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Petitioner’s endorsement and promotion of the credit card
program were not in consideration of the receipt of anything
other than “royalties” within the meaning of section 512(b)(2).
7. Refunded Annual Fee
Respondent argues that petitioner guaranteed the members a
refund of Chase Lincoln’s second year membership fee (the
second year fee), if, indeed, Chase Lincoln imposed a second
year fee. Respondent notes that petitioner actually reimbursed
some of the members for ABS's dishonored checks and argues that
petitioner therefore provided a service pursuant to the credit
card program.
No plausible reading of the agreements reveals any
obligation by petitioner to use its own funds to reimburse the
members for the second year fee. We have found that, pursuant
to the SC-ABS agreement, petitioner allowed ABS to use
petitioner’s name and marks in connection with ABS’s marketing
efforts under the SC-ABS agreement. Supra sec. V.A. Implicit
in its license of its name and marks, and allowing ABS to use
facsimile signatures of its officers, is petitioner’s
endorsement of whatever ABS is marketing. See Rev. Rul. 81-
178, 1981-2 C.B. at 136 (“payments for the use of a
professional athlete’s name, photograph, likeness, or facsimile
signature are ordinarily characterized as royalties.”).
Although a licensor may not expect the value of its name or
other intangibles to suffer on account of their license, we
assume that some portion of the royalty is in consideration of
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