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Because we believe that David R. Webb Co. is the controlling
authority in this case, we need not decide the dispute between
the parties over the status of Pac. Transp. Co. v. Commissioner,
supra. We note, however, that the Court of Appeals, in reversing
our decision, relied on two Supreme Court cases, Woodward v.
Commissioner, 397 U.S. 572 (1970), and United States v. Hilton
Hotels, 397 U.S. 580 (1970), decided after our Memorandum Opinion
was released.
In settling on a final price for the DeVilbiss industrial
and commercial assets, the possibility of incurring a liability
on the patent infringement claim in the Lemelson lawsuit was
considered by both petitioner and DeVilbiss. DeVilbiss, as
seller, disclosed the patent infringement claim that arose from
its activities to petitioner during the due diligence period.
Petitioner, as buyer, was aware of the Lemelson lawsuit and
expressly assumed the contingent liability as part of the
acquisition agreement. Both petitioner and DeVilbiss
contemplated the possible exposure that might result from the
Lemelson lawsuit and sought the opinion of their corporate
officers. Although the liability did not affect the negotiations
or the final established purchase price, the assumed liability of
the Lemelson lawsuit transferred to petitioner pursuant to the
purchase agreement.
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