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June 13, 2006 ﾖ Regretfully M.T.H. Electric Trains feels compelled to respond to Lionelﾒs statement regarding our recently filed lawsuit in the Southern District of New York Bankruptcy Court. The action was filed against Lionel LLC for patent infringement pertaining to Lionelﾒs inclusion of certain patented features found in M.T.H.ﾒs sound and train control technology.
Make no mistake, Lionel initiated this process in 2002 that ultimately led up to our patent infringement claim that we did not intend to act on at this time. Rather than rebut Lionelﾒs slickly worded press release of June 13, 2006 with fancy words of our own, we believe consumers who desire to understand the nature of this dispute would be best served by reviewing an assortment of documents that lays out how this entire dispute began, could have ended two years ago and can still end or at the very least be postponed if so desired by Lionel today. Beginning Wednesday, June 14, 2006, a timeline of events complete with a series of downloadable documents will be available via various online forums that illustrates Lionelﾒs actions and M.T.H.ﾒs counter actions in the brightest of light.
M.T.H. made clear to Lionel before the patent infringement case was filed that we had no interest in acting on this case, if at all, until learning how the Sixth Circuit Appeals Court will rule on Lionelﾒs appeal in the theft of trade secrets case between the two firms. That case resulted in a finding of libel against Lionel, its Korean subcontractor Korea Brass and Korea Brassﾒ U.S. Agent, Yoo Chan Yang in 2004. The jury in the federal case awarded M.T.H. a judgment of nearly $41 million resulting in Lionelﾒs bankruptcy filing in late 2004 to avoid posting a bond while appealing the case to the Sixth Circuit Court of Appeals. On June 7, 2006, the Sixth Circuit held oral hearings on the case during which both parties presented and responded to questions from the three circuit court judges presiding over the appeal. Their opinion is expected within the next six to eight months.
When reviewing the online timeline, consumers will learn that Lionel started this fight up again on May 31, 2006 by filing a motion for discovery under Bankruptcy Rule 2004. Their motion contains 63 categories requesting but not limited to all documents pertaining to M.T.H.ﾒs sound and train control intellectual property stemming from the technologyﾒs birth to the present including all documents related to the design, manufacture and marketing of the technology. In addition, because of the lax standards of Bankruptcy Rule 2004, often characterized as a ﾓfishing expeditionﾔ, the document request is not constrained by any confidentiality agreements and can be distributed amongst Lionelﾒs engineers and marketing executives providing those individuals with an in-depth look at M.T.H.ﾒs technology and future promotional plans. Such details are not necessary to determine whether Lionel should object or not to M.T.H.ﾒs claim of patent infringement and instead provide Lionel with an in-depth peek into M.T.H.ﾒs intellectual property and marketing plans. As many know, M.T.H. has been in this position before when Lionel had access to M.T.H.ﾒs production schedules and designs and again fear what they will do with this kind of information if obtained in this manner.
By filing suit, M.T.H.ﾒs confidential documents will be protected under the Federal discovery rules and prevent Lionel from again obtaining some of the most sensitive information we own via their preferred method of discovery.
PATENT INFRINGEMENT TIMELINE
The following timeline illustrates the developments of patent infringement issues between M.T.H. Electric Trains and Lionel over the past four years. Under each date we have included a link to a PDF document that contains either actual correspondence between M.T.H. and Lionel counsel or court documents pertaining to the actual issue.
Consumers interested in understanding in more detail the actual events between the two firms, as they occurred, will find this information far more helpful than a press release designed to put the firm's best foot forward. With this information, consumers will be able to see both company's tactics and concerns so that one can draw a more balanced impression of what has been occurring in our industry.
It is our hope that when such information is digested, M.T.H.'s actions will be better understood.
June 21, 2002 - Lionel files a complaint against M.T.H. for falsely advertising its DCS System. In the complaint exhibit D is an affidavit by Lou Kovach (developer of TMCC I and TMCC 2) who Lionel had examine M.T.H.ﾒs DCS System. At that time Lionel could have added to the complaint any Patent Infringement claims it may have had against M.T.H.
September 4, 2002 - Lionel sends M.T.H. a letter claiming DCS infringes TMCC patents. Lionel demands that M.T.H. immediately cease and desist from selling any more DCS Systems.
September 13, 2002 - M.T.H. responds to Lionel's claim that Lionel owned the concept of "remotely controlling model trains" by sending Lionel prior art of a remote control system built by Marklin.
September 20, 2002 - Lionel asks M.T.H. to sent proof of the Marklin System.
October 3, 2002 - M.T.H. sends Lionel the Marklin brochures that predate Lionelﾒs Patent application.
October 15, 2002 - Lionel or its attorneys canﾒt find the dates on the Marklin brochures (which show the technology predates Lionel's patents) and ask M.T.H. to provide the definite dated material.
