Opinion ID: 745282
Heading Depth: 2
Heading Rank: 2

Heading: Breach of Confidentiality Cause of Action

Text: 88 ERG's third cause of action is based on its belief that Genesis violated the parties' Confidential Disclosure Agreement by disclosing confidential information to Aerostar regarding the design, manufacture and pricing of ERG's inflatable costumes and component parts. 11 89 California case law recognizes a cause of action in tort for breach of confidence. See, e.g., Faris v. Enberg, 97 Cal.App.3d 309, 321, 158 Cal.Rptr. 704 (1979). This tort is based upon the concept of an implied obligation or contract between the parties that confidential information will not be disclosed. See, e.g., Tele-Count Eng'rs, Inc. v. Pacific Tel. & Tel. Co., 168 Cal.App.3d 455, 462, 214 Cal.Rptr. 276 (1985); see also Landsberg v. Scrabble Crossword Game Players, Inc., 736 F.2d 485, 489 (9th Cir.1984). In other words, this cause of action recognizes an obligation in law where in fact the parties made no promise. It is not based upon apparent intentions of the involved parties; it is an obligation created by law for reasons of justice. Fink v. Goodson-Todman Enterprises, Ltd., 9 Cal.App.3d 996, 1010, 88 Cal.Rptr. 679 (1970) (citation omitted). 90 To prevail on a claim for breach of confidence under California law, a plaintiff must demonstrate that: (1) the plaintiff conveyed confidential and novel information to the defendant; (2) the defendant had knowledge that the information was being disclosed in confidence; (3) there was an understanding between the defendant and the plaintiff that the confidence be maintained; and (4) there was a disclosure or use in violation of the understanding. See, e.g., Aliotti v. R. Dakin & Co., 831 F.2d 898, 903 (9th Cir.1987) (citing Tele-Count Eng'rs, 168 Cal.App.3d at 462-66, 214 Cal.Rptr. 276 (1985)). 91 Information need not be protectable either as a trade secret, see Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462, 465-67 (9th Cir.1990), or by copyright law, see Tele-Count Eng'rs, 168 Cal.App.3d at 462-66, to be the subject of a breach of confidentiality claim. However, the information disclosed must be confidential and novel to warrant protection. Id. 168 Cal.App.3d at 462; see also Faris, 97 Cal.App.3d at 322-23. Accordingly, the key to ERG's breach of confidence claim is whether the information conveyed to Genesis by ERG was confidential and novel. 92 We affirm the district court's grant of summary judgment on this cause of action because--even assuming that ERG can meet all of the other elements--ERG can not establish that it conveyed any confidential and novel information to Genesis. ERG and Genesis began their relationship--whatever it may have been--at some time in 1989. It is undisputed that by that time, ERG had already placed several of its inflatable costumes on the market through its previous sales to assorted customers. After Genesis began to sell ERG's costumes to the customers Genesis located, ERG did not require any of these purchasers to execute non-disclosure agreements. Accordingly, it can be presumed that in all of its sales prior to Genesis's arrival into the picture, ERG likewise did not require any type of non-disclosure agreement to be signed by the purchasers. ERG has not offered any evidence suggesting otherwise, and in fact, there is substantial evidence indicating that ERG never took any steps to prevent other manufacturers from looking inside ERG's costumes and reverse-engineering them. 93 The absence of any non-disclosure agreements entered into by these previous purchasers is dispositive of the instant breach of confidence claim. In Aliotti, 831 F.2d at 903, we held that the plaintiff could not have conveyed any confidential information to the defendant concerning her products for the express reason that three of the dolls in question--the products at issue--were already on the market. Because no confidential information was conveyed, we granted summary judgment there against the plaintiff on her breach of confidence cause of action. Likewise, in the instant case, we affirm the district court's grant of summary judgment to Genesis and Aerostar since because ERG's costumes were already on the market before Genesis became involved, any design or manufacturing information that ERG may have disclosed to Genesis was not confidential as a matter of law. See id. Thus, even though the Disclosure Agreement states that the information conveyed was confidential, as a matter of law, this information was actually not confidential. Id. 94 In this regard, it is important to note that reverse-engineering is perfectly legal in a product not protected by a patent. See, e.g., Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 156-58, 109 S.Ct. 971, 980-81, 103 L.Ed.2d 118 (1989); Chicago Lock Co. v. Fanberg, 676 F.2d 400, 404-05 (9th Cir.1982). Accordingly, by not requiring the purchasers of its costumes to sign non-disclosure agreements, ERG gave up any ability it may have had to claim that the manufacturing and design information disclosed to Genesis was confidential in nature. 95 In addition to this claim that Genesis disclosed confidential information about ERG's manufacturing and design processes, ERG also argues that Genesis breached the confidence it owed to ERG by disclosing to Aerostar the prices that purchasers were paying for ERG-manufactured costumes. We also reject this argument on the ground that such information was not confidential. In the first place, the prices allegedly improperly disclosed were the prices that Genesis--not ERG--charged the purchasers. Thus, the price information was, if confidential at all, Genesis's confidential information--not ERG's. In addition, price information is not covered in the definition of Information detailed in the Disclosure Agreement, so Genesis technically would not have violated the Disclosure Agreement by disclosing any pricing information. 96 For the forgoing reasons, the district court's grant of summary judgment to defendants on ERG's breach of confidence cause of action was correct. Although ERG argues that the question of whether the information conveyed by ERG to Genesis was confidential should have been left for the jury, this contention is without merit since any information ERG conveyed to Genesis was not confidential as a matter of law. See Aliotti, 831 F.2d at 902-03.