FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BLUETOOTH SIG INC., 

No. 08-35312 Plaintiff-Appellant,

D.C. No.

v.  2:05-cv-1778-JCC

UNITED STATES OF AMERICA,

OPINION Defendant-Appellee. 

Appeal from the United States District Court

for the Western District of Washington

John C. Coughenour, District Judge, Presiding

Argued and Submitted

July 9, 2009—Seattle, Washington

Filed July 8, 2010

Before: Robert R. Beezer, Diarmuid F. O’Scannlain, and

Andrew J. Kleinfeld, Circuit Judges.

Opinion by Judge O’Scannlain

9819
COUNSEL

K. Lee Marshall, Bryan Cave LLP, Saint Louis, Missouri,

argued the cause for plaintiff-appellant and filed the briefs.

Mary Gassmann Reichert, Thomas C. Walsh, and B. Derek

Rose, Bryan Cave LLP, Saint Louis, Missouri were on the

briefs.

Bridget M. Rowan, Tax Division, Dep’t of Justice, Washington, District of Columbia, argued the cause for the defendant9822 BLUETOOTH SIG INC. v. UNITED STATES
appellee and filed the brief. Kenneth L. Greene, Tax Division,

Dep’t of Justice, Washington, District of Columbia was on the

brief.

OPINION

O’SCANNLAIN, Circuit Judge:

We must decide whether an association which owns and

markets a wireless networking protocol and trademark is entitled to exemption from federal income tax as a business

league.

I

A

Bluetooth is a technological specification that allows for

two-way wireless data transmission using radio frequencies

between multiple electronic devices over short distances (typically less than thirty feet). In less technical (and hence less

precise) jargon, it provides a language for electronic devices

to talk to one another. Originally, it was primarily used to

connect mobile phones and wireless headsets. It is now also

used for wireless communication between a great variety of

products, including personal computers, printers, digital cameras, keyboards, home audio equipment, and medical devices.

Ericsson Technology Licensing AB began to develop Bluetooth. It worked with a few other major manufacturers

(Toshiba, IBM, Intel, and Nokia) in refining the Bluetooth

technology in an association called Bluetooth Special Interest

Group. Ericsson initially owned the Bluetooth name and patents. Subsequently, the technology companies caused the Special Interest Group to be incorporated as Bluetooth SIG

(“SIG”) on November 13, 2000 as a Delaware nonprofit corBLUETOOTH SIG INC. v. UNITED STATES 9823
poration to own the name and patents. Its stated purpose: “development and regulation of technical standards for the

compatibility and interoperability of wireless products within

a wireless personal network.” 

Ericsson sold all of its rights to the Bluetooth name and

patents to SIG on February 20, 2001. According to the terms

of the transfer, Ericsson was reimbursed for some of its legal

expenses and received the right to “eighty percent (80%) of

all Net e-Commerce Revenue . . . up to a maximum aggregate

of all such payments of thirty million United States dollars”

as consideration. The organizers of SIG had some interest —

it is not clear how much — in running an online store at

which consumers could buy Bluetooth-compatible devices.

For whatever reason, this did not come about, and thus there

was no “e-Commerce Revenue.” 

B

SIG’s operations fall into four major categories: specification development, marketing, trademark enforcement, and certification/licensing.1

First, SIG develops, refines, and adapts the Bluetooth specification. SIG acts as a forum through which different technology manufacturers collaborate in the development process. It

1We note that SIG’s status after 2002 is not before us. SIG appears to

seek a declaratory judgment that it is eligible for business league status.

We lack jurisdiction over such a claim. See 28 U.S.C. § 2201 (barring

jurisdiction over federal tax controversies). Although the Declaratory

Judgment Act allows for suits to determine non-profit status, they are limited to organizations claiming exemption under § 501(c)(3), not

§ 501(c)(6). See I.R.C. § 7428. Furthermore, SIG’s suit seeks relief for

only the 2000-2002 tax years. However, because both parties freely discuss post-2002 evidence, and because the result does not hinge on consideration of such evidence, we will discuss it as well. We do not decide

whether consideration of post-2002 evidence would be proper if objected

to by one of the parties. 

9824 BLUETOOTH SIG INC. v. UNITED STATES
does this through meetings, conferences, working groups, and

by sharing research results. As a result, the Bluetooth specification is constantly evolving. 

