In the Matter of the Petition of Lowe’s Home Centers, Inc.

Dr. Shapiro was asked to opine on the value of Lowe’s trademarks and trade names and the process by which other intangible assets helped create value for Lowe’s. In his expert report, Dr. Shapiro demonstrated that “Lowe’s trade names had little intrinsic value,” and that “people shop at Lowe’s stores because of convenience, product selection, low prices, and quality service, not because of its name. The name just signifies the attributes they expect to receive when shopping at Lowe’s, it is not the attributes themselves.”

As noted by the court,

Dr. Shapiro testified that LHC owned unique and valuable intangible assets that included a distribution network, marketing know-how, logistics know-how, assembled workforce, employee goodwill, favorable store locations, economies of scale in purchasing and advertising, good relations with suppliers, and the ability to provide quality service. He did not fix the value of these intangibles. Dr. Shapiro postulates that where a licensor owns a trade name that he licenses to a licensee, who himself owns valuable intangible assets that substantially increase the returns from the use of the trade names, in such case any excess returns earned are attributable both to the assets owned by the licensor as well as those owned by the licensee.
(p. 32)

As indicated by Dr. Shapiro, trademarks, standing alone, have little intrinsic value. The substantial value that Lowe’s trademarks and trade names share is generated by the attributes of quality, price and customer service that have become associated with the branded products and services that display the Lowe’s marks.”
(p. 58)

In his report, Dr. Shapiro opined that,

The income earned on a trademarked product increases with the amount of organizational capital supporting that mark. Hence, trade names and organizational assets are synergistic – each enhances the value of the other. Thus, any analysis that ignores a company’s organizational assets will overvalue its trade names – and that overvaluation will be in direct proportion to the amount of its organizational assets (exhibit 15, page 11).

In the Matter of Sherwin-Williams Company (supra). The Tribunal adopted this identical language from Dr. Shapiro’s report received in evidence in that case, in support of its conclusion that that taxpayer’s total valuable intangible assets were not limited to trademarks and trade names, but included the taxpayer’s organizational assets as well. Matter of Sherwin-Williams supports the Division’s premise that value is generated by the combined effect of a company’s trademarks and trade names and its organizational assets as well.
(p. 57)