Corporate Royalties for Model Kits

[lightning2000]

(Excerpted from StrategyPage.com)

We Want It All
October 29, 2007: In the U.S., Congress is being called on to prevent defense corporations from shutting down production of model kits, films or games that use images of military equipment. Over the last decade, the weapons manufacturers have increasingly demanded payments to allow such depictions.

For over half a century, model kits have been sold that enable military history buffs to assemble scale models of military ships, aircraft and vehicles. But that era is coming to an end, as the manufacturers of the original equipment, especially aircraft, are demanding high royalties (up to $40 per kit) from the kit makers. Since most of these kits sell in small quantities (10-20,000) and are priced at $15-30 (for plastic kits, wooden ones are about twice as much), tacking on the royalty just prices the kit out of the market. Popular land vehicles, which would sell a lot of kits, are targeted as well. The new U.S. Army Stryker armored vehicles were not available for several years because of royalty demands, and this created bad publicity for the vehicle manufacturer. Even World War II aircraft kits are being hit with royalty lawsuits. Some deals have been made, but the royalty demands are seen as greedy and unreasonable by everyone by the lawyers.

These royalty demands grew out of the idea that corporations should maximize "intellectual property" income. Models of a company's products are considered the intellectual property of the owner of a vehicle design. Some intellectual property lawyers have pointed out that many of these demands are on weak legal ground, but the kit manufacturers are often small companies that cannot afford years of litigation to settle this contention. In the past, the model kits were considered free advertising, and good public relations, by the defense firms. The kit manufacturers comprise a small industry, and the aircraft manufacturers will probably not even notice if they put many of the model vendors out of business. Some model companies will survive by only selling models of older (like World War I), or otherwise "no royalty" items (Nazi German aircraft) and ships. Foreign aircraft, from manufacturers that have not got the same kind of legal advice, would also remain available. But American aircraft were always the bulk of sales, and their loss will cripple many of the kit makers. Some of the vehicle manufacturers have noted the problem, and have lowered their demands to a more reasonable level (a few percent of the wholesale price of the kits).

The lawyers also went after film and game producers, but were rebuffed because many of these operations are part of large corporations, who were willing to fight back. The rapacious royalty seeking attorneys backed off there, and kept after the smaller model kit firms. All this is actually in sharp contrast to past practice. For decades after World War II, the defense companies had their public relations departments work closely with the model kit manufacturers, and there was never any thought of demanding royalties. But then came the idea of "maximizing intellectual property" (without considering the side effects) and the lawyers displaced the public relations specialists.

The U.S. House of Representatives is still considering a new law, H. R. 4806, which would prohibit defense contractors from requiring licenses or fees for use of military likenesses and designations. The Department of Defense opposes this law, as do most defense industry lobbyists.

Lightning2000

[Col.Pickle]

That's retarded! Don't the weapons manufacturers have enough money already?

[ltcbj]

I have just written to my congressman about this.

"Dear Representative Jones:

It has come to our attention that the House is considering bill HR 4806
which would protect hobby model and kit manufacturers, small businesses
specializing in models of U.S. military ships, planes and vehicles, from
having to pay rapacious defense manufacturers for the privilege of using
the semblances of the original designs. After many decades of producing
model kits of the hardware that were used to win our wars these major
corporation's have entrusted the living history of our nation to money
hungry lawyers.

For many of our children their first real taste of American history comes
through the purchase and building of an airplane, ship or tank model kit.
The defense contract corporations have just recently decided to demand
royalties on what was once considered simply as good publicity. They are
demanding outrageous "royalties" on each kit- royalties that would in
effect price the kit out of the market. In effect they are threatening to
put many small manufacturers out of business with their demands.

These model kits have been a staple of childhood and a segue into history
for generations of American boys since before World war Two. Please do not
let corporate demand for profits end what has been a fulfilling hobby for
so many millions.

Support HR 4806 and urge your fellow representatives to do so as well.

Your Constituents,"

I would urge all the members of this board to write their own reprehensibles, uh, representatives urging support of this bill.

Thank you Lightning for making us aware of the situation. This could spell an end to our hobby's future if this bill is not enacted.

[Rowsdower]

I like to say I'm surprised but I'm not.

This rates four and four

[ltcbj]

I even wonder how much of a real argument that they have anyway. Haven't most of these images fallen into the public domain by now? Is the new slogan "First we kill our enemies, then we kill our friends."??

[aferguson]

since the defense contractor's revenues come from the US government, to develop and manufacture these military vehicles and the US government's revenues come from tax payers, shouldn't the royalties go to the tax payers?

If these companies want to spend their own money developing planes, tanks and ships, then they should be able to claim royalties when the likenesses are used i guess, but if they are not putting up the development and design costs, then the royalties should go to who does.

[ltcbj]

I am going to go to other forums on which I am a member and inform them of this corporate stealth attack on our hobby.

Lightning- may I use your post verbatim- just copy and paste it, giving proper identification of the source (you) of course?

[lightning2000]

Hi Itcbj,
Actually, the source is www.StrategyPage.com. Please attribute the article to them, not to us.

