Appeals Court Report

[Anonymous]

"Richard Maddox personally told me he warned the powers that be at Lionel that they didn't need to take this road, but they ignored him."

*** Maddox was allegedly in charge of Lionel at the time (CEO/President?). Who inside of Lionel (not WellSprings) had the authority to over rule him? If this was such a concern to him, why didn't he step down/leave before it happened?

[Warburton]

One way or another, the $45 million jury award was way out of line. There is no way that the product technology Lionel supposedly stole is worth that much. I've seen the list of items and that's a slam dunk. The amount of the award is the real problem here. I think what will eventually happen is the appeals court will reduce the judgement to a more reasonable amount and Lionel will pay it and that will be the end of the story...

[PaulEFudd]

PoppaZit: I find your comments logical and unbiased.

Lionel's move overseas was a hot topic years ago, many hobbiests blasted them while others thought it was necessary. 6 years later and people want to see them come back to the USA! I recall reading Maddox quote that "they're eating our lunch" - meaning MTH. It would be interesting to hear/read what he has to say about this whole matter.

Like others, I was flabbergasted at the size of the jury award. It seems reasonable that the timing of the affair is partly or wholey responsible for the size of the award. MTH in the late 1990s/early 20th century was pouring money into DCS development, Mike Wolf said he was "betting his company" on it's success. There was press releases from MTH claiming how great DCS would be and many diehard MTH fans were in "Arm-Chair Model Railroad Heaven." I can remember the talk on the OGR forum, we were all like little kids.

MTH cranked out PS1 engines like there was no tomorrow, a true testament to Samhongsa's production capabilities and a strong market.
DCS delivery time was pushed back, back, and back again. I think it was 2 years overdue. At some point, MTH switched to making PS2 engines, which could only be operated in conventional mode. I believe this was the time of the dealer glut.

If I have my dates from the trial correct, MTH reported their largest losses during this period. I think anyone with any sense has to question whether the alleged losses were soley due to the stolen plans and Lionel's "unfair" advantage, or to a transition period. I would figure Lionel would try to differeniate the numbers in their appeal, and I bet it ain't easy from what I know about accounting books.

I want to see MTH compensated for true losses. At the same time I don't want what appears to be yet another outlandish jury award to put Lionel out of business. I continue to buy both companies products to this day and I hope they agree to a settlement they can both live with.

Paul

[brianel027]

All this lawsuit stuff is interesting on one hand (like a soap opera), but on the other hand, is as interesting to me as the new catalogs from both MTH and Lionel.

These lawsuits have their origins based on circumstances that involve high-end products with technology that furthers their expense. And while these products have an audience, the vast variety of these new products stand little chance of acutally paying for their development on their own individual unit sales. A new scale steam engine can easily cost up to a quarter million just to bring to production. I have no doubt this is why Atlas 0 has thus far introduced no scale steamers. And when/if they do, I'm sure it will be something that has some broad-base appeal, possibly like the new Lionel Dockside steamer.

So you have these lawsuits based on expensive products... lawsuits that further drain budgets of the train companies. I have little doubt that the glut of high end products along with the resulting lawsuits have contributed greatly to the overall price increases on train products that have nothing to do with the other products in question. Add in the attitude that Lionel feels they are the leader that can do no wrong - and then the grudge that MTH has held against Lionel from the very beginnings of MTH and you have a formula for what has transpired today.

How ironic that current Lionel CEO Jerry Calabrese seems to have a desire to aim more products at the beginning modeler and to reach new audiences. Just as ironic that the companies like Williams and RMT, that have shyed away from all the technology and high-end products are the ones in the best postion to make the very products that Lionel and MTH ought to be making, at the price point which will not deter newcomers from purchasing them.

Again, in my opinion, RMT has quickly taken and is holding the award for not only the very best new company, but for making the VERY products at the price point that the others should have been doing all along. Scale modelers may scoff at the Beep, the Buddy, the Peep and the new little passenger cars - and yet these AFFOEDABLE non-scale products are PRECISELY what the market needs more of.

And one can add Atlas 0 to the list with Williams and RMT. Another BIG irony, that Atlas 0 has recently made some very top notch scale products (scale reefers, Atlas 0 track and now the TrainMan line), and that they have now purchased the Industrial Rail tooling and may be positioning themselves to really give MTH and Lionel a run for whatever money they both have left when this whole legal mess is finally (?) done.

