Serious questions about licensing fees...

General Discussion General Modeling Discussion
1

Hi all,

I understand modelers being upset that licensing fees charged by defense contractors for kits modeled on military vehicles and equipment. It is generally accepted that the licensing fees drive up kit prices.

But, I have a whole bunch of questions about this topic, and there don’t seem to be many answers.

  1. Why the focus on military vehicles? Don’t licensing fees drive up the cost of NASCAR models and airliner models? Aren’t they equally bad for modelers of non-military kits? Is it fair to Boeing to say it can’t charge licensing fees for its design of the F-15 (which it owns) even though it can charge a fee for the 747 design? Is that fair to airliner modelers?

  2. Just how much of a kit’s cost is attributable to the licensing fee? Why is the Trumpeter USS Enterprise Kit (for example) so expensive? I doubt that the licensing fees (if there are any for that kit) are the primary cost for expensive kits.

  3. Why should model kits be exempt from licensing fees? Because we want it that way? Tee-shirts, toys, and video games all have to deal with licensing fees. They are a valid and legal protection for a firm’s intellectual property. What makes models different?

The argument is that military vehicles are designed and purchased using public money, therefore the design’s license should be public domain. But that is a shear fallacy. Think about it for a second. If Boeing couldn’t charge a licensing fee for the design of the F-15, what would stop another country from simply using the design to make their own fighters (provided they could get the resources to do so)?

“Ah ha,” you say, “but making model kits are different than making the real thing.” You’re right. So you tell me, isn’t that argument valid for non-military kits too? If not, why not?

I realize that I’m sticking my neck out by going against the general trend, but I simply don’t think licensing fees are that evil. I have read some valid complaints on the part of kit manufacturers that they don’t get enough in return for the fees they pay, and I’d like to see some way to address that issue.

Anyway, I’m interested in responses to my questions. Why are licensing fees so bad? If they’re that bad, why only focus on military kits? How much of a kit’s cost is the licensing fee?

Regards,

2

I’m sure that licensing fees do drive up the cost of car and airliner kits, but there is a difference. Boeing doesn’t own the F-15, the taxpayers do. It was designed with taxpayer money and paid for with taxpayer money. Boeing just won the privelage to produce them for us. A 747 however was designed and build with Boeing’s own money, it was their investment and they are entitled to their compensation for it.

I don’t know how much of the cost is due to licensing, if any at all. I’d always assumed that kits like that cost so much due to shipping and packaging costs, not to mention all the molds that had to be made.

They shouldn’t for a privately owned product. Kits based on taxpayer property however aren’t the same thing.

Other countries can and do copy aircraft designs and military hardware designs. That is part of the reason that some elements of those planes are secret.

No, it’s not. The whole thing is about ownership. Any company that owns a product can charge licensing fees, they’re entitled to reap a profit from their investment.

Private companies however, are not entitled to profit from the investment taxpayer money.

Military hardware belongs to the people of this country and companies cannot charge us for using the likeness of our own property.

Good topic here, and well addressed Drew.

3

If the licensing fees are not too outrageous, I think that it can and will most likely be the next step. Ferrari has charged a licensing fee for years, and the kits have never been too far in price of any other kit. I think the people who are going to take the biggest hit on this is the Legit model manufacturers who have to abide by the licensing laws that may come out of this, while perhaps some Chinese and Korean Manufacturers can get away without getting the licensing done. If they make it fair for every company to get the license, and they don’t get too greedy with their fees (good luck), it should be a smooth transaction, and may be inevitable either way.

4

Drew,

Concerning cost: There have been quite a few “guesses” circulated concerning the additional cost per model kit. The problem with estimates like these is that much of the cost will be highly dependent on 1) the number of units produced and 2) the cost for licensing. The most repeated (and seemingly realistic) estimates seem to range from about 1% to 4% of kit price. Not that much, but it still adds to the rising costs of our hobby.

Other than that, I think maddafinga hit most of the points very well and I agree with them as stated.

5

As for car models: as far as I know they already have the licensing fee system, and that’s one of the resons why they are so expensive compared to military subjects.

Further more, the cost are not only in the fee but in the asociated insurances. This is needed so that the company that issues a license (for instance Boeing) will not get sued when damages arise from a model kit.

6

Good reply, maddafinga, I agree on all your points.

7

I also agree completely wiht Maddafinga, well said and well argued.

8

Thanks for the replies, guys.

I’ve done a bit more research, and from what I can tell, Boeing does own the design for the F-15. Madda’s logic is sound, but not supported by the current laws.

I think the effort by International Model-Hobby Manufacturers Association reports that New Jersey Congressman Robert Andrews (as highlighted by Jeff’s post at the top of the forum) is a good start in the right direction to making the laws fit the logic.