Second, SIG engages in marketing, public relations, and

other promotional activities designed to “influence the acceptance, understanding, and use of Bluetooth enabled products.”

It conducts market research, sponsors trade fairs, and publishes handouts and flyers for trade shows and other events.

It also publishes newsletters for members in order to keep

them informed of the organization’s activities. 

Third, SIG enforces its trademark both by ensuring that its

members conform to the “Bluetooth Brand Book” and by

detecting unauthorized use of the Bluetooth trademark. It

employs trademark counsel to protect its mark both in the

United States and around the globe. According to SIG’s marketing manager, unauthorized users were encouraged to

become part of SIG and have their products certified. It does

not appear that any infringement suits have been filed. SIG

works to have infringing products seized and destroyed if they

pass through U.S. customs. 

Fourth, SIG operates a certification and listing program.

The organization does not directly provide product testing services to its members. Until 2006, a member desiring certification needed to submit its product to a Bluetooth Qualification

Testing Facility. The results of the testing would, in turn, be

submitted to a Bluetooth Qualification Board for review. The

boards and testing facilities were independent entities, but had

to be approved by SIG and pay an annual fee. The fees

charged by the testing facilities varied and were unregulated

by SIG. Once the product was certified by a board, its manufacturer could use the Bluetooth trademark on the product by

paying a listing fee. The product would also be listed as

Bluetooth-compliant on the SIG website. This process needed

BLUETOOTH SIG INC. v. UNITED STATES 9825
to be repeated for each product that used the Bluetooth specification.2

C

As of October 2005, SIG had 4,148 members, all independent businesses. SIG has three membership classes: Adopters,

Associates, and Promoters. Adopters pay no annual fee, but

pay a listing fee of $10,000 per product. 

Associates pay an annual fee of either $7,500 or $35,000

depending on the size of the manufacturer. They pay a

reduced listing fee of $5,000 per product and have the right

to participate in the continuing development of the Bluetooth

specification. They receive certain marketing and promotional

opportunities that may not be available to Adopters.3

Promoters pay no annual fee but enjoy the same benefits as

Associates, plus a seat on the board of directors. Each of the

original five companies involved with the technology has Promoter status. New applicants must be approved by the board

of directors and pay a one-time fee in an amount set by the

board. As of the date of the district court’s ruling, only three

additional members had been permitted to join the Promoter

group.

D

Between its incorporation and the end of 2000, SIG realized $309,180 in income with $146,985 in expenses. At the

2Beginning in August of 2006, the third-party testing program became

optional in most cases. Instead, manufacturers could declare their products

compliant after conducting testing with a software program. 

3For example, according to Lindsay Puett, marketing coordinator for

SIG during 2003-2004, “if an opportunity comes along, we often try and

go to them first with it.” For instance, if members of the media asked SIG

for product recommendations for a “gift guide or whatnot, [it would] pass

the opportunity to Associate members first.” 

9826 BLUETOOTH SIG INC. v. UNITED STATES
end of 2001, it had about $4 million in assets against about

$2 million in liabilities (mostly deferred revenue). Its 2001

annual income of about $5.3 million came from four sources:

membership fees (about $2.8 million, or 52% of total

income); “brand management”

4

 (about $1.8 million, or 34%),

license fees (about $50,000, or less than 0.1%), and conferences/events (about $700,000, or 13%). Expenses of about $4

million were broken down into “brand management” (about

$700,000, or 18% of total expenses), “development and core

services” (about $500,000, or 13%), sales and marketing

(slightly less than $500,000, or 11%), and “general and

administrative” expenses (about $2.3 million dollars, or 59%).

Net income was thus about $1.3 million. 

At the end of 2002, SIG’s assets had grown to about $5.6

million, mostly in cash and investments. Liabilities were less

than two million dollars, mostly in deferred revenue. Revenues of over $6.7 million were primarily derived from membership fees (about $3 million, or 44%) and product

registration fees (about $2.7 million, or 40%). Events brought

in almost a million dollars in revenues. Major expenses

included events (which cost about $800,000), about $600,000

each for “development and core services” and marketing/promotion, plus around $800,000 for legal fees. The bulk

of the remainder was apparently staff salaries (management

services and wages/contracts services). Total expenses were

almost five million dollars. Net assets increased by about $1.8

million in 2002. 

E

In 2002, SIG applied for an exemption under I.R.C.