[trigtrax]

*** Maddox was allegedly in charge of Lionel at the time (CEO/President?). Who inside of Lionel (not WellSprings) had the authority to over rule him?

Okay, let's just say the chain of command at Lionel wasn't all straight lines. But rather than go through the numerous questions this will generate I believe *** Maddox will be returning to this industry in the near future. When he does anybody who wants to can discuss these things with him. LOL!! Just tell him T Rex sent ya[:o)]

[GregM]

I fully realize that my opinion on this means nothing but it doesn't give me that warm fuzzy feeling.

QUOTE: I believe *** Maddox will be returning to this industry in the near future.

[Anonymous]

"Okay, let's just say the chain of command at Lionel wasn't all straight lines."

Either your'e in charge or you're not. This is too weird.

There has never been any evidence presented that anyone at Lionel was directly involved with what went on in Korea. I don't know *** Maddox but what I've read about him is that he's a straight shooter. The alternatives as I see them are he was in charge and is ultimately responsible for whatever happened or he was in charge and nothing of consequence really happened. I don't see him as being the kind of guy who say's the buck stops somewhere else.

[Poppa_Zit]

QUOTE: Originally posted by trigtrax

*** Maddox was allegedly in charge of Lionel at the time (CEO/President?). Who inside of Lionel (not WellSprings) had the authority to over rule him?

Okay, let's just say the chain of command at Lionel wasn't all straight lines. But rather than go through the numerous questions this will generate I believe *** Maddox will be returning to this industry in the near future. When he does anybody who wants to can discuss these things with him. LOL!! Just tell him T Rex sent ya[:o)]

Oh, I say let's go through through the numerous questions this will generate.

Hey, trigtrax, YOU were the one that involved *** Maddox in this thread, not us. Now you want us to forget the whole thing as you laugh it off, hiding behind the pretense you know something we don't know because you're an "insider" and he'll recognize your pet name? Hey, T. Rex, you've ducked every one of our questions.

Since you refuse to put your cards on the table here, for all we know you are just another one of those know-it-all, sycophantic train-collector hangers-on that hold court at train shows, insignificant guys who hope we'll all be in awe of their importance as they imaginatively describe themselves as "friends" with toy company honchos. Just because they met the guy at York in the Elephant Ears line..

Some of this industrial intrigue dates back to Maddox's term. What you say now makes me really want to know how culpable he is.

With this latest duck-out, your cred just dropped to zero, sir.

[nblum]

"he was in charge and nothing of consequence really happened. "

Bingo :).

" I don't see him as being the kind of guy who say's the buck stops somewhere else."

What a coincidence. Bingo again.

[3railguy]

Did anyone demonstrate to the judge what happens to PS-1 boards when the batteries go dead? Did they explain that Korea Brass installed TMCC boards in the Lionel engines that utilized MTH plans? That consumers got good looking steam engines that ran when they bought Lionel copies instead of going "clink, clank, clunk" when they bought MTH? $1,000 is a lot to spend on an engine. I hope the judge considers what really sank MTH sales. It wasn't a flooded market.

[prewardude]

[zzz]

[trigtrax]

Hey, trigtrax, YOU were the one that involved *** Maddox in this thread, not us.

No you were claiming the allegations weren't proven. I simply told you what the man at the top told me. People are trying to imply that one man, namely Bob Grubba was responsible for everything that happened. That is not true.
Then you asked for the ins and outs of the whole process and I told you *** Maddox will be returning to the industry so go right to the source.
Like so many others you want to shoot the messenger, I didn't involve Mad Ducks in any of this. I learned these things long after they occured. I'm sorry if the facts don't fit into a fantasy world.
The truth is Lionel was run a certain way with problems in their distribution system. Those problems weren't evident when they were the only game in town. As soon as MTH captured a large enough share of the market Lionel's internal weakness became a very real threat. That's where all this comes from. Lionel can operate at $80 to $100 Million, they can't operate at $50 to $60 Million. Ergo, Mad Ducks statement "MTH ate our lunch". Now you've had 4 bosses in this period and Lionel still has the same problem. Do you think all 4 are dummies? Do you think that none of them can see what's really wrong? If they were really "in charge" don't you think they would have fixed it?
Instead Lionel chose to conspire to eliminate MTH and return to the status quo. That's why they got the plans and the production schedule and used them.

