Microsoft Corporation - Page 16




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         H.  International Retail Channel                                             
              In 1990 and 1991, petitioner exported shrink-wrapped software2          
         products (made in the United States) to its CFC’s for distribution           
         to end users outside the United States.  In addition, petitioner             
         licensed its CFC’s the rights to duplicate and distribute shrink-            
         wrapped software packages outside the United States pursuant to CFC          
         (or product localization) agreements.   In most instances, the CFC’s         
         localized petitioner’s software and then manufactured copies of the          
         localized software for distribution as shrink-wrapped products.              
              The CFC’s in Ireland (Microsoft Ireland), Japan (Microsoft              
         Japan), Korea (Microsoft Korea), and Taiwan (Microsoft Taiwan)               
         reproduced, packaged, and distributed retail products for the                
         international retail channel, as well as white box products for the          
         international OEM channel.  (A “retail” product consisted of an              
         individual copy of the software marketed in a decorative retail box          
         (shrink-wrapped software), containing software-loaded storage media,         
         user manuals, and other documentation.  A “white box” product                
         consisted of software-loaded media and product documentation                 
         packaged in a plain white box, intended to deter separate retail             
         sales by a foreign OEM.)  Microsoft Ireland manufactured both retail         



               2    Shrink-wrap packaging consisted of packing the                    
          software-loaded diskettes with manuals and other printed                    
          materials in shrink-wrapped boxes bearing graphics, product                 
          information, trademark registrations, trade names, and other                
          trade dress.  The warehousing operation consisted of storing and            
          shipping the shrink-wrapped software packages.                              





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