question about UP licensing

[Anonymous]

I hope the UP uses some of this new found revenue to wa***heir freaking motive power. What filthy heaps some have become.

[Anonymous]

There have been many posts about this subject, so I thought I would throw in my two cents. By the way - I AM a lawyer, and while nobody can tell you the final word in trademark law, my thoughts might shed some light on this matter. I also will tell you up front that I am of two hearts about this matter, as I can easily see both sides positions.

From the railroad's position, their trademark is a piece of property, just like a boxcar or a depot. They have the right to control its use. For example, lets say you wanted to rent a coffee shop in the depot. You would expect to pay rent for that coffee shop space, right? And that rent would not "KILL + DESTROY" your business - you would simply factor it in to the cost of your services or products. Yes, the coffee is more expensive, but, that is one cost of doing business. Would there be some people who could not afford coffee in your coffee shop? Perhaps. But, then those people have the right to brew up their own cup of joe.

The licensing of a trademark is just like renting that space for the coffee shop. As a manufacturer, if I want to use somebody else's trademark, I pay rent for that. In the UP case, it is 3% of the wholesale price of my product, and they have a say as to what that trademark is applied to. Just as I would not expect the railroad to furnish me with free real estate for my coffee shop, why should I expect them to furnish me with free decorations for my train cars? It was they, after all, who spent the money to develop their logos, paint schemes, and trademarks, and it is I who wants to profit from their efforts. And what of the modeler who can no longer afford to purchase my goods that are decorated with the UP trademarks? Well, under the "fair use" doctrine, he is free to make his own model and decorate it as he wishes - just like the guy who brews up his own pot of coffee.

And what about the guy who wants to put the logos on other products? Perhaps a teddy bear with a UP t-shirt on? Or, perhaps just a teddy, with a UP train running into a well placed tunnel? Well, just like the railroad can't be forced to rent its real estate to a porn shop, there is no requirement that the owner of a trademark be forced to permit its tradedress on products it doesn't approve of. The railroad has a right to control its property.

From the manufacturers standpoint, I also see their position. The manufacturer in many cases has been using the UP trademarks for literally decades without comment from the railroad. They also use the "fallen flag" railroads trademarks - marks that are no longer in use for literally decades - without comment or fees. Suddenly, the giant awakens to a flea on its back - and the UP wants to scratch it off. At the least, if the flea is going to stay there, as model railroading surely shall, the giant wants its 'blood money' - as UP does now.

The manufacturers positions will almost surely be that they are simply exercising "fair use" of the trademarks, somewhat like a news paper who publishes a picture of a UP boxcar. They will also cry out "laches", which is a doctrine along the lines of "gee, you let me use your stuff for so long that I have invested in it, so you can't come along later and cry foul". Sometimes this works - you have to protect your property, lest someone else ends up with it, or at least a right to use it.

I guess the funny part to me is that Lionel, who refused to pay UP its trademark fees, has its own very strong trademark licensing program, and certainly knows the value of protecting your image! Likewise, were I to start making model kits and put them in a blue box with a picture of a steam locomotive on the right side, with a Diesel on the left, and called my kits "Afterburn Models", it wouldn't be too long until the nice folks in Compton came looking for me and my money.

Now, there is one argument that the railroads are in the transportation business, and model railroad manufacturers are in the toy business, and there is no possible way that the one could be mistaken for the other. And besides, the toy business is still just a flea on the back of the giant. Therefore, there is no chance for there to be an error on the part of either segment's customers as to what was being sold, and who was selling it. This is in defense of the idea that trademarks help prevent misbranding of one good as the goods of another, and there is no way a reasonable person would confuse the two industries. But, that argument still does not address the fact that the owner of property still has a right to use, or prevent the use, of his property. And the "de minimus" damages argument, that we are just a flea, really not hurting anyone, still does not address the idea that if I want to be free of fleas I can be.