Now some people want to spin all kinds of tales about this, I really don't care. You can chose to believe whatever you like. And you can chose to call me a nut. That will not change anything. I gave you my source, if you don't believe me, follow it up. [:D]

[nblum]

Talk about fantasy worlds. Lionel conspired to eliminate MTH by having Korea Brass acquire MTH production drawings and schedules. Total nonsense. First of all, the production of scale steamers and articulateds by K-Line, 3rd Rail and Weaver abroad shows that no one needs MTH's drawings to produce locomotives as nice or nicer, and just as operational as the PS1 stuff MTH was making back then. The reason Lionel did not conspire to acquire these drawings is that they would be of little to no use. Trade secrets? These are trade secrets the way an E-unit or coupler is a trade secret.

I have no idea whether the production schedules introduced into evidence were of use to Lionel, but the proposition that they could be used to put MTH out of business, when MTH went from zero dollars to 40-45 million per year in five or six years is so laughable that anyone who believes these production schedules were critical to what happened to MTH in the late 1990s is in fantasy land. What happened to MTH was they committed several key mistakes, including continuing production of the flawed, out of date PS1 system long after Lionel introduced TMCC and RS, they delayed introduction of DCS until 2002, and they got outcompeted by a superior brand name making similar models three or four years after they demonstrated a growing "scale" market.

This is why the lawsuit is largely a sham that created circumstantial evidence that Lionel had done something "wrong" that actually damaged MTH. MTH damaged themselves. The materials that Korea Brass had access to were of virtually no use to them and Lionel and arguably do not constitute trade secrets, whatever a jury of laymen decided.

[Anonymous]

"Lionel conspired to eliminate MTH by having Korea Brass acquire MTH production drawings and schedules."
---------------------

Yep, that's pretty much how it went, whether one cares to believe it or not (although "eliminate" in this sense applies to unfair competitive advantage, not the firm per se). And a judge and jury apparently believed it, as well.

[nblum]

"And a judge and jury apparently believed it, as well."

True. But as usual, apparently a judge and jury with no technical knowledge or understanding of manufacturing, and given expert testimony that was far below the standard expected in our modern technologic society. Very likely an example of what's wrong with using the current layman oriented tort system to evaluate technical, scientific or medical issues rather than a true reading on what the real consequences of the Korean events were, in my opinion.

[Bob Keller]

Well guys, we seem to be on the brink of "The sky is blue." "No its orange." "No, its Purple." "No, its pink."

Why don't we go mow our lawns and let this simmer until the judges make their decision? They will be plenty of time to fight over who's version of reality is true at that time.

[trigtrax]

I said it in the past and I'll say it again. Fanatical fans now condemn the whole Judicial system because Lionel lost the case, after the Appeal ruling they will be demanding a Constitutional Amendment or look to instigate a revolutionary overthrow of the Government and rule of law. There are no limits in their determination to avoid the truth.
The Jury in Michigan determined the facts, the Judge applied the law. That's the public record, sorry if it doesn't fit with some peoples predjudices. [:o)]

[trigtrax]

Why don't we go mow our lawns

I live in Brooklyn, I can't mow my lawn because I don't have one. Is it Okay to polish my concrete instead. [:-,]

[nblum]

The repeated and ongoing failures of the tort system in dealing with technically complex or scientific issues are hardly restricted to toy trains and are a major agenda of the Republican party. Of course, the Republican party may come under some folks' definitions of fanatical Lionel fans ;).

Anyone who has functioned as an expert witness in court on such issues, as I have, knows the current jury system is quite unsuited as a method for resolving such disputes. Stating that ignorant and untrained judges and juries with no credentials in medicine, technology or science should not be adjudicating cases involving these issues isn't a call for revolution, it's a call for progress, sanity and facing reality.

[Anonymous]

Now that this case has made it to the appeals court, Lionel is trying to downplay the damage their actions with their Korean and Chinese partners may have done to MTH.

The original court ruled in favor of MTH and increased the award asked by MTH based on the facts of the case. When documents are destroyed it is difficult to find the smoking gun, however when it has been proven that documents were indeed destroyed, that leads people to believe that the evidence was really there.

Lionel can only hope that the court will reduce the damages assessed by the first court .

Steve Tapper
Northern Central High Railers

[Anonymous]

"Well guys, we seem to be on the brink of "The sky is blue." "No its orange." "No, its Purple." "No, its pink."
------------------------------

No, Bob, it's gray! I just looked outside. Defintely gray! [:D]

[cnw1995]

Grey here too - spelling things the 'English' way today.