Cordially,

Lightning2000

[ltcbj]

Thanks for the attribution Lighhtning.

[theToyFederation]

On the Ehanger.com forum (military aviation art site) they were discussing this back in March.
http://www.ehangar.com/modules.php?name ... pic&t=1338
Frankly the big defense firms need to get a clue

[Rowsdower]

Hey these poor starving aerospace giants are barely scraping by! I mean come on guys they only get a few billion per Raptor! They need the revenue from these royalties from including a Corsair in a flight sim or selling a F-15 model or they might go broke!

[ltcbj]

I mean they are, as a rule, just in business trying to make a buck. Pretty much like the rest of us are. But their business is making weapons. They earn their money from what they actually manufacture, almost always for the government. To my mind those weapons, when they leave the factory and are put into service become part of our armed forces and to the extent that they are in fact employed enter the public domain.

No "model manufacturer" is making full sized one-to-one working models of the Stryker, Abrams or Raptor, fully functional out of rolled steel, aluminum and exotic materials. The model makers are creating externally detailed hollow likenesses out of plastic, wood and soft metals. There is no stepping on property or "intellectual" rights going on.
What about the people who buy an old Mustang (or even better an old Lightning) and refurbish it. Have they messed with the "intellectual property" of North American? Did Merlin mess with North American's "intellectual property" by putting their engines into someone else's airframe??

This is just another example of the unholy lawyering-up this nation. The tort bar is constantly seeking new ways to squeeze money out of anything that exists. It is the "Edwardsing" of America and it makes me sick.

[aferguson]

at $40 per kit and if 20,000 kits were sold (which they wouldn't be at those high prices but let's pretend) that's $800,000 in royalties; which is probably the cost of one oleo strut on the F-35. Of course that's gross, then you have to deduct legal fees etc so they would net less.

But what actually will happen is that model kits of the litigating company's products will no longer be made, so they will make zero in royalties, will have shelled out a fair bit in legal fees trying to collect royalties on products that won't be made and have created loads of ill will among some of the american public. I don't understand what the logic is behind this.

I can see the day when a bunch of pissed off model builders march on Washington DC, X-acto knives in hand.

[ltcbj]

I don't even think that the corporations care about the small amount of royalties that they would get. It's just busy work for the lawyers who are always seeking new and novel ways to fleece other people and redistribute other's wealth into their own pockets.

The Tortish and the voracious.

[ltcbj]

Ok -- before anyone goes writing a Congressman about this, here's a few important facts:

First, HR4806 was the 109th Congress version of the bill (that is, the 2-year Congress that ended Dec 31, 2006). The current version is HR607 The Military Toy Replica Act, introduced by Rep. Rob Andrews, Democrat of New Jersey. The only co-sponsor is Jim Saxton, a New Jersey Republican. The bill is currently sitting in the House Armed Services Committee. Until it is acted on there, it is highly unlikely that it will be attached to anything else.

In a nutshell, writing to any Congressman that doesn't sit on Armed Services is probably a waste of time. For what its worth, Rep. John Kline, who represents Minneapolis and St. Paul (and therefore GHQ's environs), is on armed services. While he is a Republican, and therefore in the minority on the committee, Armed Services does tend to be more bipartisan than some of the others. If you are going to contact anyone, this would be the guy.

[Rowsdower]

$800,000 in royalties; which is probably the cost of one oleo strut on the F-35.

Probably not too far off on that one.

[jrs.]

I say lighten up everything is made in China anyways, when the hell did china care about US patent laws or any royalties???

[ltcbj]

When the kits get imported to the USA the corp.s would demand the royalties on each kit. China might make the kits and sell them in other countries but here any retailer who sold them would have the added royalty cost added on when it got to him.

[jrs.]

I thought it would be the manufactures? Not the retail end? Guess I dont import or export anything though??? Cant imagine the retailers having to catch it? But the manufactures including it in the price etc I could see?

In any event it just seems like a real stupid idea on their part. I think that they maybe have some rights to some degree and for some time but again I simply dont know much about royalties, trademark law, imports exports terrifs etc?

[aferguson]

if they made the royalty reasonable, like $1 per kit, i don't think anyone would really mind; but requesting $40 per kit seems more like they are attempting to stop the manufacture of model kits of their products, rather than make a few extra dollars.

[VMF115]

viewtopic.php?t=5658&highlight=

I thought I would put my two cents in on this one as well.

I will break down the act and show you were it fails to help most manufacturers:

Military Toy Replica Act - Directs the Secretary of Defense to require that any contract entered into (this means from the time the act is put into law) or renewed (this means renewing an existing contract from the time the act is put into law) by the Department of Defense include a provision prohibiting the contractor from requiring toy and hobby manufacturers, distributors, or merchants to obtain licenses from, or pay fees to, the contractor for the use of military likenesses or designations on items provided under the contract.

The law does nothing to assist in limiting our royalties on last year’s models. For example, if the contract for the A-10 was renewed on July 1 of this year by the DOD and the act is signed into law today, we would still have to pay royalties on the A-10. This act only protects manufacturers on paying royalites for products whose contracts are entered into or renewed AFTER the act is signed.

