MTH Electric Trains
Encyclopedia
MTH Electric Trains, formerly Mike's Train House, is an American
toy train
and model railroad designer, importer, and manufacturer, based in Columbia, Maryland
. It is a privately held company
.
MTH's founder, Mike Wolf, started assembling and selling trains at the age of 12 in 1973 for Williams Electric Trains
, which had begun producing reproductions of trains manufactured by Lionel Corporation in the early 1970s. By 1980, Wolf was operating a mail order
business out of his parents' home, selling Williams trains and parts out of his bedroom.
When Williams decided to end its line of Lionel Standard gauge
and O gauge reproductions, Wolf bought the tooling and continued building the replicas. Although many published reports have stated that Williams had acquired original Lionel tooling, both Wolf and Jerry Williams deny this claim.
From 1983 to 1987, MTH marketed the reproduction trains on its own. In 1987, Lionel approached Samhongsa, MTH's subcontractor in South Korea
, about manufacturing Standard Gauge trains that bore the Lionel name. Samhongsa directed Lionel to Wolf. Before the end of 1987, MTH became a Lionel subcontractor, allowing MTH's Lionel reproductions to bear the Lionel name and be marketed by Lionel
itself. As part of the agreement, MTH sold Lionel trains product as part of its mail order business. By the early 1990s, MTH was the second-largest mail-order Lionel dealer in the country.
MTH had a troubled relationship with Lionel, and it ended in April 1993, when MTH decided to re-enter the market with an O scale model of the General Electric
Dash 8 diesel locomotive, which Wolf had first offered to produce for Lionel. Turned down, Wolf decided to market the locomotive himself, citing reduced orders from Lionel for MTH's replicas as the reason. Then-Lionel CEO Richard Kughn, who learned of the decision from a flyer at a train show, responded by canceling MTH's Lionel dealership. MTH in turn filed an anti-trust suit against Lionel, which was settled out of court in 1995.http://www.inc.com/magazine/20050201/mth.html MTH then expanded its product line, adding the former Lionel vintage reproductions, reproductions of equipment from other manufacturers, and new original designs. By 1998, MTH was the largest manufacturer of O gauge trains, eclipsing Lionel's market share by approximately $60 million to $50 million. At its peak, MTH employed about 135 people.
MTH also produced many sets of New York City Subway
cars as well as two sets of Chicago 'L'
cars. The NYC Subway sets were licensed by the MTA
. Lionel currently holds this license in O scale while Walthers
holds the license in HO scale after acquiring Life-Like. The license transfer is in part due to MTH producing sets covered in graffiti.
MTH and Lionel developed a rivalry similar to that between Lionel and Ives
in the 1930s and Lionel and American Flyer
in the 1940s and 1950s. Although their train cars are the same size and can operate as part of the same train, the two companies' locomotives use their own proprietary electronic control systems. MTH uses a system called Digital Command System (DCS), which is capable of operating MTH engines as well as engines using Lionel's Trainmaster Command Control
(TMCC), used by many other O gauge manufacturers, and Digital Command Control
(DCC), which is an open industry standard used by most two-rail scales.
In December 1999, three former employees of Samhongsa rival Korea Brass were convicted of industrial espionage for stealing and using proprietary MTH designs to produce models for Lionel. In April 2000, MTH again sued Lionel, this time for industrial espionage, citing as evidence original electronic drawing files and the precedent set in the South Korean criminal courts. On June 7, 2004, a jury in Detroit, Michigan
found Lionel guilty and awarded MTH $40.8 million. The following day, Lionel announced it would appeal the verdict. On December 14, 2006, the judgement was overturned on appeal, citing legal mistakes in the jury trial, and a new trial ordered.
MTH has also traded lawsuits with Quantum Sound Industries, whose technology is used to add electronic sound to model locomotives from various manufacturers. MTH's critics also say the company patented some elements of DCC, which was supposed to be an unencumbered open standard
.
