Opinion ID: 984451
Heading Depth: 3
Heading Rank: 2

Heading: broad construction or waiver

Text: Convolve contends the district court erred when it found that Compaq failed to protect the confidentiality of 22 CONVOLVE v. COMPAQ COMPUTER certain information because it failed to designate it as such pursuant to its obligations under the NDAs. Convolve asserts that the parties understood that all of their mutual disclosures were confidential, notwithstanding the marking requirements in the NDAs. In other words, Convolve argues that fact issues remain as to whether those trade secrets were confidentially disclosed, despite Convolve’s failure to follow the NDA confidentiality procedures, because the right to enforce those procedures was waived. The district court found that Convolve did not send a confirmatory letter designating the alleged disclosure of the information relating to ATSIs 1B, 2A, 2C, 2E, and 3B–D as confidential. While Convolve does not dispute this finding, it contends that the parties’ course of conduct did not require a follow-up letter. To address this argument, we look to the relevant language of the NDAs. Convolve alleged that only Seagate misappropriated these particular trade secrets; therefore, we apply the law of the state that controls that NDA—as noted, that is California law. When interpreting a contract, California law requires courts to “give effect to the mutual intention of the contracting parties at the time the contract was formed.” Windsor Pacific LLC v. Samwood Co., Inc., 152 Cal. Rptr. 3d 518, 527 (Cal. Ct. App. 2013) (citing Cal. Civ. Code § 1636). Such intent is ascertained “solely from the written contract if possible,” and also “the circumstances under which the contract was made and the matter to which it relates.” Id. (citing Cal. Civ. Code. §§ 1639, 1647). The contract’s terms and provisions are to be interpreted according to their ordinary meaning. See Canaan Taiwanese Christian Church v. All World Mission Ministries, 150 Cal. Rptr. 3d 415, 422 (Cal. Ct. App. 2012). Contract interpretation is a question of law that we review de novo. Wash. State Republican Party v. Wash. State Grange, 676 F.3d 784, 796 (9th Cir. 2012) CONVOLVE v. COMPAQ COMPUTER 23 (citing Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 681 (9th Cir. 2009)). The plain language of the Convolve-Seagate NDA unambiguously requires that, for any oral or visual disclosures, Convolve was required to confirm in writing, within twenty (20) days of the disclosure, that the information was confidential. Paragraph 7 of the Convolve-Seagate NDA provides that, for “any oral or visual disclosures,” the disclosing party must (1) designate the information as confidential at the time of disclosure and (2) confirm “in a writing delivered within twenty (20) days to the Recipient which provides clear notice of the claim of confidentiality and describes the specific information disclosed.” J.A. at 293. The intent of the parties, based on this language, is clear: for an oral or visual disclosure of information to be protected under the NDA, the disclosing party must provide a follow-up memorandum. And, we see no error in the district court’s conclusion that Convolve failed to provide this written follow-up memorandum with respect to each of these ASTIs. Convolve argues that, regardless of whether the confidentiality of the trade secrets was confirmed in writing, it presented evidence that the parties understood their mutual disclosures were confidential, notwithstanding the NDA strictures. In other words, Convolve argues that it presented evidence that the parties waived the written confidentiality requirement through their course of conduct. And, Convolve argues that the district court disregarded such evidence in contravention of controlling California law. Even assuming Convolve is correct that the district court was required to provisionally consider the evidence of the parties’ conduct, we still find the court’s conclusion to be correct. As previously stated, the NDAs do not appear reasonably susceptible to the interpretation Convolve urges. Convolve’s assertion that the parties understood that all 24 CONVOLVE v. COMPAQ COMPUTER oral and visual disclosures were under the purview of the NDAs absent a written follow-up memorandum so stating is contrary to the terms of the NDAs. Thus, Convolve’s interpretation is unreasonable and would render paragraph 7 of the NDA a dead letter. In California, “where the subsequent conduct of parties is inconsistent with and clearly contrary to provisions of the written agreement, the parties’ modification setting aside the written provisions will be implied.” Alvarado Orthopedic Research, L.P. v. Linvatech Corp., 2013 WL 2351814, at  (S.D. Cal. May 24, 2013) (quoting Diamond Woodworks, Inc. v. Argonaut Ins. Co., 135 Cal. Rprt. 2d 736, 747 (Cal. Ct. App. 2003)); see also Biren v. Equality Emergency Med. Grp., 125 Cal. Rptr. 325, 335 (Cal. Ct. App. 2002) (“[T]he parties may, by their conduct, waive such a provision where the evidence shows that was their intent.”) (quoting Frank T. Hickey, Inc. v. L.A. Jewish Cmty. Council, 128 Cal. App. 2d 676, 682–83 (Cal. Ct. App. 1954)). “Before a contract modifying a written contract can be implied, [however,] the conduct of the parties according to the findings of the trial court must be inconsistent with the written contract so as to warrant the conclusion that the parties intended to modify the written contract.” Garrison v. Edward Brown & Sons, 25 Cal. 2d 473, 479 (1944)). The operative question, therefore, is whether Convolve presented enough evidence to create a genuine issue of material fact that the parties, through their conduct, intended to waive or modify the NDA marking provision. Convolve’s evidence consists of the testimony of a single Seagate employee that he believed that all disclosures were confidential. But, the subjective intent of one of the parties is not indicative of the mutual intent of both parties. Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., 135 Cal. Rptr. 2d 505, 514 (Cal. Ct. App. 2003) (“The parties’ undisclosed intent or understanding is irrelevant to CONVOLVE v. COMPAQ COMPUTER 25 contract interpretation.”) (citations omitted). Convolve also argues that, because Seagate and Compaq acknowledged that the oral and visual disclosures at the October 1998 meeting were covered under the NDAs, this demonstrates that the parties understood that all subsequent disclosures were also covered under the NDA. This evidence, however, leads to precisely the opposite conclusion. By acknowledging that the disclosures at the October 1998 meeting were confidential, the parties’ conduct demonstrates they understood that oral and visual disclosures indeed required such written follow-up. As such, we perceive no error in the district court’s conclusion that the parties did not waive or modify the marking provisions of the NDAs.