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given that petitioners’ involvement in that possession focused
mainly on the Woburn-based efforts of MedChem U.S.A.’s personnel
to understand the Avitene manufacturing process and, after June
30, 1990, to move that process from Alcon P.R.’s facility in
Puerto Rico to MedChem U.S.A.’s facility in Woburn. Whereas
petitioners initially planned to establish a manufacturing
facility in Puerto Rico during the relevant years and, to that
end, hired Mr. Perez, opened an office in Humacao, and purchased
land in Juncos, their plans changed in 1990. In 1990,
petitioners scuttled their efforts to establish a facility in
Puerto Rico, wrote off the proposed facility’s capitalized costs,
closed the Humacao office, terminated Mr. Perez, and began moving
the Avitene manufacturing process into MedChem U.S.A.’s idled
Amvisc facility in Woburn. Petitioners also caused Alcon P.R. to
move into that facility all of the equipment in Puerto Rico that
had been and was required to be used to perform the work in phase
1 of the Avitene manufacturing process.
Petitioners assert that all of MedChem P.R.’s income was
attributable to its sale in Puerto Rico of Avitene that was
manufactured in that possession and that MedChem P.R. had a
significant business presence in Puerto Rico. We disagree.14
14 We distinguish Frank v. International Canadian Corp., 308
F.2d 520 (9th Cir. 1962), a case cited by petitioners to support
their assertion that MedChem P.R. actively conducted a trade or
business by virtue of its sales activity. The relevant holding
(continued...)
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