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of the DHL trademark for 1982 through 1992,20 and for fees from
DHLI to DHL for delivery services in the United States and for
imbalances and transfers. Finally, respondent determined that
DHL should share in some of DHLI’s income, which was determined
in connection with DHLI’s network fees. As between DHL and DHLI,
no royalties were charged for use of the DHL trademark, and,
until 1987, no charge was made for the imbalance and transfer
services. Beginning in 1987, a cost plus 2 percent fee was to be
charged to the party with the excess of shipments to the other
and for DHL’s transfers of DHLI’s shipments through the United
States. Respondent contends that the 2-percent fee was
inadequate to fully compensate DHL.
The proposed royalties and the transfer and imbalance items
are necessarily interrelated and to some extent inversely
proportionate. The royalty rate must be tied to the value or
income capacity of the trademark. The fees for services for use
of another company’s infrastructure and ability to efficiently
deliver packages is related to the physical facilities and the
intangibles we have described as existing infrastructure and
operating know-how. We have been convinced that the trademark
and the other intangibles are equally important in terms of the
DHL network’s income potential. Accordingly, within the context
of all intangibles, to the extent that the royalties are less
20 Royalties for years prior to 1990 are relevant because
they affect the computation of net operating losses carried into
the taxable years before the Court.
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