October 28, 2002 - M.T.H. informs Lionel where to look on the brochures to find the dates of August 1980 and January 1991 which demonstrate how the Marklin technology predates Lionel's patent claims.
November 13, 2002 - Lionel asks M.T.H. for any additional prior art that invalidates Lionel's patent claims.
January 30, 2003 - Lionel drops it baseless suit against M.T.H. for its false advertising claims relating to M.T.H.ﾒs DCS System.
September 18, 2003 - Lionel sends M.T.H. a sends to tell them that they are still investigating if M.T.H.ﾒs DCS System is infringing its patents one year after the original letters were exchanged.
September 26, 2003 - M.T.H. responds to Lionel's letter with a suggestion to Lionel that it review all the prior art M.T.H. cites in its DCS Patents.
September 29, 2003 - M.T.H. sends Lionel a letter pointing out its infringement of M.T.H.ﾒs registered trademark ﾓIvesﾔ, the use of the QSI HO Board that incorporates 1 scale mph increments for speed control, and M.T.H.ﾒs microprocessor controlled Synchronized Puffing Smoke feature.
October 10, 2003 - Lionel responds to M.T.H.ﾒs letter by agreeing not to use the Ives name in its next catalog and to investigate M.T.H.ﾒs claims of infringement.
October 27, 2003 - M.T.H. responds to Lionelﾒs October 10th letter.
November 19, 2003 - Lionel responds to M.T.H. claiming that a Lionel B&A Hudson steam locomotive features synchronized puffing smoke which predates M.T.H.'s synchronized puffing smoke patent.
December 3, 2003 - M.T.H. responds to Lionelﾒs claim that its B&A Hudson is prior art by pointing out that the ﾓpuffingﾔ action is achieved with a crude "mechanical apparatusﾔ and thus does not qualify as prior art to M.T.H.ﾒs microprocessor based method of achieving its synchronized puffing smoke action.
December 4, 2003 - M.T.H. sends Lionel a copy of M.T.H.ﾒs just-issued US Patent #6,655,640 covering synchronization of smoke and sound effects.
February 20, 2004 - M.T.H. writes Lionel after getting a copy of Lionelﾒs newly issued patent for its so called Smart Smoke system, which is exactly what M.T.H. had designed and put out in the market prior to Lionel filing its patent application. While Lionel was arguing that M.T.H.ﾒs synchronized smoke system was not patentable as evidenced by their belief that the Lionel B&A Hudson qualified as prior art, Lionel's own lawyers which had filed a patent application for the exact same invention.
As of June 14, 2006, Lionel has never responded to M.T.H.'s Letter concerning the synchronized smoke system.
December 27, 2004 - M.T.H. writes Lionel once again to introduce Lionelﾒs new lawyers and management team of Lionelﾒs continued violation of M.T.H.ﾒs Synchronization Smoke Patent, Speed Control Patent and use of M.T.H.ﾒs registered trademark of Ives. M.T.H. offers to settle all disputes with no monetary damages to Lionel if Lionel agrees to stop using M.T.H.ﾒs Intellectual Property.
As of June 14, 2006, Lionel has never answered M.T.H.ﾒs letter and continues to display no regard for M.T.H.ﾒs intellectual property. If Lionel had prior art to M.T.H.ﾒs patent, at the least, one would have expected them to at least say they did.
November 7, 2005 - Lionel sends M.T.H. another threat that M.T.H. is violating Lionel patents in an attempt to leverage M.T.H. into settling all its claims against Lionel.
Note: portions of the letter contain redacted information not pertaining to the patent infringement issues discussed in this timeline.
December 5, 2005 - M.T.H. responds to Lionel's threat that their request is unfounded and contains baseless claims of patent infringement on M.T.H.ﾒs part.
Note: portions of the letter contain redacted information not pertaining to the patent infringement issues discussed in this timeline.
May 31, 2006 - Lionel files a motion under Bankruptcy Rule 2004 to conduct discovery to determine whether to object to M.T.H.'s Patent Infringement Claim.
June 13, 2006 - M.T.H. files suit against Lionel for patent infringement.
June 13, 2006 - M.T.H. objects to Lionels discovery using Bankrupty Rule 2004.
Naturally we would prefer that none of the above events ever had taken place. Indeed, the information shows that we have tried in the past to terminate these actions upon Lionel's agreement. Alas, no such cooperation has occurred and in some cases, outright silence has been Lionel's preferred response.
Regardless of Lionel's stance today, M.T.H. continues to prefer that, at the very least, the actions of the past few weeks be terminated on both sides until after the Sixth Circuit Court of Appeals rules in the theft of trade secrets case. Standing down these actions until then is the very least our two firms can do to illustrate to the marketplace of our commitment to the industry and our customers.