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would sell to DHLI an interest in the non-U.S. rights to the DHL
trademark. DHL would also sell to DHLI the U.S. rights to the
DHL trademark, to be encumbered by the 15-year royalty-free
license to DHL. Both royalty-free licenses, as well as the
elimination of DHL’s right to terminate the agreement at will,
could reduce the value of the DHL trademark sold by DHL. The
value of the rights sold was to be determined by an appraiser but
would be valued as encumbered. The transfer of the DHL trademark
from DHL to DHLI followed this basic structure.
On April 27, 1990, DHL’s representative indicated that an
appraisal of the DHL trademark would have to be obtained in order
to set the exercise price. Because the transaction was taxable
to DHL, the representative did not want the exercise price to
exceed fair market value, and he noted that the DHL trademark
would be encumbered at the time the option was granted by
reciprocal long-term royalty-free licenses to DHLI and DHL, and
the trademark should therefore be diminished in value.
The July 9, 1990, trademark option agreement provided that,
upon exercise of DHLI’s option to purchase DHL’s trademark
rights, DHL would “retain an interest in the [DHL] Trademarks in
the form of a fifteen-year royalty-free license to use the
Trademarks in the United States”. At the time the trademark
option agreement was signed, the parties were still working on a
form of trademark license. Although there were drafts of a
trademark license agreement and negotiations concerning a license
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