§ 501(c)(6), which exempts business leagues from taxation. In

2004, the IRS denied the application, stating:

4Apparently, this means listing fees. 

BLUETOOTH SIG INC. v. UNITED STATES 9827
Your primary purpose and activity is to promote

a single brand of inter-connection technology, rather

than the improvement of business conditions of one

or more lines of business. In addition, one of your

substantial activities consists of providing particular

services to individual persons.

SIG responded by paying the assessed tax and penalties for

2000, 2001, and 2002 (about $900,000) and then filing administrative refund requests for those years. After waiting the

required time period and receiving no response, it then sued

in the Western District of Washington. The complaint sought

a refund of income tax, penalties, additions, and interest paid

for 2000-2002 under 28 U.S.C. § 1346(a) and I.R.C. § 7422.

The district court granted summary judgment for the United

States. SIG timely appeals.

II

The district court reviewed the Commissioner’s decision to

deny § 501(c)(6) status de novo. Our review of the district

court decision is also de novo, because the existence of a business league is a mixed question of law and fact. See Eng’rs

Club of S.F. v. United States, 791 F.2d 686, 688-89 (9th Cir.

1986).5

5Our precedent is unclear as to the distinction between fact and law in

§ 501(c)(6) cases. For instance, in Engineers Club, we “assume[d], without deciding, that the district court was not clearly erroneous in determining that the Engineers Club food and beverage service was incidental to

the main purpose of the organization.” Eng’rs Club, 791 F.2d at 689. The

government has not argued for a more deferential form of review, and we

note that the district court decision in Engineers Club was the result of a

bench trial. See Eng’rs Club of S.F. v. United States, 609 F. Supp. 519

(N.D. Cal. 1985), overruled by Eng’rs Club, 791 F.2d at 687. In any case,

the result here is the same irrespective of the standard of review. We do

not imply that every appellant who challenges a § 501(c)(6) determination

is entitled to a fully de novo review. 

9828 BLUETOOTH SIG INC. v. UNITED STATES
Section 501(c)(6) of the Internal Revenue Code exempts

from income tax

[b]usiness leagues, chambers of commerce, realestate boards, boards of trade, or professional football leagues (whether or not administering a pension

fund for football players), not organized for profit

and no part of the net earnings of which inures to the

benefit of any private shareholder or individual. 

[1] The operative Treasury regulation, which “merits serious deference,” see National Muffler Dealers Ass’n v. United

States, 440 U.S. 472, 484 (1979), states that

[a] business league is an association of persons

having some common business interest, the purpose

of which is to promote such common interest and not

to engage in a regular business of a kind ordinarily

carried on for profit. It is an organization of the same

general class as a chamber of commerce or board of

trade. Thus, its activities should be directed to the

improvement of business conditions of one or more

lines of business as distinguished from the performance of particular services for individual persons.

An organization whose purpose is to engage in a regular business of a kind ordinarily carried on for

profit, even though the business is conducted on a

cooperative basis or produces only sufficient income

to be self-sustaining, is not a business league. An

association engaged in furnishing information to prospective investors, to enable them to make sound

investments, is not a business league, since its activities do not further any common business interest,

even though all of its income is devoted to the purpose stated.

Treas. Reg. § 1.501(c)(6)-1 (26 C.F.R. § 1.501(c)(6)-1).

BLUETOOTH SIG INC. v. UNITED STATES 9829
[2] We have distilled that regulation into a six-factor test:

Thus, for an organization to achieve business

league status, the requirements as stated in Treas.

Reg. § 1.501(c)(6) must be met. Section 1.501(c)(6)

requires a business league to be an association (1) of

persons having a common business interest; (2)

whose purpose is to promote the common business

interest; (3) not organized for profit; (4) that does not

engage in a business ordinarily conducted for profit;

(5) whose activities are directed to the improvement

of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons; (6) of the same

general class as a chamber of commerce or a board

of trade.

Eng’rs Club, 791 F.2d at 689. 

[3] The district court focused its discussion on factors four

and five. We do likewise.