As of June 2004, MTH has 57 employees and annual sales of about US$40 million. News reports from the fall of 2004 estimated MTH's annual sales at closer to $30 million. As a privately held company, MTH does not officially release sales figures. In its 2007 reorganization plan, Lionel estimated MTH's annual revenue at about $30 million and stated that MTH is the second-largest manufacturer of O gauge trains in terms of market share.
Although MTH is disliked by Lionel collectors
because its reproductions have lowered the market value of all but the most pristine vintage Lionel equipment, and disliked by some other hobbyists because of its aggressive marketing and legal tactics, MTH is widely credited with bringing innovations into a hobby that had changed very little since the 1950s, as well as lowering prices.
On December 30, 2005, the Union Pacific Railroad sued MTH for using its logo
s, along with the logos of various fallen flag
railroads it has acquired, without a license. UP had previously sued other manufacturers, most notably Lionel and Athearn
, for their use of the logos. At the time of the suit, UP had 104 licensees. The suit requested that MTH stop using the trademarks, pay damages, and send UP-branded inventory to the railroad to be destroyed.
On November 8, 2006 MTH Electric Trains and Union Pacific Railroad announced that they have amicably settled the trademark infringement case that U.P. filed against MTH in Omaha, Nebraska federal court. The settlement benefits both parties, as well the entire model railroad industry. It allows Union Pacific to continue to protect its intellectual property, and authorizes MTH’s use of Union Pacific’s trademarks and paint designs on model train products and accessories. Union Pacific has also decided to change its trademark-licensing program so that model railroad manufacturers will no longer have to pay a royalty, and will enjoy a perpetual license to use Union Pacific trademarks and paint designs on model railroad products.
In late 2007 Lionel and MTH settled their long-term fight over trade secrets and patent infringements. In March 2008 the court approved a settlement that includes a one time cash payment to MTH. The payment will take place soon after Lionel exits bankruptcy. The details of the settlement are under court seal.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
toy train
Toy train
A toy train is a toy that represents a train. It is distinguished from a model train by an emphasis on low cost and durability, rather than scale modeling. A toy train can be as simple as a pull toy that does not even run on track, or it might be operated by clockwork or a battery...
and model railroad designer, importer, and manufacturer, based in Columbia, Maryland
Columbia, Maryland
Columbia is a planned community that consists of ten self-contained villages, located in Howard County, Maryland, United States. It began with the idea that a city could enhance its residents' quality of life. Creator and developer James W. Rouse saw the new community in terms of human values, not...
. It is a privately held company
Privately held company
A privately held company or close corporation is a business company owned either by non-governmental organizations or by a relatively small number of shareholders or company members which does not offer or trade its company stock to the general public on the stock market exchanges, but rather the...
.
MTH's founder, Mike Wolf, started assembling and selling trains at the age of 12 in 1973 for Williams Electric Trains
Williams Electric Trains
Williams Electric Trains is an American toy train and model railroad manufacturer, based in Columbia, Maryland. That was recently sold to Bachmann Industries in October 2007....
, which had begun producing reproductions of trains manufactured by Lionel Corporation in the early 1970s. By 1980, Wolf was operating a mail order
Mail order
Mail order is a term which describes the buying of goods or services by mail delivery. The buyer places an order for the desired products with the merchant through some remote method such as through a telephone call or web site. Then, the products are delivered to the customer...
business out of his parents' home, selling Williams trains and parts out of his bedroom.
When Williams decided to end its line of Lionel Standard gauge
Standard gauge
The standard gauge is a widely-used track gauge . Approximately 60% of the world's existing railway lines are built to this gauge...
and O gauge reproductions, Wolf bought the tooling and continued building the replicas. Although many published reports have stated that Williams had acquired original Lionel tooling, both Wolf and Jerry Williams deny this claim.
