K-Line was a manufacturer of O gauge electric trains and accessories from approximately 1980 to 2010. Its scrappy, value-oriented approach to the hobby endeared K-Line trains to many of its customers.
K-Line Electric Trains and Lionel tended to target one another in their advertisements. They referred to one another as “Brand K” and “Brand L.” In 2005, the rivalry turned to litigation, which eventually resulted in K-Line admitting wrongdoing, going out of business, and Lionel licensing and selling products under the K-Line name from 2006 to 2010.
An overview of K-Line trains
K-Line’s parent company, MDK Inc., was based in Chapel Hill, North Carolina. Its founder, Maury D. Klein, was a nationally known Lionel dealer who advertised in magazines like Model Railroader.
K-Line was founded initially in 1974 to manufacture Lionel-compatible train track. In the mid 1980s, K-Line was able to acquire tooling and manufacturing rights from Marx, a famous toy company that went out of business in 1978, and from Williams Electric Trains, a manufacturer that had acquired parts of Kusan’s train product line. Kusan, a manufacturer of motorized plastic toys, briefly competed with Lionel in the 1950s but with limited success. Marx was much more successful, ranking behind Lionel and American Flyer in terms of prestige but not necessarily in sales. Marx outsold American Flyer and at times its sales approached those of Lionel.
K-Line entered the market at a time when the hobby was in transition. Lionel Corporation, the company that made the famous trains of the 1950s and earlier decades, had sold the rights to its trains in 1969 to cereal conglomerate General Mills and become a chain of toy stores. General Mills kept the Lionel brand alive and in the public consciousness and out of bankruptcy, but struggled with management and marketing. Around the time that K-Line entered the picture, General Mills had moved Lionel production to Mexico unsuccessfully, then spun the company off along with Kenner and Parker Bros.
K-Line started out doing what Marx and Kusan had done: selling trains of reasonable quality for much less than Lionel charged. K-Line was able to quickly put together a reasonable product lineup based on Marx designs. K-Line copied Lionel’s operating coupler so its offerings were completely compatible with Lionel.
How K-Line came to own the Marx tooling
When Marx discontinued its trains, it was under the ownership of Quaker Oats and under the management of another Quaker Oats subsidiary, Fisher-Price. Fisher-Price planned to scrap the Marx trains tooling, but some employees convinced management that the tooling had value beyond its scrap value. Fisher-Price sold the tooling to Maury Klein.
Initially Klein purchased tooling for Marx’s old plastic buildings in 1980, and started production of O27-profile track along with the buildings. Klein was able to locate tooling for the O gauge trains themselves in 1984. Some of it was unusable, as it had been stored in a dilapidated warehouse that didn’t protect it from the elements. By 1985, Klein was producing trains from the old Marx tooling, starting a 20-year run. In 1986, Klein purchased tooling for the former Kusan production from Williams Electric Trains. This rounded out the box car, locomotive and other former Marx tooling he had acquired.
K-Line made extensive use of the Marx 333 steam locomotive and 1998 diesel switcher tooling. The plastic Marx 1829 steamer only saw use in K-Line’s K1311 Ringling Bros circus set. K-Line also acquired the Marx E7 diesel tooling but never put it into production. Some test shots K-Line performed later surfaced.
K-Line trains retained a following among Marx enthusiasts because the trains were based on Marx designs, and many spare parts from K-Line continued to fit old Marx trains.
K-Line trains move upmarket
The old Marx and Kusan tooling was designed to compete with Lionel’s postwar offerings and utilized selective compression. These products tend to be called “O gauge” and sell for less money than 1:48 O scale products. The distinction can puzzle many hobbyists.
By the late 1990s, K-Line’s two largest competitors, Lionel and MTH had built extensive O scale product lines. These trains with better scale fidelity and detail and a higher price theoretically offered better profit margins. In 2001, K-Line hired Robert Grubba, the former director of engineering at Lionel, to help in moving upmarket with a line of 1:48 scale model trains. These included locomotives, freight cars, and aluminum passenger cars.
K-Line created new tooling and licensed some technology to add sound and remote control to its high-end trains while maintaining compatibility with Lionel offerings. K-Line’s high end products still undercut Lionel and MTH prices. Meanwhile, K-Line continued selling its less-expensive O gauge products, including train sets and rolling stock, at mass market stores like Hobby Lobby.