III

A

[4] We first consider prong four: whether SIG “does not

engage in a business ordinarily conducted for profit.” Revenue Rulings published by the Internal Revenue Service guide

our inquiry. Revenue Rulings are entitled to at least Skidmore

deference, as they constitute “a body of experience and

informed judgment to which courts and litigants may properly

resort for guidance.” Texaco Inc. v. United States, 528 F.3d

703, 711 (9th Cir. 2008) (quoting Skidmore v. Swift Co., 323

U.S. 134, 140 (1944)).6

6

See also Tualatin Valley Builders Supply, Inc. v. United States, 522

F.3d 937, 946-48 (9th Cir. 2008) (O’Scannlain, J., specially concurring)

9830 BLUETOOTH SIG INC. v. UNITED STATES
[5] Revenue Ruling 58-294 demonstrates an instance in

which business league status was denied. The association

there “operated for the purpose of promoting uniform business, advertising and fair trade practices in connection with

the manufacture and sale of a certain patented product.” Rev.

Rul. 58-294, 1958-1 C.B. 244. The association indirectly

owned the patent, granted licenses thereunder, and sold equipment and materials needed to manufacture the product. The

similarities between the association in the Ruling and SIG are

substantial. Here, SIG aims to promote uniform practices in

connection with a certain patented technology, directly owns

the relevant trademark and patent, and grants licenses to its

members. 

[6] Revenue Ruling 70-187 is relied on by both parties. It

states that a “nonprofit organization formed by manufacturers

of a particular product to conduct a program of testing and

certification of the product to establish acceptable standards

within the industry as a whole qualifies” as a business league.

Rev. Rul. 70-187, 1970-1 C.B. 131. The organization “permits manufacturers to display its ‘seal of acceptance’ on all

product models that have been certified as meeting its standards.” Id. It “fixes its charges at amounts sufficient to defray

only the cost of the program.” Id. Deciding that the organization’s testing and certification program to enforce its product

standards was “a self-regulatory measure to prevent trade

abuses in the industry,” the Ruling concludes that the organization is a business league. Id.

[7] Although the organization in Revenue Ruling 70-187

and SIG are similar in some ways, there are critical differences. First, the Ruling does not address an “industry” that

was created and established by the members themselves.

(asserting that the Revenue Ruling at issue in that case should be entitled

to Chevron deference, but acknowledging confusion in circuit precedent

concerning the deference to be given to informal agency action more generally). 

BLUETOOTH SIG INC. v. UNITED STATES 9831
Nothing in the Ruling suggests that the members’ very ability

to make or to market the product itself was controlled by the

organization. (Whether SIG set its charges to cover only certification expenses will be discussed later.).

[8] As the district court recognized, the Bluetooth trademark is a “valuable commodity” which is “for sale.” Under

different circumstances, Ericsson (or the original Promoters)

might have licensed its intellectual property for a low price.

Companies license their intellectual property rights all the

time, and here — where competitors could just as easily come

up with a different standard — the owner will likely license

its intellectual property at a low enough cost to prevent the

formation of rival standards. If Ericsson had decided to

license the Bluetooth brand and technology, it would be

engaging in business activity of the sort ordinarily engaged in

for profit. A low selling price and a manufacturer-agnostic

rights holder do not change the fundamental commercial

nature of the transaction. See Treas. Reg. 1.501(c)(6)-1 (“An

organization whose purpose is to engage in a regular business

of a kind ordinarily carried on for profit, even though the business is conducted on a cooperative basis or produces only

sufficient income to be self-sustaining, is not a business

league.” (emphasis added)). Nothing about the way SIG conducts its business leads to a contrary conclusion.

American Plywood Ass’n v. United States, 267 F. Supp.

830 (W.D. Wash. 1967), can be readily distinguished and, in

any event, is not controlling authority. In that case, a business

league comprised of plywood manufacturers was allowed to

test and to certify member plywood in order to promote the

acceptance of plywood by the public. As the district court

here put it:

Whereas the plywood association served as a

vehicle for advancing a common and pre-existing

interest between members, [SIG] was formed to

create a common interest between its members. Put

9832 BLUETOOTH SIG INC. v. UNITED STATES
another way, the product in American Plywood was

something the members were already selling to

begin with; the product here is something the members banded together to create. Thus, the collective

enterprise of [SIG] derives from the fact that it has

created a thing of value, which its members can then

use to enhance the value of the products they sell.

This is a distinction of consequence under the

rationale of American Plywood, because of that

court’s emphasis on “principal” and “incidental”

activities. American Plywood, 267 F.Supp. at 832-33

(“The rule is well established that a trade association

whose main purpose justifies exemption from

income tax will not forfeit tax exempt status by

engaging in incidental activities which, standing

alone, would be subject to taxation”). In delineating

principal activities from incidental activities in that

case, it was significant that the association’s members came together with a common interest in

expanding the use of plywood as a building material.

