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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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