- 137 -
royalty is not the only arm’s-length consideration for the use of
intangible property; the transfer or use of other reciprocal
rights can also represent fair market value. That regulation,
sec. 1.482-2(d)(2), Income Tax Regs. (1968), contains the
following:
To the extent appropriate, an arm’s length
consideration may take any one or more of the following
forms: (a) royalties based on the transferee’s output,
sales, profits, or any other measure; (b) lump-sum
payments; or (c) any other form, including reciprocal
licensing rights, which might reasonably have been
adopted by unrelated parties under the circumstances,
provided that the parties can establish that such form
was adopted pursuant to an arrangement which in fact
existed between them. * * *
Petitioners also make two other arguments against
respondent’s royalty determination. First, they argue that even
though DHLI had contracted with independent agents in several
countries for delivery service, those agents were allowed to use
the DHL name without payment of a royalty. Petitioners also
cited a few other examples of royalty-free use of a name.
Second, petitioners argue that a royalty payment from DHLI to DHL
does not make economic sense. In that regard, petitioners
contend that DHL received a benefit in the form of DHLI’s
development of an international network into which DHL could make
shipments.
Respondent counters, first, that DHLI was not the owner
and/or developer of the trademark, and we have so held. With
respect to petitioners’ other two arguments, respondent contends
that petitioners did not produce credible, specific, or
Page: Previous 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 NextLast modified: May 25, 2011