While they surely sought to compete with each other

over whose plywood was better, they could all agree

that selling more plywood was better for everyone,

and it was this latter purpose for which the association was principally formed. Thus, while that association’s quality control and promotional activities did

create a basis for choosing between plywood manufacturers, this was “incidental” to the organization’s

main purpose, which was to broaden the use of plywood in the building materials market. In the present

case, [SIG] creates, markets, and sells a thing of

value. That it also helps [SIG’s] members sell their

products does not change this fact.

B

[9] Next, we turn to prong five: whether SIG’s activities

“are directed to the improvement of business conditions of

BLUETOOTH SIG INC. v. UNITED STATES 9833
one or more lines of business as distinguished from the performance of particular services for individual persons.”

Eng’rs Club, 791 F.2d at 689. First, we consider whether

SIG’s activities benefit at least one “line of business.” We

must select between dueling concepts of this term of art. One

category of possible definitions does not support SIG’s position, and the alternative is implausible.

1

[10] Most obviously, the “line of business” could be a

broad industry such as the wireless communication industry

or the consumer electronics industry. However, SIG does not

benefit all or nearly all members of any such line of business.

It is implausible that most of — or even a substantial amount

of — the benefits of SIG’s activities fall upon members and

non-members alike. SIG claimed that Bluetooth had no “reasonable commercial substitute” while maintaining that nonBluetooth manufacturers would benefit (in the words of the

district court) because consumers “would opt for the unreasonable choice [i.e., a non-Bluetooth product] with greater

frequency because of how impressed they are with the Bluetooth brand.” As the district court stated, “[b]oth simple logic

and [SIG’s] dominant market position belie this theory.”

Rather, it is clear that the business interests of SIG’s members

are advanced at the expense of other industry members.

[11] A review of the case law indicates that a benefit to

non-members is a key characteristic of business leagues. For

instance, the Seventh Circuit rejected an organization’s bid

for business league status in Guide International Corp. v.

United States, 948 F.2d 360 (7th Cir. 1991). Although

“Guide’s stated purpose [was] to facilitate the use and

exchange of information regarding data processing equipment

in general, the primary benefit inure[d] to IBM which [was]

only a segment (70 to 75%) of the mainframe computer business, not a line of business.” Id. at 362. “[W]hile Guide’s

members reflect[ed] a wide variety of businesses, no single

9834 BLUETOOTH SIG INC. v. UNITED STATES
business [was] enhanced and Guide only benefits IBM and

those individuals within various lines of business who use

IBM mainframes.” Id. Accordingly, the organization was not

a business league. Accord Nat’l Prime Users Group, Inc. v.

United States, 667 F. Supp. 250 (D. Md. 1987) (denying business league status to a similar group); Rev. Rul. 83-164,

1983-2 C.B. 95 (same, despite Rev. Rul. 74-147 finding a

business league where users owned computers made by various manufacturers).

Likewise, Revenue Ruling 70-80 stated that a “nonprofit

trade association of manufacturers whose principal activity is

the promotion of its members’ products under the association’s registered trademark does not qualify for exemption

under section 501(c)(6) of the Code.” Rev. Rul. 70-80, 1970-

1 C.B. 130. If minimum quality criteria were met, members

could sell their products under the trademarked name. “[A]

significant number” of manufacturers in the industry were not

members. Id. Because the trademark was promoted such as to

give members a competitive advantage, the trademarking program did not benefit the industry as a whole. Id.

[12] In contrast, Revenue Ruling 55-444 states that a business league may be “formed to promote the business of a particular industry . . . . by conducting a general advertising

campaign to encourage the use of products and services of the

industry as a whole . . . . notwithstanding the fact that such

advertising to a minor extent constitutes the performance or

[sic] particular services for its members.” Rev. Rul. 55-444,

1955-2 C.B. 258. The organization’s “receipts [were] derived

from assessments on members and from contributions from

the national industry association.” Id. “[S]ome of the newspaper and radio advertisements urged consumers to buy from an

organization member.” Id. Despite the pro-member slant of

some advertisements, the Service found the organization to be

a business league: “[m]ost of the benefits to members of the

organization were indirect and accrued alike to members and

other persons in the industry” and the advertising favoring

BLUETOOTH SIG INC. v. UNITED STATES 9835
association members was only “a minor portion of total

advertising expenditures.” Id.

