- 136 -
1984 $2,759,000
1985 3,239,000
1986 4,007,000
1987 5,156,000
1988 6,247,000
1989 7,305,000
1990 8,597,000
1991 10,536,000
1992 9,249,000
Petitioners argue, first, that no royalty was due from DHLI
because it was the “developer” and, second, if we should find
that DHL was the developer and/or owner of the trademark, no
royalty would be due under an arm’s-length standard.22
Petitioners contend that this is so because of reciprocal
benefits to both DHL and DHLI under the mutual agency agreement.
Petitioners rely on a regulation that indicates that a cash
22 Petitioners did not offer an expert who proposed a
royalty rate for use of the DHL trademark. Petitioners’ experts
concluded that the trademark had little or no value and that,
accordingly, no royalties are warranted. Another of petitioners’
experts, in reaching a value for the trademark, used the parties’
.75-percent rate (to begin in 2007) discounted to an amount that
he believed would apply in 1990. The discounting was a present
value approach. Although a present value approach has been held
appropriate to reflect the time value of money, no meaningful
reason was advanced for discounting a royalty rate for the
passage of time. The value of a trademark or the amount of a
royalty does not automatically increase or decrease with the
passage of time.
Finally, one of petitioners’ experts, an economist, provided
his opinion of all respondent's statutory notice sec. 482
adjustments, including the trademark value, royalties, imbalance
fees, transfer fees, etc. His critique of respondent’s
determinations was based on the information available to
respondent at the time the notice was issued and not on the
substantial amount of information that was exchanged by the
parties after the issuance of the notice. This expert’s report
had some relevance to the question of whether respondent’s
notices of deficiency were arbitrary or capricious but is out of
sync with the evidence the Court must evaluate on the basis of
the record.
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