Lawsuit with Lionel
In July 2005, Lionel sued K-Line for trade theft, claiming numerous K-Line products, including K-Line’s Power Chief 120-watt transformer and some of its 1:48 scale trains, contained stolen Lionel intellectual property. The Power Chief, Lionel maintained, was derived from Lionel’s CW-80 transformer.
The two sides settled on August 10, 2005. K-Line agreed to withdraw the infringing product from the market by January 2006, paying $700,000 in damages, and paying a royalty in the interim. But the agreement quickly fell apart. Lionel objected to K-Line’s announcement, which did not admit wrongdoing, and said it violated the terms of the settlement.
K-Line’s controversial statement
Since this statement is difficult to find online today, here is the full text of K-Line’s August 10, 2005 statement.
CHAPEL HILL, NC, Aug. 10 — K-LINE Electric Trains is pleased to announce that the lawsuit with Lionel has been settled through negotiation. We will continue to ship all of our products as catalogued and advertised.
While K-LINE hired as an outside consultant a Lionel engineer, Marty Pierson, he was not hired to develop advances on Lionel technology, but to create superior alternatives. For example, K-LINE’s Cruise Control is not related in any way to Lionel’s Odyssey System.
The sound and speed control products were developed by Mr. Pierson in collaboration with K-LINE engineers. However, certain agreements he signed as a Lionel employee gave Lionel a claim of ownership of this work. K-LINE has agreed to pay a royalty for the use of this technology through January 31, 2006.
“We are satisfied with the outcome of the negotiation. However, we prefer to compete in the marketplace rather than the court system which only hurts consumers, adding cost to the products of all parties,” said Maury D. Klein, President of MDK / K-LINE Electric Trains. “K-LINE will continue the evolution of our technology in engines and transformers, as well as other products. Upgrades are already in the development stream. We certainly agree with two contentions that Lionel made in their lawsuit: K-LINE offers superior technology, and at considerably lower prices. We will maintain that leadership.”
The key elements of the settlement include:
* K-LINE will continue to deliver all products with the sound, speed control and transformer technology at issue and pay a royalty to Lionel through January 31, 2006
* The agreement places no restrictions of any kind on wholesalers and retailers selling these K-LINE products before or after January 31, 2006
* The agreement has no impact on K-LINE’s on-going license of TrainMaster Command Control and RailSounds technology from Lionel
K-LINE has granted Lionel a license to incorporate our patented next-generation ‘Radio-linked Bi-Directional Control System’ into Lionel locomotives and other command products. The companies further agreed to jointly share all improvements and enhancements to the system made by either company.
MDK, Inc., headquartered in Chapel Hill, NC, is a leading manufacturer of O Scale and O Gauge model trains and accessories, sold under the K-LINE Trains brand for more than 30 years. K-LINE products are available online at www.k-linetrains.com, at K-LINE SuperStores and K-LINE Authorized Retailers nationwide.
Cruise Control is a trademark of MDK Inc.
TrainMaster, RailSounds, and Odyssey are trademarks of Lionel LLC.
The court agreed with Lionel. On August 22 it granted an injunction preventing K-Line from selling any product containing Lionel technology.
On August 23, K-Line filed for Chapter 11 bankruptcy. The two companies reached a new settlement on October 27, 2005, including $2 million in damages. At the time, K-Line had more than $5 million in debts and its gross revenue was $7-$8 million.
K-Line initially hoped to reorganize but was unable to continue as a result of the settlement. K-Line operations ceased in December 2005, leaving 25 people without jobs.
What happened to K-Line trains
K-Line sold out in February 2006 to Sanda Kan, one of its suppliers and its biggest creditor, at $3.8 million. In 2006, Lionel licensed the K-Line name and product line from Sanda Kan. The arrangement started on April 18, 2006 and lasted four years. Lionel sold the K-Line product line as “K-Line by Lionel.” Contrary to some of Lionel’s press releases at the time, Lionel didn’t purchase K-Line, it simply licensed rights.
At the end of the agreement, Sanda Kan sold the old K-Line tooling to several companies, including Atlas, Bachmann, and RMT.
Brasseur Electric Trains in Saginaw, Michigan bought the inventory of K-Line spare parts.
In 1998, K-Line published a book detailing its first 13 years of production. The K-Line Collector’s Guide turns up on Ebay from time to time.