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matter to the point where she contends that it is a significant
factor. Given the fact that respondent recognizes the existence
of all of the parties as valid corporate entities and does not
attack the bona fides of the license agreements between SDI USA
and petitioner, on the one hand, or petitioner and SDI Bermuda,
on the other, we are not disposed to allow the close relationship
element to control our decision.
The facts of the matter are that the two license agreements
had separate and distinct terms and that petitioner had an
independent role as the licensee from SDI Bermuda and the
licensor of the other entities, including but not limited to SDI
USA. The schedules of royalty payments provided for a spread,
not unlike the spread involved in Northern Indiana, which
compensated petitioner for its efforts. Like the finance
subsidiary in Northern Indiana, petitioner engaged in licensing
activities from which it realized substantial earnings. In fact,
on a percentage basis, it earned between 5 and 6 percent,
compared to the 1 percent earned by that finance subsidiary in
Northern Indiana.16 Under the circumstances herein, we think
these arrangements should be accorded separate status with the
result that, although the royalties paid by petitioner to SDI
16 In dollar amounts, petitioner retained net royalties in the
amounts of $233,199 in 1987, $216,035 in 1988, $275,046 in 1989,
and $219,313 in 1990.
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