As for royalties:
Boeing for example…. Royalties are paid on the name (trademark) of the aircraft. Many people think that we are paying to say Boeing on the side of our box. This is wrong. We are paying to write F-86 or Sabre Jet on the side of the box. Boeing then requires us to put their licensing mark (Boeing) on the boxes that contain one of their trademarks. I had one gentleman write me a nice letter stating that we should have saved our money on the Boeing logo and put it into a better pilot. I got a good laugh... he is correct about the pilot but wrong about paying Boeing. Their logo is pretty much free, we pay to say F-86.

The only aircraft that Boeing has rights to that requires a license for the SHAPE of the aircraft is the 747. They do not have the rights to the likeness of the Sabre, 104, F-4, F… In essence one could remove all trademarks, i.e. F-86, Sabre Jet, North American from our boxes and not have to put Boeing on the box or pay for royalties.

Why don’t we do this? Because you would not by our product if I called the very familiar Sabre Jet F-86… the Jason Jet. I like the ring of it, but the idea is not a winning idea.

So the market itself is perpetuating the payments of royalties because of the words, not the shape, you expect to see on the box.

Regards,
Jason

Here is what Jason said about it.

[ltcbj]

jrs.: You proposed a scenario involving manufacturers out side the reach of the U.S. judicial system. If the manufacturer is outside that reach somebody inside will take the hit. Isn't that how it always works? That or the items would be banned for sale in the USA and kits would be smuggled in by "mules" from Asia via S. America and Mexico. "Cigarette boats stopped on the high seas and throwing Hasagewa model ships into the sea. "Wetbacks" sneaking across our southern border with big sacks like Santa Claus; then whispering to ten (and thirty) year old boys "sssst- you wanna Monogram P-51, only twenteee-fife dollars" from parked cars with the engines running.... Not a pretty picture.

[Coreyeagle48]

Greetings

We had a very similar incident in our schools with this involving Disney characters. Several of my fellow coworkers wanted to decorate their rooms with Disney characters the students made by enlarging them on big pieces of paper then tracing them by means of an overhead projector. The characters looked really good but our school adminstrators said not to put them up because apparently some teachers somewhere else did the same thing and Disney actually sued the school district for copyright infringement. There have also been other instances where companies have made Disney characters on products and the Disney company has sued because they were not paid royalty fees.

Even though Boeing provides for the government as does Lockheed, they are still privately held companies with defense contracts. The Department of Defense has picked these companies to do business with them, not the other way around. This isn't the Soviet Union where the factories must cooperate with the state, Boeing could techincally at any time drop out of their agreement or instead of producing F-15E's produce a jet for the public. Just because they work for the United States Government does not mean that they shouldn't be able to charge royalties for the use of their name. It is more about as a company or person protecting your creations and now your name gets used than anything else. This goes for companies that work for the government too. Boeing really doesn't want an F-86 on the toy market that looks nothing like an F-86.

I agree that the companies should be allowed to charge royalties for the use of their names, likenesses and trademarks. However, it should be at a price that allows toy companies to stay in business and not have to pass a signifcant markup to their consumers.

Corey

[ltcbj]

Corey: I think that these images (and names) have moved into the public domain, and that certainly, for the WW2, pre-war, Korean War and for others at least up to the present. An argument might be made that vehicles currently in use haven't achieved "historical" status but the mere fact that they are in use seems to pretty much guarantee that; doesn't it?

Certainly an F-86 that doesn't look like one would neither have attached royalties nor any following in the model world. Generic jets, tanks and ships have no place or standing.

I really think that the demand for royalties falls under the same schema as so many law suits do today- lawyers looking for pockets to fleece.

Many years ago Disney forced a toy store in West L.A. to remove images of Disney characters from their window even though they were selling the characters inside. Disney is very image conscious. They did not want some other company (the small independent toy store) using their well established images for profit. But that is different from the situation we are talking about here. Here the defense contractor is supplying a product for public use and in fact has no "intellectual property right" to it, its name or its image. Also the item itself (the F-86 for instance) has a built in obsolescence as technology improves. Remember, the government both names the vehicles (provides designations) and uses them for the public good. The Sherman tank was built by numerous manufacturers for instance- should each of them collect their own or a share of the royalties?

The Colt .45 automatic is now cloned by dozens of manufacturers. Do they each pay a royalty to Colt for each one made? Of course in this case we are not talking about models but the real thing. It would be interesting to learn if they do or not. Any body know?

We are just talking about toys here. I really don't agree that the defense contractors should be pulling their own off the top....

[aferguson]

I think Disney is a scum bag company. I've heard so many bad stories about them, the latest of which is about lemmings. Disney is responsible for the myth (yes it's a myth) that every few years, in order to reduce their population, lemmings commit mass suicide by marching over cliffs.

The truth is that these lemmings are merely migrating to less crowded areas, often by jumping into bodies of water and swimming for miles.

Disney thought the mass suicide story had more zip to it, so told the tale in a well known documentary they filmed in the 70's. They even went to the lengths of physically throwing thousands of captured lemmings over cliffs and filming it, as proof of the mass suicide story.