[13] SIG’s advertising campaign is not “general” or

intended to promote “the use of products and services of the

industry as a whole.” It benefits members directly and predominately by giving them a competitive advantage over nonmembers. Although consumers using Bluetooth products may

benefit, that is not enough. SIG is more like the organizations

in Revenue Ruling 70-80 and Guide than the organization in

Revenue Ruling 55-444.

2

We cannot accept the idea that “Bluetooth-enabled products” constitute an industry. No one can manufacture Bluetooth products (at least in any meaningful way) without

joining and contributing money to SIG. Accordingly, membership in the proposed line of business would be necessarily

limited to members of SIG. SIG has not identified any line of

business that has such a requirement. Nor has SIG pointed to

any industry where the industry organization created the

industry itself. The “Bluetooth industry” is inextricable from

SIG itself, which controls the rights to the technology and

trademark. To quote the district court, the industry must be

“what members did aside from the particular organization . . .

not what they developed as a result of their membership.”

Furthermore, while Bluetooth may be the best available

technical solution for certain wireless applications, it is hardly

the only game in town. Other protocols have their advantages

and disadvantages. While Bluetooth is predominant in its

home market of cellular headsets and handsets, its superiority

in other markets is less clear. For instance, SIG discusses

other technologies on its website, often emphasizing their

shortcomings in relation to Bluetooth. If Bluetooth were truly

the only viable specification, SIG would not need to trumpet

its superiority over other options.

9836 BLUETOOTH SIG INC. v. UNITED STATES
3

SIG relies heavily on the district court decision in American Plywood. The American Plywood Association (the

“APA”) was granted business league status from 1936 to

1960. Am. Plywood, 267 F. Supp. at 831. The district court

noted that the APA’s work in promoting the plywood industry

and public acceptance thereof was “largely . . . responsible”

for the massive increase in plywood sales over that period. Id.

After the APA passed a bylaw which increased “its membership dues ‘to be devoted to the promotion of . . . plywood

[with the APA’s seal of approval] primarily through the

medium of television,’ ” the Commissioner revoked its

§ 501(c)(6) status, and the APA sued for a refund of taxes

paid thereafter. Id.

The court noted that the APA’s promotional and quality

control activities must be viewed in the context of the APA’s

“inter-related activities as they have developed in the past

thirty years,” activities which had been carried out “to the

great benefit of all softwood plywood manufacturers, whether

members of plaintiff association or not.” Id. at 832-33. The

government countered that, once the bylaw passed, the “quality control and promotional activities . . . became more than

incidental to plaintiff’s main purpose and activities.” Id. at

833. The court noted that no profits accrued from the quality

control activities, that the APA’s income was “derived solely

from membership dues,” and that “there [was] no possibility

that dues may be reduced because of profits.” Id. at 834. The

court held that the quality control services were not more than

incidental and were consistent with the organization’s long

history of promoting quality in other ways. Id.7 The benefits

derived from the APA’s quality control were “inherently and

most immediately group benefits in that quality control

7For instance, the APA had lobbied government agencies to allow only

the use of plywood meeting certain commercial standards. Id. at 835. 

BLUETOOTH SIG INC. v. UNITED STATES 9837
insures [sic] safe plywood, a prerequisite to its acceptance by

the public.” Id. at 835. 

SIG is dissimilar to the APA in many important ways.

Chief among them is that, as discussed above, Bluetoothcompatible products do not constitute an industry. We have

no difficulty in treating plywood as a line of business apart

from the larger building products industry (e.g., drywall). Plywood is made of a specific material by a specific process. In

contrast, Bluetooth-compatible products stand in relation to

non-Bluetooth-compatible products more as IBM mainframes

stood in comparison to other mainframes in Guide.

[14] Other differences run in favor of the government as

well: all funding for the APA inspection came from general

dues, and the trademark program could not turn a profit or

lead to reduced dues. Id. at 834. With SIG, in contrast, funding comes from specific licensing fees, and such funding

could be keeping membership dues down. The district court

found that the APA’s operation benefitted non-members, id.

at 832-33; the district court here quite properly determined

that SIG’s certification and the advertising based on it do not.