From 1983 to 1987, MTH marketed the reproduction trains on its own. In 1987, Lionel approached Samhongsa, MTH's subcontractor in South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, about manufacturing Standard Gauge trains that bore the Lionel name. Samhongsa directed Lionel to Wolf. Before the end of 1987, MTH became a Lionel subcontractor, allowing MTH's Lionel reproductions to bear the Lionel name and be marketed by Lionel
Lionel, LLC
Lionel, LLC is a designer and importer of toy trains and model railroads, based in Chesterfield Township, Michigan. Its roots lie in the 1969 purchase of the Lionel product line by cereal conglomerate General Mills....
itself. As part of the agreement, MTH sold Lionel trains product as part of its mail order business. By the early 1990s, MTH was the second-largest mail-order Lionel dealer in the country.
MTH had a troubled relationship with Lionel, and it ended in April 1993, when MTH decided to re-enter the market with an O scale model of the General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
Dash 8 diesel locomotive, which Wolf had first offered to produce for Lionel. Turned down, Wolf decided to market the locomotive himself, citing reduced orders from Lionel for MTH's replicas as the reason. Then-Lionel CEO Richard Kughn, who learned of the decision from a flyer at a train show, responded by canceling MTH's Lionel dealership. MTH in turn filed an anti-trust suit against Lionel, which was settled out of court in 1995.http://www.inc.com/magazine/20050201/mth.html MTH then expanded its product line, adding the former Lionel vintage reproductions, reproductions of equipment from other manufacturers, and new original designs. By 1998, MTH was the largest manufacturer of O gauge trains, eclipsing Lionel's market share by approximately $60 million to $50 million. At its peak, MTH employed about 135 people.
MTH also produced many sets of New York City Subway
New York City Subway
The New York City Subway is a rapid transit system owned by the City of New York and leased to the New York City Transit Authority, a subsidiary agency of the Metropolitan Transportation Authority and also known as MTA New York City Transit...
cars as well as two sets of Chicago 'L'
Chicago 'L'
The L is the rapid transit system serving the city of Chicago and some of its surrounding suburbs. It is operated by the Chicago Transit Authority...
cars. The NYC Subway sets were licensed by the MTA
Metropolitan Transportation Authority (New York)
The Metropolitan Transportation Authority of the State of New York is a public benefit corporation responsible for public transportation in the U.S...
. Lionel currently holds this license in O scale while Walthers
Wm. K. Walthers
Wm. K. Walthers, Inc. is a manufacturer and distributor of model railroad supplies and tools.Wm. K. Walthers, Inc., was founded in Milwaukee in 1932 -- but really, it started years earlier, when seven-year-old Bill Walthers got his first taste of the hobby with a small, wind-up toy train for...
holds the license in HO scale after acquiring Life-Like. The license transfer is in part due to MTH producing sets covered in graffiti.
MTH and Lionel developed a rivalry similar to that between Lionel and Ives
Ives Manufacturing Company
The Ives Manufacturing Company, an American toy manufacturer from 1868 to 1932, was the largest manufacturer of toy trains in the United States from 1910 until 1924, when Lionel Corporation overtook it in sales.-Early history:...
in the 1930s and Lionel and American Flyer
American Flyer
American Flyer was a popular brand of toy train and model railroad in the United States in the middle part of the 20th century.- The Chicago era, 1907–1938 :...
in the 1940s and 1950s. Although their train cars are the same size and can operate as part of the same train, the two companies' locomotives use their own proprietary electronic control systems. MTH uses a system called Digital Command System (DCS), which is capable of operating MTH engines as well as engines using Lionel's Trainmaster Command Control
Trainmaster Command Control
Trainmaster Command is Lionel's electronic control system for O scale 3-rail model trains and toy trains. Conceptually it is similar to Digital Command Control , the industry's open standard used by HO scale and other 2-rail DC trains...
(TMCC), used by many other O gauge manufacturers, and Digital Command Control
Digital Command Control
Digital Command Control is a standard for a system to operate model railways digitally. When equipped with Digital Command Control, locomotives on the same electrical section of track can be independently controlled....
