.P. sues toy maker over use of logos

(Bloomberg News circulated the following article on January 5.)

NEW YORK -- Union Pacific Corp., the biggest U.S. railroad by sales, has sued to stop the nation's second-largest model-train maker from using logos for the Union Pacific and other rail lines it owns.

The lawsuit seeks damages from closely held Mike's Train House Inc., based in Columbia, Md. Mike's Train House, owned by MTH Electric Trains, pushed larger rival Lionel LLC into bankruptcy in 2004 by winning a suit about theft of trade secrets.

"The whole purpose of the licensing program is to ensure our logo and brand is used accurately and appropriately," said Mark Davis, a spokesman for Omaha-based Union Pacific.

U.P. began collecting royalties two years ago for use of its name and those of railroads it has taken over, including Southern Pacific Lines and Western Pacific. Decades ago, rail companies helped design model trains and charged nothing for using their logos.

"There was a time when the railroads thought this was good publicity for them," said Neil Besougloff, editor of Classic Toy Trains magazine. "Hobbyists think it's wrong that Union Pacific wants the model train enthusiasts to pay a premium."

MTH, founded in 1980, has been in talks with U.P., said Andy Edleman, vice president of marketing for Mike's Trains. He said he didn't know of the lawsuit, filed Dec. 30 in federal court in Omaha.

U.P.'s royalty demands "have affected what trains we make," Edleman said. "You can't charge more for a Union Pacific train."

CSX Corp., the third-largest U.S. railroad, has a fee-based licensing program that is less cumbersome than Union Pacific's, which is based on sales, Edleman said.

BNSF Railway Co., the second-biggest railroad, doesn't charge for licensing its name, and No. 4 Norfolk Southern Railway Co. doesn't have a program, he said.

Edleman rejected U.P.'s argument that licensing is needed to ensure the accuracy of the logos: "This is a self-policing industry. The industry is forced to create a railroad's logo and color as accurately as possible or it won't sell."

Friday, January 6, 2006

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