Parev Products Co. v. I. Rokeach & Sons
United States Court of Appeals for the Second Circuit
124 F.2d 147 (1941)
Parev Products Company, Inc. (Parev) (plaintiff) formed a contract with I. Rokeach & Sons, Inc. (Rokeach) (defendant), under which Parev gave Rokeach exclusive use for 25 years of Parev’s secret formula for a kosher coconut shortening in exchange for royalties on all sales of the shortening. Rokeach named the shortening Nyafat. The contract prohibited Parev from competing with Rokeach’s sale of Nyafat or a similar product, and prohibited Rokeach from selling, manufacturing, or distributing Nyafat or a similar product once the contract expired or terminated. Nyafat, and Parev via the royalties, did well for the first 15 years, but then Rokeach began distributing Kea, a cottonseed-oil shortening. Parev sued Rokeach, asking the district court to find an implied negative covenant that Rokeach would not compete with Nyafat or interfere with Nyafat sales. Parev argued that Rokeach began selling Kea in order to escape paying royalties to Parev. Rokeach responded that it began distributing Kea because the lower price made Kea better able to compete with the then-new Crisco and Spry shortenings. Rokeach argued that any implied covenant would only prohibit tortious competition, and alternatively, that Kea was not truly similar to Nyafat. The district court dismissed Parev’s complaint based on its view of the parties’ intent. Parev appealed.
Rule of Law
Holding and Reasoning (Clark, J.)
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