Finally, American Plywood places great weight on the trademark activity in the context of the APA’s tireless thirty-year

history of successfully promoting plywood of all kinds.8See

id. at 832. In this case, there is no such history to fall back

upon. SIG advertises Bluetooth and only Bluetooth, and in no

way seeks to promote products which lack the Bluetooth

trademark. Indeed, the key point of the Bluetooth advertising

message is that consumers should ensure their devices will

work together by selecting those products whose manufacturers have paid SIG for permission to brand their products with

the Bluetooth logo.

8Of course, we are not bound by American Plywood, but we do not

think its holding can be divorced from the APA’s history and broad scope

of activity which benefitted member and non-member alike. 

9838 BLUETOOTH SIG INC. v. UNITED STATES
C

[15] Continuing our analysis of prong five, we also conclude that SIG engages in particular services for particular

member-manufacturers. We recognize that the promotion of

products under an organization’s registered trademark is not

necessarily inconsistent with business of a non-profit flavor.

Am. Plywood, 267 F. Supp. at 832-33. Nor do we deny that

an industry organization may create a ‘seal of approval’ for

products meeting trade standards to combat abuse in the

industry. Here, however, there is no industry, only an organization promoting one of a number of possible technologies for

the interest of its members as opposed to an industry writ

large. 

SIG is similar to the alleged business league in MIB, Inc.

v. Commissioner, 734 F.2d 71 (1st Cir. 1984). MIB was (and

still is) a clearinghouse for life insurance companies. See id.

at 73. It helps member companies determine whether an applicant is hiding any medical limitations, participation in aviation, and the like. See id. About half of MIB’s revenue came

from fees charged for each applicant’s name that was submitted to an insurance company. The other half came from

assessments on member companies based on the amount of

insurance in force. See id. at 74. The court concluded that

MIB provided particular services for individual persons. See

id. at 77. “The ultimate inquiry,” said the court, “is whether

the association’s activities advance the members’ interests

generally, by virtue of their membership in the industry, or

whether they assist members in the pursuit of their individual

businesses.” Id. at 78.9 It was not enough that “members of a

particular industry or trade have banded together to provide a

service which all of them need,” even if that activity is “to9But: “ ‘[I]t can hardly be supposed that individuals would often join

organizations without the expectation of receiving some personal benefits

therefrom.’ ” MIB, Inc., 734 F.2d at 78 (quoting Nat’l Leather & Shoe

Finders Ass’n v. Comm’r, 9 T.C. 121, 126 (1947)). 

BLUETOOTH SIG INC. v. UNITED STATES 9839
tally commendable” and serves the public interest. Id. at 77;

see also Guide, 948 F.2d at 362 (acknowledging that the organization benefitted members of the public who used IBM

mainframes). 

[16] “[A] major factor in determining whether services are

‘particular’ is whether they are supported by fees and assessments in ‘approximate proportion to the benefits received.’ ”

MIB, Inc., 734 F.2d at 79. Here, about half of the revenue

came from per-use charges. Although the remainder of the

funding came from dues based on size and sales volume —

a traditional business league revenue source — that funding

was not unrelated to the number of requests and were in any

event not enough to “defeat the inference of particular services created by the service charges.” Id. Accordingly, the

business league exemption was denied.

[17] Even though the Bluetooth certification fees are not as

proportional to the benefit received as were the fees in MIB,

Inc., there still exists an obvious quid pro quo: in each transaction, the ability to use the Bluetooth trademark on one product is exchanged for several thousand dollars. Cf. Am.

Plywood, 267 F. Supp. at 834 (certification costs were covered by member dues, not special fees). As with MIB, Inc.,

there is no reason that the presence of membership dues (here

based, albeit roughly, on manufacturer size) overrides that

perception. And although some of SIG’s activities promote

Bluetooth generally, the certification program primarily aids

members in the pursuit of their businesses. That is, after all,

why members pay the listing fees. Like the MIB, Inc. court,

we mean to cast no aspersions on SIG or the public benefit

that accrues from collaboration in the wireless industry. Yet,

a finding of group and public benefit does not necessarily

make an organization a business league. See MIB, Inc., 734

F.2d at 80.

D

[18] Finally, we consider whether the particular services

SIG performs for its members are incidental. Incidental activi9840 BLUETOOTH SIG INC. v. UNITED STATES
ties which fall outside of the definition of a business league

will not bar an organization from receiving non-profit status.

