Columbia, Maryland, June 7, 2004 --- The federal court case between M.T.H. Electric Trains and Lionel Trains, LLC concluded on June 7, 2004 with a verdict in favor of the plaintiff, M.T.H. Lionel and its co-defendants were found liable on MTH’s claims of misappropriation of MTH’s trade secrets. The jury also found that defendant’s actions were willful and malicious. The jury awarded M.T.H. damages in the amount of $40,775,745.00. The verdict was broken down as follows: MTH’s Past Lost Profits $11,978,887.00, MTH’s Future Lost Profits $13,794,598.00, Lionel unjust enrichment $12,834,820.00, and Korea Brass and Mr. Yoo Chan Yang unjust enrichment $2,167,440.00.
M.T.H. filed the suit in April 2000,
after learning that Lionel’s South Korean subcontractor, Korea Brass, had
acquired and used drawings & plans from M.T.H. subcontractor Samhongsa to
design and manufacture model trains for Lionel.
The suit alleged that Lionel violated Michigan trade secret law by using
M.T.H.’s designs to develop - in a very short period of time - die-cast
“O” Gauge scale steam locomotives to the quality it previously had never
before produced. The suit
specifically asserted that Lionel and co-defendants Korea Brass and Yoo Chan
Yang (the U.S. commissioned agent for Korea Brass) knew or had reason to know
that the Lionel trains were designed and manufactured using M.T.H.’s trade
secrets and had and used MTH’s Production Schedule information.
M.T.H. claimed it suffered substantial financial damages and profit
The case, which spanned two continents,
centered around Lionel’s knowledge of the origin of the plans and trade
secrets illegally appropriated from Samhongsa between 1997 and 2000. Several Korean individuals were convicted of these thefts and
sentenced to jail for their actions. Korea
Brass was found liable to Samhongsa in a civil suit that developed as a result
of the Korean events and subsequent convictions.
The federal Judge presiding over the U.S. case, the Honorable John
Corbett O’Meara, found each of these Korean events relevant to the U.S. case
and allowed them in as evidence.
Hundreds of exhibits were submitted during the four-week trial including copies of emails between the defendants, computer files seized as evidence that showed that M.T.H. files existed on design disks that were provided to Lionel, and expert testimony from professionals certified to render opinions on Korean trade secret law, product design, and economic harm to MTH.
Throughout the four-year ordeal, M.T.H.
Electric Trains focused on incorporating new efficiencies into its overseas and
domestic operations in order to remain competitive with what was becoming a more
aggressive Lionel product line. Despite
the loss of revenue resulting from the trade secret thefts, M.T.H. has been able
to expand its product line, infuse new technology into its products, and
maintain the interest and excitement of the model train marketplace with new
releases and marketing initiatives. Today
M.T.H. remains profitable, efficient and innovative in ways many its competitors
have been unable to match.
“Despite the wishes of some model
railroading enthusiasts that pursuing a lawsuit against Lionel wasn’t in the
best interest of the hobby, I felt our firm had no choice but to seek justice
against those who wronged us,” stated M.T.H. President Mike Wolf. “We stand by our conviction that the loss of these trade
secrets benefited our competition”, he added.
“We believe in pursuing our legal rights and felt that a court
challenge was the right thing to do. Laws
protecting innovation and the development of new technological improvements
ensure that manufacturers will keep investing in their products.
Ultimately those improvements provide consumers with better choices,
operating features and overall product value.
The federal court in Michigan agreed that enough merit existed in our
case to proceed to trial, and the jury rightfully found the evidence compelling
enough to warrant a verdict in our favor. The
award simply reinforces the seriousness of this type of business conduct and
should serve as a strong reminder that firms can’t look for shortcuts or thumb
their nose at ethical business practices.”
Posted June 22, 2004