Lionel Quality Electric Trains
Jerry Calabrese comments on latest MTH lawsuit
06/13/2006


Dear Friends,

The least favorite part of my job is commenting on legal issues, but I thought it was important to set the record straight from the outset and confirm that Lionel has, again, been sued by MTH.  

Yesterday, despite its prior statements to the contrary, MTH sued Lionel for alleged infringement of its smoke and speed related patents, seeking unspecified damages and injunctive relief.  MTH also asked the court to preemptively rule that its own trains do not violate four of Lionel's patents, or to declare our patents invalid.  Lionel does not believe that it infringes MTH's patents and intends to vigorously contest these claims and defend its patents, which pre-date the MTH patents in question. 

We’re disappointed that MTH has again decided to resort to litigation at this time, especially since the alleged smoke and synchronized speed related patent infringement issue was already filed in the bankruptcy court as a $17 million secondary claim, and would have had to be resolved before Lionel could emerge from bankruptcy, in any case. There are a lot of possible explanations as to why MTH chose to bring this action now, but I’ll refrain from interpretation or speculation. 

What I do know for sure is that last week the Federal Court of Appeals, in Cincinnati, heard our arguments about why we believe the MTH judgment against Lionel was wrong and should be thrown out, mandating a new trial.  Obviously, there are no certainties when it comes to the decisions of courts, but based on the tough questions the judges asked the MTH lawyers, we’re cautiously optimistic of a favorable decision. 

Based on their newest legal action, I’m beginning to think that MTH's perception of last week's oral arguments may be the same as our own. 

As I’ve repeatedly said, I’d prefer that the rivalry between MTH and Lionel be settled in the court of public opinion, by consumers who vote with their purchases, and not the courts of law. Having said that, please be assured that we’re determined to handle both at the same time.  Despite the additional burden and expense caused by this new MTH lawsuit, neither Lionel’s business nor its commitment to making and selling the best possible model trains will be disrupted. Thanks again for your continued support. 

Best Regards,

Jerry Calabrese

Phone 586-949-4100 Fax 586-949-1013 WWW.LIONEL.COM