(DCC), which is an open industry standard used by most two-rail scales.
In December 1999, three former employees of Samhongsa rival Korea Brass were convicted of industrial espionage for stealing and using proprietary MTH designs to produce models for Lionel. In April 2000, MTH again sued Lionel, this time for industrial espionage, citing as evidence original electronic drawing files and the precedent set in the South Korean criminal courts. On June 7, 2004, a jury in Detroit, Michigan
Detroit, Michigan
Detroit is the major city among the primary cultural, financial, and transportation centers in the Metro Detroit area, a region of 5.2 million people. As the seat of Wayne County, the city of Detroit is the largest city in the U.S. state of Michigan and serves as a major port on the Detroit River...
found Lionel guilty and awarded MTH $40.8 million. The following day, Lionel announced it would appeal the verdict. On December 14, 2006, the judgement was overturned on appeal, citing legal mistakes in the jury trial, and a new trial ordered.
MTH has also traded lawsuits with Quantum Sound Industries, whose technology is used to add electronic sound to model locomotives from various manufacturers. MTH's critics also say the company patented some elements of DCC, which was supposed to be an unencumbered open standard
Open standard
An open standard is a standard that is publicly available and has various rights to use associated with it, and may also have various properties of how it was designed . There is no single definition and interpretations vary with usage....
.
As of June 2004, MTH has 57 employees and annual sales of about US$40 million. News reports from the fall of 2004 estimated MTH's annual sales at closer to $30 million. As a privately held company, MTH does not officially release sales figures. In its 2007 reorganization plan, Lionel estimated MTH's annual revenue at about $30 million and stated that MTH is the second-largest manufacturer of O gauge trains in terms of market share.
Although MTH is disliked by Lionel collectors
Collectible
A collectable or collectible is any object regarded as being of value or interest to a collector . There are numerous types of collectables and terms to denote those types. An antique is a collectable that is old...
because its reproductions have lowered the market value of all but the most pristine vintage Lionel equipment, and disliked by some other hobbyists because of its aggressive marketing and legal tactics, MTH is widely credited with bringing innovations into a hobby that had changed very little since the 1950s, as well as lowering prices.
On December 30, 2005, the Union Pacific Railroad sued MTH for using its logo
Logo
A logo is a graphic mark or emblem commonly used by commercial enterprises, organizations and even individuals to aid and promote instant public recognition...
s, along with the logos of various fallen flag
Fallen flag
A fallen flag is a North American railroader and railfan term referring to railroad company no longer in existence due to bankruptcy or merger.-Background:...
railroads it has acquired, without a license. UP had previously sued other manufacturers, most notably Lionel and Athearn
Athearn
Athearn is a United States manufacturer of model railroad equipment, produced and distributed by American hobby manufacturer Horizon Hobby, Inc. of Champaign, Illinois, USA.-History:...
, for their use of the logos. At the time of the suit, UP had 104 licensees. The suit requested that MTH stop using the trademarks, pay damages, and send UP-branded inventory to the railroad to be destroyed.
On November 8, 2006 MTH Electric Trains and Union Pacific Railroad announced that they have amicably settled the trademark infringement case that U.P. filed against MTH in Omaha, Nebraska federal court. The settlement benefits both parties, as well the entire model railroad industry. It allows Union Pacific to continue to protect its intellectual property, and authorizes MTH’s use of Union Pacific’s trademarks and paint designs on model train products and accessories. Union Pacific has also decided to change its trademark-licensing program so that model railroad manufacturers will no longer have to pay a royalty, and will enjoy a perpetual license to use Union Pacific trademarks and paint designs on model railroad products.
In late 2007 Lionel and MTH settled their long-term fight over trade secrets and patent infringements. In March 2008 the court approved a settlement that includes a one time cash payment to MTH. The payment will take place soon after Lionel exits bankruptcy. The details of the settlement are under court seal.