-35-
* * * [development] costs not directly shared or reimbursed.”
(Emphasis added.) Respondent, however, did not present any
credible evidence that unrelated parties implicitly share the
spread or grant date value related to ESOs. Scott T. Newlon, the
only witness respondent proffered to address this issue, did not
reference any other economists, unpublished or published
articles, or any transactions supporting his theory. In fact, he
conceded that it was not possible to test whether parties
implicitly include ESOs as a compensation cost in cost-sharing
agreements. Petitioners, however, through the testimony of
numerous credible witnesses, established that companies do not
implicitly take into account the spread or the grant date value
for purposes of determining costs relating to cost-sharing
agreements. Furthermore, petitioners established that if
unrelated parties believed that the spread and grant date value
were costs related to intangible development activities, such
parties would be very explicit about their treatment for purposes
of their agreements. In short, respondent’s implicit cost theory
is specious and unsupported.
1. The Spread
Unrelated parties would not share the spread because it is
difficult to estimate, unpredictable, and potentially large in
amount. Petitioners’ uncontradicted evidence established that
certainty and control are of paramount importance to unrelated
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011