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was paid over $25,000 a year, independent of the royalties to DM,
for his public support of petitioner. These facts reduce the
purported value of the licensed Dharma name.
Petitioner argues that without the claimed royalty
deductions, its profitability would be substantially higher than
the industry average. However, profitability is not an accurate
measure of fair market royalties in this case because
petitioner's above-average profits were not attributable to the
license. Petitioner's expert did not specifically value the
individual assets licensed under the agreement or provide a
method to allocate the proposed value among the various assets.
Also, Peterson Consulting determined the profits generated by the
licensed assets and did not determine a fair market royalty for
the license. Thus, its expert report is only of limited utility
in our decision.
We find the method of valuation provided in respondent's
expert report to be more reliable than petitioner's methodology.
Consequently, we focus our attention on respondent's report.
Respondent's expert report was prepared by American Valuation
Group, Inc. (AVG). Dr. Herbert Spiro (Spiro), AVG's president,
testified regarding the valuation. In general, AVG valued the
same assets considered by Peterson Consulting. AVG's expert
report included the following assets and fair market royalties
for the licensed assets:
Licensed Assets 1991 1992 1993
SMMT $20,400 $21,012 $21,642
Computer software 4,000 4,000 4,000
Marketing of SMMT 1,000 1,030 1,061
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