I am not a shill for the railroads - I wi***hey would simply go away and let us play with our trains without interruption. But, in fact, I am surprised that they have waited so long to get into this fray. Perhaps the railroads saw a lot of value in permitting their logos to be painted on every model train in town - after all, weren't we all riding passenger trains, and shipping LCL freight just a few years ago? It was free advertising! But, now, with passenger trains run by a broke and dying Amtrak, and every freight train simply an endless string of trailers and ship containers bound across the country to another port to Europe, the railroads don't see the value of the free advertising, nor the "dilution" of their hard earned, paid for trademarks.

Were I a company like Kadee, InterMountain, Athearn, and the others, unless I was really really sure of my footing on this matter, I would simply license the trademarks and go on. Yes, in the short term this will mean greater costs, costs that get passed to the modelers. But, I would really hate to get a deal like Lionel got - pushed into bankruptcy for violating the trademarks and trade dress of Mikes Train House, plus a body slam from UP for violating their trademarks.

And what of the train show pundits who have emblazoned their locomotives with "Billing America" as a crass comment on the UP's licensing efforts? That is an expression of the free speech permitted - nay, demanded - under the First Amendment to the Constitution. But, should the modeler start selling his art pieces as "UP" locomotives, instead of "Satire Art Piece", he ought to look out - cause the fun police will soon swoop down on him! We have the right to make comments on our world, and the pompous amongst us often are the target of scathing attack (think - Jerry Falwell in Hustler Magazine, being portrayed as "A##hole of the Month", his head protruding from the south end of a north bound mule, and his "life story" being a collection of filthy stories of supposed incest in an outhouse - ruled 'parody', no violations of law). But, put your 'parody' out as an authentic UP trademark, and you best watch out!

The biggest problem, to me, is the requirement from the UP that the manufacturers disclose so many aspects of their finances in order to comply with the licensing agreement. Perhaps the railroad and the manufacturers could work out a deal where such detailed financial reporting is not required in order to comply. But, in the long haul, I would expect the courts to enforce UP's right to protect its image, and to exploit it for profit, just as they have since the first trademark cases back in the 1700's. So, we should all get ready for this - its coming.

[Anonymous]

I guess you have no comment about the suggestion that the $5.00 price increase for a hundred dollar loco might not be largely due to someone other than UP having their hand in your pocket? As we've all seen, the UP licensing agreement is 3% of wholesale, so it seems someone else in the supply chain is grabbing most of that $5.00 but in your opinion it is UP, the owner of the trademarks that is the bad guy. So, is licensing bad, but price-gouging ok?

Wayne

[Anonymous]

QUOTE:
The free ride may be over but despite the Chicken Littles, the sky isn't falling. The 3% wholesale royalties is not going to break the bank or "kill the industry," even when it's written in screaming capital letters"

Well, we're certainly headed down that slippery slope. And for anyone who is snickering right now because, quote "I don't model the UP", (and I've seen plenty of those posts) be assured, your favorite road will be jumping on the bandwagon shortly.

Now that the UP camel has got his snot-encrusted nose under the tent, you'd better be prepared to start paying extortion, er, I mean "licensing fees" to every other road, not to mention EMD, GE, Trinity, Gunderson et al. when they decide to get in on the act. That oughta be good for another 5 or 10 bucks a model.

Maybe that's no big thing to the high rollers who never let anything less than Overland brass touch their rails, but to me, that $5 is one less bottle of paint, or a decal, or something else that I could have bought, meaning that some other manufacturer has to suffer...and $5 here and $5 there eventually starts to add up.

By the way, if you haven't noticed, Accurail has already quit producing anything with UP markings, and a small decal manufacturer I talked with said (off the record, so no names) (and Thank God it's not Oddballs!) that rather than pay UP up front and go through the all the hassles, he would stop making UP decals altogether.

And if the UP was really all that concerned about how their trademark looked on a model train, then they should really be delighted that more "gag" UP cars sporting derogatory slogans, such as "Billing America" (and far worse things) are showing up at train shows now than ever before.

These are just some of the real impacts on the MRR ground of this hair-brained licensing fee scheme.

