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The Agreement required EAPR to provide, “at its own cost and
expense,” all the capital equipment needed to manufacture the
video games, and required this equipment to be located in the
leased space. Under the Agreement, PPI was responsible for
routine normal maintenance and EAPR was responsible for repairs,
parts, and replacement. EAPR bought, and during the years in
issue owned, all of the equipment (including wave solder
machines, production assembly lines, label machines, and test
equipment) used in Puerto Rico to manufacture the video games.
EAPR bought the equipment from unrelated sellers.
The Agreement required EAPR to provide “all materials and
components for the manufacture of Products [the video games].”
The Agreement provided that EAPR was responsible for ordering
these items and paying for them, and “PPI shall have no authority
to order or purchase or otherwise represent EAPR with respect to
such materials and components.” The manufacture of video games
required various components and materials, including ROM and RAM
chips, printed circuit boards, batteries, plastic cases, and
other parts. EAPR paid for and owned all such components and
materials used in Puerto Rico to manufacture the video games in
issue. Raw materials and components were obtained from unrelated
suppliers. EA’s personnel in San Mateo issued purchase orders to
vendors for raw materials and components on behalf of EAPR.
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Last modified: May 25, 2011