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The U.S. railroad industry has been consolidating since the 1940s, and almost every year sees the list of operating roads shrink. Most railroad companies that once existed have either closed, been assimilated by a larger company, or participated in a "merger of equals" in which neither company's name survived unaltered (an example of the latter being the Burlington Northern / Santa Fe merger, which produced the Burlington Northern and Santa Fe Railway, now known as the BNSF Railway). Before World War II, there were over 140 Class I railroads operating in the U.S. (at the time a railroad was given Class I status if it earned at least $1 million in revenue annually).
As an indication of the level of consolidation that has taken place, only four Class I railroads (then, railroads with over a million dollars in income per year) from before the Great Depression still exist under their original names, these being the:
- Union Pacific Railroad
- Kansas City Southern Railway
- Canadian National Railway
- Canadian Pacific Railway
However, as railroads merge or buy each other, duplicate and less profitable rights of way often are sold to new short line railroad companies. Yet, even these short lines themselves merge and buy each other, creating even more fallen flags. For example, many of the former Milwaukee Road branch lines in southern Wisconsin were sold to a railroad called the Wisconsin and Calumet Railroad (WICT). The WICT is now itself a fallen flag, its rights of way now operated by the Wisconsin and Southern.
In the case of a merged or purchased railway, the new owner sometimes attempts to enforce the trademarks of the old name in order to collect royalties from model railroad manufacturers. However, this violates trademark law, which requires that marks actually be used by the owner in order to remain protected and not fall into the public domain.
In order to prove that the historic trademarks are still enforceable, some railroads have begun painting pieces of rolling stock in the liveries of their constituent railroads. Whether this is sufficient to prove that the marks have not been abandoned has yet to be decided in court.
Two railroads, specifically Union Pacific and CSX Transportation, have filed suits in U.S. court to prevent the use of their trademarks or their historic trademarks by model manufacturers without first obtaining a license to reproduce the marks. The licensing agreements that the railroads offer include conditions that many model manufacturers feel are excessive in scope or monetary value. Some model manufacturers have signed licensing agreements while others have refused on principle or simply closed their business. Model manufacturers argue that the historic trademarks have been out of use so long that they are abandoned and therefore available to use freely. Courts have yet to decide on these issues.
- McGonigal, Robert S. (2006-05-01). "Understanding railroad reporting marks". Trains.com. Kalmbach Publishing. Retrieved 2007-09-17.