Dharma Enterprises - Page 27

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          skillful means and SMMT to justify substantial transfers of its             
          profits to DM, a closely related entity.                                    
               Moreover, we do not agree with petitioner's contention that            
          SMMT is a proprietary trade secret that justifies the exorbitant            
          royalties that petitioner paid to DM.  "Mastering Successful                
          Work", which DM published in 1994, relates to SMMT and sells for            
          $14.95.  The preface of the book states that it is based on                 
          materials that petitioner received pursuant to the license                  
          agreement.  Petitioner denies that "Mastering Successful Work"              
          reveals any of the allegedly proprietary SMMT materials.                    
          However, the testimony of petitioner's witness with regard to               
          this issue is not credible.  Moreover, the Nyingma Institute                
          offers skillful means classes, and DM published a book relating             
          to skillful means in 1978.  Nevertheless, we find that                      
          petitioner's license of SMMT does support the payment of some               
          royalties to DM.                                                            
               We accept the general methodology of respondent's expert in            
          valuing SMMT.  Respondent's expert, Dr. Spiro, valued SMMT based            
          on the tuition for classes at the Nyingma Institute.  Respondent            
          argues that SMMT had little value because Nyingma workers valued            
          work as a spiritual practice before working for petitioner.  SMMT           
          has value to petitioner and to its Nyingma employees apart from             
          the spiritual value that Nyingma employees place on work.  SMMT             
          enabled the Nyingma employees to develop and expand their                   
          practice of Dharma.  SMMT provided a benefit to the Nyingma                 
          employees similar to an employer's offering to pay for college              


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Last modified: May 25, 2011