[nblum]

"When documents are destroyed it is difficult to find the smoking gun"

Actually, the documents should be irrelevant. If there is a trade secret, you should be able to say what it is (MTH's expert witnesses could not), and you should be able to see it in the finished product by comparing the Lionel finished product (which is available) with the MTH finished product (ditto). The absence of testimony based upon the actual trade secrets involved and the failure of the judge to have MTH demonstrate those trade secrets being present in the actual Lionel product are major failings of how the case was adjudicated, IMO. The destroyed documents are a smoke screen to give the appearance of something wrong happening when the evidence, if it exists, should be right there in front of your nose, in the model itself. From Lionel's standpoint, they hope the appeals court will rule that the initial judge failed to conduct the trial in an appropriate manner for a trade secrets liability case.

[Anonymous]

The bottom line, Lionel was found guilty. I doubt that the appeals court will find anything that would result in a reversal of judgement. Lionel's only hope now that the amount of the award is reduced. When Jerry C came on board he should have called Mike and tried to work out an acceptable settlement. He would have saved about 2 years of legal fees. Lionel has been a predatory train company many times during its existance, they finally got what they deserved.

[Poppa_Zit]

QUOTE: Originally posted by Bill T.

The bottom line, Lionel was found guilty. I doubt that the appeals court will find anything that would result in a reversal of judgement. Lionel's only hope now that the amount of the award is reduced. When Jerry C came on board he should have called Mike and tried to work out an acceptable settlement. He would have saved about 2 years of legal fees. Lionel has been a predatory train company many times during its existance, they finally got what they deserved.

Can't start your lawn mower?

So we've returned to being unbiased and fair again. Another quasi-lawyer guy that apparently has more secret insider information upon which he's basing his opinions.

If "Lionel has been predatory ... and finally got what they (sic) deserved," pray tell by your justice system what does MTH deserve? $41 million?

[Anonymous]

I can think of many things to polish. Concrete is not one of them.

[Anonymous]

Anybody pay any attention to the recent Blackberry case? The one where a company (that actually doesn't make a darn thing) alleged patent infringement. They got a judge to issue orders to shut down the whole Blackberry system even as the US Patent Office was rapidly backtracking on it's original findings voiding all of the plaintive's patent claims. Blackberry ultimately paid off (greenmail) the plaintiff to keep it's business going. See, you can make money by not doing anything other than filing law suits.

Judges and jury's get stuff wrong. About once a week we hear of some poor shmuck whose been in jail for years for a crime he didn't commit being released because DNA or other advanced forensic techniques demonstrate they weren't the perp after all. This is why you have an entire appeals process.

If you read ALL of the Korean transcripts and go over ALL of the material that transpired here, MTH's real claim is that NO ONE ELSE can make detailed accurate scale model trains. If they do so, it must be because they copied our stuff.

The Korean engineers at the heart of this dispute did not "copy" the Samhongsa designs, they made two models, one for Korea Brass (aka Lionel) and one for Samhongsa (MTH). They did so using Samhongsa copyrighted AutoCad templates. This is what they were convicted of in Korea. The similarity in designs were a) same locomotive (duh) and b) same designer's doing the work. BTW, Samhongsa at the time allowed and even encourgaed engineers to do outside work. I think they now stipulate it can't be for a competitor. Hindsight is usually 20-20.

Re *** Maddox was he head of Lionel or a "puppet"? Which one was it? Somehow he's also been morphed in Bob Grubba? Was it some shadowy figure at Wellsprings that dispatched ninja spies to steal the top secret train plans? The reason the heads of Lionel were let go was because of problems in the distribution channel? One of the direct dealers was the criminal matermind behind Koreagate? Someone's been watching too much X-Files or needs to get their med's checked.

[Poppa_Zit]

I almost forgot. Those who apparently have MTH secret insider decoder rings -- care to go on the record right now with how MTH will fare in the trademark lawsuit filed against it by Union Pacific?

UNION PACIFIC -- just another predatory company picking on MTH.

[Anonymous]

Well, I wouldn't say that UP is picking on MTH. They're picking on everybody, without favoritism. At least MTH hasn't, to the best of my knowledge, caved in to their extortion. I could be wrong about that, but I assume if I am wrong, there would be no legal action in the first place.

[dougdagrump]

What ever happened to the MTH v QSI or was it QSI v MTH ?[zzz]