- 30 -
value of the trade names and trademarks through advertising and
other promotional activities. AVG determined that royalty rates
attributable to advertising range from 1 to 2.5 percent of the
franchisee's gross sales with an industry average of 2 percent.
AVG assigned a value to the licensed trade names and trademarks
of 1 percent of petitioner's gross sales, which produced royalty
payments in the amounts of $52,396, $57,636, and $62,823, during
the years in issue, respectively. AVG established that DM did
not advertise the trade names or trademarks or engage in other
promotional activities. DM has not registered the trade names or
trademarks with any governmental unit. AVG believed that these
facts support a value for the licensed trade names and trademarks
that is substantially less than the average advertising fee rates
for quick-print franchises. Petitioner contends that DM owns a
nonregistered, common-law trademark in the licensed trade names.
Petitioner asserts that the quick-print industry, used by AVG in
its valuation, is not comparable to petitioner's business.
Quick-print businesses rely on advertising to attract walk-in
customers, but lithographic printers, such as petitioner,
generally do not have walk-in customers. Petitioner did not
advertise and relied on its quality and low prices to obtain
customers.
Although DM has not engaged in commercial printing since
1985, petitioner agues that DM has developed name recognition for
the word "Dharma" in the printing industry through its religious
printing activity. Petitioner's customers who testified at trial
Page: Previous 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 NextLast modified: May 25, 2011