Reference no: EM131390571
Jennings conceived a secret process for the continuous freeze-drying of foodstuffs and related products and constructed a small pilot plant that practiced the process. However, Jennings lacked the financing necessary to develop the commercial potential of the process and, in hopes of obtaining a contract for its development and the payment of royalties, disclosed it in confidence to Merrick, a coffee manufacturer, who signed an agreement not to disclose it to anyone else.
At the same time, Jennings signed an agreement not to disclose the process to any other person as long as Jennings and Merrick were considering a contract for its development. Upon Jennings's disclosure of the process, Merrick became extremely interested and offered to pay Jennings the sum of $1.75 million if, upon further development, the process proved to be commercially feasible. While negotiations between Jennings and Merrick were in progress, Nelson, a competitor of Merrick, learned of the process and requested a disclosure from Jennings, who informed Nelson that the process could not be disclosed to anyone unless negotiations with Merrick were broken off. Nelson offered to pay Jennings $2.5 million for the process, provided it met certain defined objective performance criteria.
A contract was prepared and executed between Jennings and Nelson on this basis, without any prior disclosure of the process to Nelson. Upon the making of this contract, Jennings rejected Merrick's offer. The process was thereupon disclosed to Nelson, and demonstration runs of the pilot plant in the presence of Nelson representatives were conducted under varying conditions.
After three weeks of observing experimental demonstrations, compiling data, and analyzing results, Nelson informed Jennings that the process did not meet the performance criteria in the contract and that for this reason Nelson was rejecting the process.
Two years later, Nelson placed on the market freeze-dried coffee that resembled in color, appearance, and texture the product of Jennings's pilot plant. What are the rights of the parties?
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