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manufacturing facilities to Puerto Rico, as management believed
this relocation overseas might cause a reduction in petitioner's
sales.
Around 1987 or 1988, Intel Corp. (a customer of petitioner
that had recently relocated certain of its manufacturing
facilities to Puerto Rico) asked whether Mr. Martin could
establish a plant in Puerto Rico to supply its Puerto Rican
facilities. As a result, during 1988, Mr. Martin incorporated
LaserGraphics Caribe, Inc. (Caribe), to conduct a label and
printing business in Puerto Rico.
Mr. Martin was Caribe's sole shareholder. Petitioner had no
interest in Caribe, as the latter corporation was a personal
business venture of Mr. Martin that was totally separate and
distinct from petitioner.
From 1988 through 1990, Mr. Martin devoted some of his time
to Caribe's business operations. Caribe established a plant in
Puerto Rico. Mr. Martin operated Caribe for about 2 years, then
sold the business after concluding that he could not operate it
profitably.
During 1989 and 1990, petitioner successfully developed its
Micro Clean 100 proprietary process for producing labels meeting
the "clean room" production facility standards of its electronics
industry customers. The process represented a significant
technological innovation in the label industry. Before its
development, there were no contaminant-free labels comparable to
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