Opinion ID: 209871
Heading Depth: 3
Heading Rank: 2

Heading: Representation to Inland Revenue

Text: Next, Coinco argues that the district court erred by ignoring Mars's purported admission that a royalty over 4% was excessive. The 1996 Agreements between Mars and its subsidiaries include a clause that states: For the years 1990-1995, the parties agree that the historical royalty payment with respect to the Covered Intellectual Property was excessive to the extent it exceeded a net royalty of 4% after taking into account product development recovery.... J.A. 4945. Coinco argues that this clause indicates Mars's belief that any royalty rate for all of Mars's patents (including the patents-in-suit) would be excessive if it were above 4%. The district court found that the 4% rate was only minimally relevant for two reasons: (1) because it was the result of negotiations with United Kingdom taxing authorities, not an arm's length transaction; and (2) because [i]t is certainly not a license between competitors, as the license in the hypothetical negotiation between Mars and Coinco would be. J.A. 123. We see no error. The district court was plainly correct to conclude that the terms in an intra-company license agreement made to satisfy the requirements of the United Kingdom taxing authorities are likely to be very different from those resulting from a hypothetical negotiation between competitors. While Coinco may be correct that the United Kingdom taxing authorities requested that the license rate be one that simulates the rate that would have been reached in an arm's-length negotiation between independent enterprises, there is no evidence that suggested that the 4% rate would have been the rate at which Mars would have licensed a competitor. See J.A. 129-30 (district court reasoning that it would be economically suicidal for Mars to license the competitor of its subsidiary). Thus, the district court did not abuse its discretion by refusing to cap the reasonable royalty rate at the 4% rate referred to in the 1996 Agreements.