But what amazes me, is that apparently there are some people around here who support the idea of paying more and having fewer choices, and figure somehow this is a healthy thing for our hobby.

"But by golly, we're helping UP 'protect' their trademark!"

Big deal.

And as John Gibson says, "That's My Word."

[IRONROOSTER]

QUOTE: Originally posted by Muddy Creek

QUOTE: Originally posted by ericsp
Athearn's Blue Box kits decorated for UP or its victims are usually 25 cents more than the others. The only Athearn RTR locomotives I have looked at are the SD50 and SD45T-2, those are $5 more ($99.98 and $104.98).

Again, perhaps the manufacturer or dealer needs to explain why they are charging so much more than the 3% that UP collects as royalties. Assuming for the sake of argument that the wholesale cost of that $100 locomotive is $60, the royalty payment would be $1.80. Someone is pocketing $3.20 above and beyond UP's rightful royalties.

Does this indicate price-gouging? Is this of any concern?

Wayne

Just to confuse things a little. Remember that the $5 is not what the wholesaler increased it by. Going with your supposition that the wholesale price is $60 for $100 the wholesale for $105 would be $63 This is a $3 increase by Athearn. Subtract the $1.89 (It's 3% of $63) for UP leaves $1.11 for Athearn (the other $2 goes to the retailer as markup).

UP wants their royalty up front according to their application form so Athearn has a cost of capital as well as record keeping and maybe a lawyer reviewing everything. I would say Athearn isn't losing money over this deal, but they aren't making a lot more either. The retailer makes more, but his cost is higher so he has more capital tied up.

Enjoy
Paul

[dehusman]

Gray Loess wrote:
"Protect it from WHAT exactly?
In all the discussions of this topic over the past year, I've yet to see anyone demonstate in any real tangible way that UP is being harmed by Athearn making a model of a locomotives or freight car with UP markings on it."

Another poster on another thread pointed out that the people that are infringing on the good name of the UP and "harming" their image by the inappropriate use of the logo
are.... (drum roll please).....

Model railroaders and railfans.

Think of all the "gag" UP models that were put out a few years ago with the slogans slamming UP's service. As I recall I think somebody even produced them commercially. Since I read that post I haven't been able to think of any other situation where the UP's logos were used improperly in public. While I still think it was for general business reasons, that would be incredibly ironic if modelers were the cause, not the "victims".

Dave H.





The only thing UP is protecting is their ability to go through our pockets at the rate of 5 bucks an engine.

It's about one thing, and that's GREED gentlemen

[Anonymous]

I think the RRs have woken up to the perils of "naked licensing" in which an organization allows use of their trademarks without formal agreements, direct supervision or remunineration. Basically the status quo for past decades. More and more often, would-be trademark pirates are attempting to wrest control of the trademark away from companies by claiming the trademark was "abandoned," something often repeated by posters in this thread and others who wrongly assume that simply by not charging for its use or by not using it in their current paint scheme, the railroads have abandoned the mark. What I've read of trademark laws, the legal definition of "abandonment" goes beyond these simplistic, wishful beliefs.

Also, it may simply be the demands of shareholders for the companies they've invested in to make every effort to maximize profits. Some here call that greed. Imagine, shareholders demanding the company make money.

The free ride may be over but despite the Chicken Littles, the sky isn't falling. The 3% wholesale royalties is not going to break the bank or "kill the industry," even when it's written in screaming capital letters"

Wayne

[lonewoof]

I'm curious if anyone knows why this licensing issue came up in the first place? Obviously manufacturers have been using logos, road names, etc. for 50 or 60 years, maybe more. Why are the RR's just now getting defensive about it?
I can imagine a bunch of scenarios, having nothing at all to do with modeling, that COULD have set things off...but does anyone really know? (Anyone not affiliated with UP, CSX, NS -- whoever started this to begin with?)

[davekelly]

Interesting point. What if UP agrees that monies collected from the licencing agreements be used solely to keep their steam engines going? This could be another win win situation.

[Anonymous]

holy cow! some of you guys are just vicious!