See Am. Plywood, 267 F. Supp. at 832 (“The rule is well

established that a trade association whose main purpose justifies exemption from income tax will not forfeit tax exempt

status by engaging in incidental activities which, standing

alone, would be subject to taxation.”). However, we conclude

that the services at issue here are not incidental. Unlike in

American Plywood, there is no long-standing overarching program of SIG promoting the wireless industry — or any other

industry — as a whole. It would be as if the only activities of

the American Plywood Association were certification, development of its standard, and promotion of the same. Everything that SIG does supports, in one way or another, the

Bluetooth brand which is the organization’s central asset and

focus.

We may consider “the fact that . . . . a large percentage of

[an organization’s] income was derived from activities for the

benefit of individuals is a strong indication that these activities were more than merely incidental.” Ind. Retail Hardware

Ass’n, Inc. v. United States, 366 F.2d 998, 1002 (Ct. Cl. 1966).10

Indiana Retail also relied on the amount of staff time consumed by the supposedly incidental function. Id.11

SIG is stuck between a rock and a hard place: if it is making a profit off of qualifications, it is clearly distinct from the

10In Indiana Retail, the supposedly incidental activities were the source

of almost 60% of the organization’s revenue. Id. at 1002. Accord Associated Master Barbers & Beauticians of Am., Inc. v. Comm’r, 69 T.C. 53,

68-69 (1977) (relying on receipts and expenses averaging about thirty percent to find that sickness and disability insurance program for members

was not incidental). 

11See also, e.g., Evanston-North Shore Bd. of Realtors v. United States,

320 F.2d 375, 380-81 (Ct. Cl. 1963) (considering the costs, as well as the

revenues, attributable to the supposed incidental activity); Associated

Master Barbers, 69 T.C. at 68 (considering disbursements from insurance

program). 

BLUETOOTH SIG INC. v. UNITED STATES 9841
organizations in Revenue Rulings and cases which did not

charge more than was necessary for the costs of administering

the certification program. See, e.g., Rev. Rul. 70-184. If it

spent as much on certification as it brought in, then a quite

substantial part of the organization’s efforts are tied up in certification, proving that the activity is not merely incidental.

Either way, SIG’s certification program is inconsistent with

business league status.

Furthermore, SIG’s advertising promotes only its members’

interests, in contrast with the situation in American Plywood.

There, “[a]ssuming advertising use of the plywood association

grade trademarks tends to negative plaintiff’s qualification for

tax exempt status,” the court wrote, “the ‘incidental’ exception is applicable.” Am. Plywood, 267 F. Supp. at 835. “The

main purpose” of the advertising was to promote plywood. Id.

at 836. “[T]he reference to trademarks in [the APA’s] advertising [was] of minor importance”: the “grade trademark

[was] shown as a symbol of quality plywood and [was] presented without special emphasis or embellishment.” Id. Almost

always, the trademark was used “in an incidental manner and

in subordinate position.” Id. No specific producer of the trademarked wood was ever mentioned. Id. “It can reasonably be

inferred from the evidence that use of trademarks in plaintiff’s

advertising produce[d], at least indirectly, benefits for the few

plywood manufacturers who are not members of [the] association.”12 Id. at 835. Accordingly, the promotional activities did

not preclude classification as a business league.

[19] The overwhelming purpose of SIG’s promotional

activities was to promote the Bluetooth brand. Far from being

of minor importance, the Bluetooth trademark was the focus

of SIG’s advertising campaign. Specific producers are sometimes named. Any benefit on the wireless communication

industry or non-Bluetooth manufacturers was, in fact, merely

12We might not necessarily endorse this particular factual finding, but

the record in the American Plywood case is not before us. 

9842 BLUETOOTH SIG INC. v. UNITED STATES
incidental. SIG’s advertising was neither an incidental part of

its operations nor only incidentally biased in favor of its members as opposed to others in the industry. It cannot avail itself

of the incidental activities exception.

IV

[20] We agree with the district court that SIG engages in

a business of the sort ordinarily engaged in for profit. We also

agree that it provides non-incidental services for particular

members. Accordingly, the district court properly held that

SIG is not entitled to exemption from taxation under I.R.C.

§ 501(c)(6) in granting summary judgment to the United

States.

AFFIRMED.

BLUETOOTH SIG INC. v. UNITED STATES 9843