However, why stop with kits of military vehicles? Aren’t licensing fees a problem with model trains and car models? The model train companies and enthusiasts are working to cut deals with train companies to keep licensing fees low or eliminate them. Maybe car model manufacturers should do the same thing.

Just some thoughts…

9

Actually, the design of the F-15 (and all military vehicles) is the property of the US government, built under contract by private companies. The payment for that design (which is usually funded by the US military) is the awarding of the contract to build the aircraft. Taxpayer dollars design the airplanes and build the airplanes. The companies want to charge licensing fees because they feel it’s their intellectual property. In fact, if they were to license say the F-15, they’d be collecting a royalty for a product that’s not technically theirs. It’s like writing a book… I wrote a book (really, I did), the publisher paid me to write the book, and he paid to have it printed. Even though I wrote the bookand my name is on the cover, and I designed that cover, I’m not entitled to print my own copies and sell them, nor am I entitled to demand a royalty from you if you decide to Ebay a copy of my book.

NASCAR, auto companies, and trademarked names (DuPont, Wal-Mart, Viagra, Home Depot) are intellectual and actual properties of the originators, and as such are subject to licensing and royalty agreements.

In the case of the railroads and auto industry, it was a financial matter, they were looking for revenue. In the case of military subjects, it’s based on the controlled usage of intellectual property. They (Boeing, General Dynamics) feel that if they don’t keep reins on the little guys (namely the model companies) then it sets a precedent for it to happen on a larger (and potentially damaging) scale.

There’s nothing anyone can do to stop Boeing from imposing licensing and royalities on 747 models. There’s also nothing to prevent Sikorsky from doing the same with it’s non-military choppers. But anything that’s ever received a military designation by the US government is the property of the people…and we’ve already paid for it with our tax dollars.

This does have ramifications at several levels, since it sets a precedent that could impact things all over the world (in our little hobby). Let’s look at the four big aircraft companies…Boeing, Northrop-Grumman, Lockheed-Martin, and General Dynamics. Between them, they own the rights to North American, Chance-Vought, Brewster, Consolidated, and McDonnell-Douglas.

This isn’t just about F-15s, it’s about Corsairs, Mustangs, and Flying Fortresses as well. Electric Boat built PT boats, now they build submarines, General Motors built aircraft and tanks, so it’s about PT-109 and TBMs and FM-1 Wildcats.

Should we have to pay a royalty to build a likeness of a Flying Fortress, just because Boeing built them 60 years ago?’

It’s a very convoluted issue, with lots of little pros and cons on both sides. The aerospace companies don’t have an issue with the hobby shop owner who sells a $25 kit that bears the name of one of their products…BUT…they have to start defending their product trademarks somewhere, and we (the model community and industry) were the easiest ones to go after and try to make an example of.

Jeff

Now, if I could just convince the Air Force to give me one of MY F-15s, life would complete!!!

10

Ah, but Jeff, where would you park it? :slight_smile:

Thanks for your comments. They clear up a lot of my questions, but still leave some. For instance, what about military vehicles that start out privately funded and designed, but are then bought by the military? Didn’t the F-5 start that way? Or, for that matter, what about the 747 that has been modified to be an airbourne laser platform (should somebody ever want to make a kit of it)?

More to the point, if licensing fees are going to be an increasing part of this hobby, then the kit makers should be demanding a lot of reciprocity. Maybe the companies like Boeing could provide accurate drawings of the planes. Maybe this could be the end of inaccurate kits.

And then again, maybe not. I’m not sure how much bargaining power the kit manufacturers have. Maybe the precise nature and limitations of the licensing agreements is what needs to be defined by law. There should also be some sort of time limitation so that the design of a Mustang or Hellcat is considered to be in the public domain.

One thing that I don’t understand is how a model is viewed by the manufacturer, the kit makers, and the law. It’s not really a copy of the design as the design is for a full-scale, real plane (or tank, car, whatever). At the same time, a model does represent the design of the real thing, and modelers get cranky when it doesn’t match very closely.

I can understand the trademark issue a little better, but that has to do with the name of the company and its identifying characteristics (as I understand it). Is that the key more than the design? It is more about being able to call something a “North American P-51D Mustang,” instead of “late WWII American fighter plane” on the box?

Regards,

11

I think it’s about both really…tangible and intellectual property, with some trademarking issues tossed in for good measure.

While I’m no expert on the fine points of this issue, especially from the point of view of the aerospace industry, I can completely understand why they want to protect their products.

My biggest point of contention is that the hobby/model industry is perhaps the least of their concerns regarding the usage of their designs and trademarks. We, as modelers, strive to recreate accurate miniatures and portray their products as best we can. That’s because we’re enthusiasts and we like their products. The reason I think they (the aerospace industry) is ganging up on the hobby industry is because we’re a small group with little or no resources to defend ourselves in the court system. They can make an example of us and use it to establish precedent for a potentially larger foe down the road.

