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Delaware North ‘grossly exaggerated’ value of Yosemite assets, feds say

Delaware North placed a “grossly exaggerated” value on the names of park attractions and other intangible assets at Yosemite National Park before demanding that its successor as the park’s concessionaire buy back the intellectual property from the Buffalo-based tourism and hospitality giant, the U.S. Justice Department contends in a court filing this week.

The federal government argues that the intellectual property – including names of prominent venues at the popular California park and a customer database – is worth $3.5 million, far less than the $51 million valuation placed by Delaware North, which relied on a “flawed” methodology, according to the Justice Department’s filing in the U.S. Court of Federal Claims on Monday.

The Justice Department’s argument came in response to a breach-of-contract lawsuit filed in September by Delaware North. The company’s suit followed the Park Service’s decision to award the lucrative Yosemite concessions contract, worth up to $2 billion over 15 years, to another vendor.

The lawsuit contends that the National Park Service should have required Aramark, which won the new Yosemite contract, to purchase the names of park attractions and other intangible assets from Delaware North, as the company says it was obligated to do when it took over park operations in 1993.

The contract to operate hotels, restaurants, stores and other services at Yosemite, located in central California, is the most valuable in the Park Service and was put up for bid last year for the first time since 1992.

When Delaware North first won the contract, the company said that it was required to buy the tangible and intangible assets of the previous operator, Curry Co., for $61.5 million, or $115 million in today’s dollars. That included trademarked slogans such as “Go Climb a Rock” and intellectual property such as the names of the Ahwahnee Hotel, Curry Village and Badger Pass.

Delaware North’s original Yosemite contract also included an agreement that any company that succeeded Delaware North at the park would have to buy out all of its assets, according to the Buffalo-based concessionaire.

When the Park Service put the Yosemite contract out to bid, according to Delaware North, the bid document required the winning concessionaire to purchase at fair value “other property” used in connection with park operations.

The bid document specified furniture, equipment and vehicles, but did not mention intellectual property until Delaware North sought and received from the Park Service an amendment that addressed intangible assets.

On June 16, the Park Service announced it had awarded the concessions contract to Aramark.

However, Park Service officials ultimately did not require Aramark to purchase at fair value all of Delaware North’s tangible and intangible assets, a costly breach of the company’s contractual rights, according to the lawsuit.

In its response filed Monday, the Justice Department said Delaware North, beginning in 2002, quietly has attempted to trademark the phrase “Yosemite National Park” and several names of the venues at the park, saying it is part of an apparent “business model” of the company to collect trademarks of notable United States properties where Delaware North holds the concessions. The response uses an example from Kennedy Space Center, in Cape Canaveral, Fla., where Delaware North is the concessionaire and has sought to trademark “Space Shuttle Atlantis.”

Delaware North said that its operating contract with NASA requires it to trademark several attractions, including Atlantis. “It is common practice for concessionaires to use trademarks at federal locations,” Delaware North said in a statement. “This is done so to safeguard the treasured names, words and symbols from improper use by entities not under contract with the government.”

The government’s response to the lawsuit also says Delaware North didn’t reveal “the existence, much less the value” of its intellectual property and other intangible assets until the Park Service was preparing to put the Yosemite contract up for bid. Delaware North said that it shared its appraisals with the Park Service months prior to the bid deadline.

The government values the assets at $3.5 million, including $1.63 million for the trademarks and service marks, $1.23 million for Delaware North’s customer database and $620,000 for Internet-related intangibles. Delaware North values its trademarks and service marks at $44 million. The government said its far lower valuation is driven by a calculation that, with a concession in a national park, it’s the “unique, natural surroundings” in the park that draw visitors to the concession and not the strength of the trademarked name.

Delaware North said that it “has not ‘grossly overvalued’ the trademarks” and that it “had two independent appraisals of the intellectual property … performed by reputable third-party experts. The valuation results of those separate appraisals are very similar.”

Delaware North asks that the amount of damages be determined at trial, while the government wants the court to dismiss the complaint. The company, whose Yosemite contract runs out Feb. 29, and the Park Service remain in negotiations.