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including such well-known entertainment systems as the Sega
Genesis, Sony Playstations, and Nintendo Systems, as well as
Apple and IBM-compatible computers. EA derived its revenues
during the years in issue predominantly from the sale to both
U.S. and foreign customers of standardized video game cartridges
and compact discs containing entertainment software. Under a
license agreement between EA and Sega Enterprises Ltd.
(hereinafter sometimes referred to as Sega), dated July 1992,
Sega granted to EA and any affiliate controlled by EA a license
to use Sega intangible property to develop, manufacture, market,
and sell video game cartridges compatible with the Sega Genesis
systems. EA distributed products primarily through its own sales
force in the United States, which sold directly to retail chains
and outlets. Outside the United States, EA distributed its
products primarily through affiliates and third-party
distributors.
Before the years in issue, EA relied on unrelated video game
manufacturers located in Taiwan and Japan to manufacture the
video games.
Beginning in 1991 (during EA’s fiscal 1992), EA became
interested in, and investigated the feasibility of, establishing
a video game undertaking in Puerto Rico through a wholly owned
subsidiary. In 1992, EA engaged Richard Baker as a consultant to
provide advice in connection with the investigation and
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