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two nonshareholder employees. Ms. Spafford is petitioner’s
principal artist; she has personally drawn and painted most of
petitioner’s original cartoon characters and most of the scenes
in which the characters appear. The other two employees also
draw original cartoon characters and scenes; their drawings are
reviewed, modified (as necessary), and approved by Ms. Spafford.
Ms. Spafford and the two employees together draw between 300 and
400 cartoon character/scenes a year, and each character/scene is
numbered and licensed.
Petitioner offers for sale at its headquarters all currently
available merchandise that bears an image of at least one of its
cartoon characters. Petitioner does not sell items that do not
bear an image of at least one of its cartoon characters, and it
does not sell its original cartoon drawings. Petitioner’s
primary customers are card and gift shops and licensing partners,
and most of its nonlicensing partner sales are by or through
independent sales representatives, each of whom has a specified
sales territory and each of whom earns a straight sales
commission. Sales representatives order petitioner’s products
directly from it, and they place the products in card and gift
shops and the like. Petitioner ships most of its inventory from
its headquarters, where petitioner’s employees generally package
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Last modified: May 25, 2011