We, to put it simply, are the first and easiest domino to knock over. Fortunately for us, it appears that our pleas were heard by our politicians and they’re working on doing something about it.

Addendum: To answer your question about the F-5 and the 747 as a USAF platform…I think (and I’m not 100% sure) that if the model is labelled as a USAF E-4B or VC-25, then it’s public domain. If that same model wears Virgin Atlantic livery and is called a Boeing 747, then it’s subject to royalty fees to Boeing and VAA.

I guess I should clarify my position and say that IF I were to build a VAA 747, I’d be prefectly willing to pay the additional percentage in royalty fees to the said companies. After all, it’s their trademarks, their logos, etc…

But if it’s a military subject, sorry, that’s double-dipping in my opinion.

Jeff

12

Thanks again, Jeff, for your well-articulated answers to my questions.

Regards,

13

If I can muddy up the waters a bit…

As a member of the architectural field, we’re asked to produce designs for buildings or structures that may or may not be built. Numerous times clients have tried to shortchange us with payment of design fees or whatever, and have demanded that we turn over our drawings because they own them. Sorry, but intellectual property laws state that the design and all associated media are ours and the courts have backed us up. The clients merely paid for our services to produce the designs.

I have a hard time believing the courts wouldn’t see it the same way with the designs of military aircraft. Our taxpayer money merely bought the services of Boeing, Lockheed, McDonnell-Douglas, etc. to produce the designs.

Now, could you argue that the taxpayers own each and every military aircraft? Absolutely, as we’re now talking raw material, just as in my field the client owns the building. But not the design.

Later on you state that this is the big guys swinging at the little guys. i couldn’t agree more as there has to be bigger and better targets out there. I’m just not convinced this is one we’re going to win.

14

The designs do belong to the company that did the work. That’s part of the reason an aircraft can be licensed for production in other countries if it is agreed on. Really what it boils down to is we the tax payers do own the final product not the name i.e Boeing, Lockheed, Northrop. So the question is if a kit was called a U.S. Air Force F-15 would it still need the licensing? Most likely not but as is often the case it seem companies crumble or cave in too avoid what could quite possibly be a more expensive legal battle.

15

I have to step in here…

When comparing intellectual property, you cannot compare apples and oranges. Military design contracts and their applicable copyright rules are governed by a completely seperate set of laws than standard business or individual law.

Might I suggest the following link:
US Code, Title 10 (Military), Subtitle A, Part IV, Chapter 137, Section 2320, “Rights in technical data”

http://straylight.law.cornell.edu/uscode/html/uscode10/usc_sec_10_00002320----000-.html

Provided that a military contract has been properly negotiated and agreed to by all parties and all of the appropriate definitions, terms, and other matters have been met, paragraph (a)(2)(A)(i and ii) states:

(A) In the case of an item or process that is developed by a contractor or subcontractor exclusively with Federal funds [Bold added for emphasis] (other than an item or process developed under a contract or subcontract to which regulations under section 9(j)(2) of the Small Business Act (15 U.S.C. 638 (j)(2)) apply), the United States shall have the unlimited right to—
(i) use technical data pertaining to the item or process; or
(ii) release or disclose the technical data to persons outside the government or permit the use of the technical data by such persons.

If the Goverment paid for it (exclusively), they own it…

16

I wondered if there were a separate set of rules governing military contracts, but I had no idea where to look.

That answers that question.

17

Thanks Foster, you just saved me another long-winded post… [(-D]

And thanks for posting up Sec 2320, that is actually precisely what I was looking for.

Jeff

18

i always thought the gov would put out specs for a aircraft or vehicle and 3,4,or5 co would design a prototype and the gov would pic the best one and award the contrct accordingly that being the case the co would own the copyrights to it

19

Not the case if the government is giving said companies grants for their research, or putting up the money for their prototypes.

20

I agree with those who feel that taxpayers dollars should be enough for companies like Boeing, when it comes to building a US tax dollar funded military project.

However, I’m not an American taxpayer, my taxes didn’t go towards the cost of building the F-15 (or w/e). What about us furriners? Should there be a tariff on foreign purchases of US military equipment? Who should get the money if there was?

Can an Englishman claim he has the right to build and sell models of the P-51, since it was a design asked for and paid by British taxpayers? That may be a bad choice since the aircraft in that example is so old, but you get the gist of my point, right?

Intellectual property is a subject rife with problematic questions and answers. I think there should be a return to the older 25 year term of copyright, and then it goes into the public domain.

On the other hand if the model kit builder is using the companies brand name, then a (small) license fee should be paid to the company. It is their identification, after all.