I don't mind the UP licensing program. Why? Well, mainly because of their steam program. UP runs steam excursions as a PR tool, but does the general public really care about steam locomotives? This is debatable. I would say that the main group of people enjoying the operating steam locomotives are the railfans. Now the UP is charging the railfans with their licencing program. I would say that this balances out. As long as UP keeps running steam, I'm happy.

Brennan

[Anonymous]

QUOTE: Originally posted by ericsp
Athearn's Blue Box kits decorated for UP or its victims are usually 25 cents more than the others. The only Athearn RTR locomotives I have looked at are the SD50 and SD45T-2, those are $5 more ($99.98 and $104.98).

Again, perhaps the manufacturer or dealer needs to explain why they are charging so much more than the 3% that UP collects as royalties. Assuming for the sake of argument that the wholesale cost of that $100 locomotive is $60, the royalty payment would be $1.80. Someone is pocketing $3.20 above and beyond UP's rightful royalties.

Does this indicate price-gouging? Is this of any concern?

Wayne

[ericsp]

QUOTE: Originally posted by Muddy Creek

QUOTE: Originally posted by jesionowski

[
Well check Athearn's and Kato's prices, they are $5.00 higher for any roadname claimed under UP's trademark aggreement including CGW, DRGW, MP, WP, SP, MSTL, ART,
CNW etc. Probably the increase in price also covers the record keeping for UP's benefit.

Rick

Is this $5.00 for every UP-related item regardless of their wholesale cost? Locomotives and rolling stock? If so, I'm beginning to think maybe the post above that says it's all about greed is partly correct and that UP isn't necessarily the greedy one.

I don't believe that the small added accounting burden of licensing is adding dollars to 3% of wholesale UP is charging. Having written some accounting software, I can tell you that at the push of a button, these manufacturers know to the penny the wholesale value of UP related sales. I doubt very much there is a staff of accountants and lawyers on staff dealing with this minor issue.

Your post is interesting when compared to one that claims another manufacturer is charging the same for undecorated items as it does for UP items. If you feel you're paying $5.00 in royalties on a small ticket item, perhaps this thread should be about price-gouging, not licensing.

Wayne

Athearn's Blue Box kits decorated for UP or its victims are usually 25 cents more than the others. The only Athearn RTR locomotives I have looked at are the SD50 and SD45T-2, those are $5 more ($99.98 and $104.98).

[Anonymous]

QUOTE: Originally posted by jesionowski

[
Well check Athearn's and Kato's prices, they are $5.00 higher for any roadname claimed under UP's trademark aggreement including CGW, DRGW, MP, WP, SP, MSTL, ART,
CNW etc. Probably the increase in price also covers the record keeping for UP's benefit.

Rick

Is this $5.00 for every UP-related item regardless of their wholesale cost? Locomotives and rolling stock? If so, I'm beginning to think maybe the post above that says it's all about greed is partly correct and that UP isn't necessarily the greedy one.

I don't believe that the small added accounting burden of licensing is adding dollars to 3% of wholesale UP is charging. Having written some accounting software, I can tell you that at the push of a button, these manufacturers know to the penny the wholesale value of UP related sales. I doubt very much there is a staff of accountants and lawyers on staff dealing with this minor issue.

Your post is interesting when compared to one that claims another manufacturer is charging the same for undecorated items as it does for UP items. If you feel you're paying $5.00 in royalties on a small ticket item, perhaps this thread should be about price-gouging, not licensing.

Wayne

[Anonymous]

QUOTE: Originally posted by Muddy Creek

Probably stretching it bit to claim $5.00 per engine. UP's licensing agreement is for 3% of the wholesale price. That $5.00 would require a wholesale price of $166.00.

Originally posted by plane_crazy

Well check Athearn's and Kato's prices, they are $5.00 higher for any roadname claimed under UP's trademark aggreement including CGW, DRGW, MP, WP, SP, MSTL, ART,
CNW etc. Probably the increase in price also covers the record keeping for UP's benefit.


Rick

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