HP sues to stop ex-CEO Hurd joining Oracle

SAN FRANCISCO Tue Sep 7, 2010 7:39pm EDT

Mark Hurd, chairman, CEO and president of HP speaks at the Fortune Brainstorm Tech conference in Pasadena, California July 24, 2009. REUTERS/Fred Prouser

Mark Hurd, chairman, CEO and president of HP speaks at the Fortune Brainstorm Tech conference in Pasadena, California July 24, 2009.

Credit: Reuters/Fred Prouser

Related Topics

SAN FRANCISCO (Reuters) - Hewlett-Packard Co sued former Chief Executive Mark Hurd and asked a court to block him from joining Oracle Corp, saying his hiring by the rival technology firm puts HP's trade secrets "in peril."

Oracle, the world's third-largest software maker, named Hurd co-president and director on Monday, a month after he resigned from HP over expense account irregularities related to a female contractor.

Hurd's separation agreement from HP did not include a non-compete provision, which are generally unenforceable in California. But it did include a two-year confidentiality pact.

In a civil complaint filed in Superior Court in Santa Clara County on Tuesday, HP said: "In his new positions, Hurd will be in a situation in which he cannot perform his duties for Oracle without necessarily using and disclosing HP's trade secrets and confidential information to others."

But employment and intellectual property lawyers said HP will have a tough time convincing a court.

"I think HP has a real uphill battle here," said Cliff Palefsky of San Francisco law firm McGuinn, Hillsman & Palefsky, who represents plaintiffs in employment cases.

"The notion is that you cannot do your job without using our trade secrets. And without specifics, it's just not likely to fly," he said.

Oracle called HP's lawsuit "vindictive" and said the company's board is making it "virtually impossible" for the two companies to partner together.

"By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees," Oracle CEO Larry Ellison said in a statement.

HP said if Hurd is allowed to go to Oracle it would "give Oracle a strategic advantage as to where to allocate or not allocate resources and exploit the knowledge of HP's strengths and weaknesses."

Hurd "cannot separate out HP's trade secrets and confidential information in performing his daily duties at Oracle," the complaint said.

HP asked the court to block Hurd from holding a position with a competitor in which it will be impossible for him to avoid disclosing sensitive information.

Linda Stevens, an intellectual property attorney at Schiff Hardin, said California courts have not been receptive to the doctrine of so-called "inevitable disclosure."

"It's pretty clear in California now that the courts are hostile to and have not adopted and in fact have rejected the inevitable disclosure doctrine," she said.

BIG HIRE

Wall Street analysts say Hurd would bring a formidable set of skills to Oracle, particularly given his expertise in IT hardware and in integrating large acquisitions.

Oracle is a major partner of HP, as well as a rival. Oracle competes with HP in the server market, following Oracle's $5.6 billion purchase of Sun Microsystems, which closed earlier this year. Oracle declined to comment on HP's suit on Tuesday.

At Oracle, Hurd will oversee sales, marketing and support.

In its lawsuit, HP said it paid Hurd handsomely with the understanding the he would not divulge sensitive information about the company.

"Despite being paid millions of dollars in cash, stock and stock options in exchange for Hurd's agreements to protect HP's trade secrets and confidential information during his employment ... (HP) alleges that Hurd has put HP's most valuable trade secrets and confidential information in peril," HP's complaint said.

Hurd's compensation from HP was valued at nearly $100 million over the three years prior to his resignation, and his exit package was worth an estimated $34.6 million.

Some legal experts said HP could have taken different steps to ensure that Hurd did not land at a close rival in such a short time.

A better way to prevent Hurd from working for a competitor would have been for HP to make his severance payable over time, said Stephen Hirschfeld, an employment attorney in San Francisco.

"I would have linked some sort of continuing obligation to the money," Hirschfeld said.

If the case follows the typical path for cases in which motions for injunctive relief are filed, a judge will soon schedule a hearing over HP's request to bar Hurd from going to Oracle.

Oracle shares surged 6 percent on Tuesday as investors cheered Hurd's appointment, which analysts generally praised as a boon for Oracle [ID:nN07245484].

Hurd resigned from HP on August 6. HP said he filed inaccurate expense reports related to Jodie Fisher, a marketing contractor who worked for Hurd's office from 2007 through 2009. Although Fisher leveled allegations of sexual harassment at Hurd, HP found no harassment had occurred.

Shares of HP closed 1.04 percent lower at $39.92 on the New York Stock Exchange. Shares of Oracle ended up 5.87 percent at $24.27.

(Reporting by Gabriel Madway and Alexei Oreskovic; additional reporting by Dan Levine, Yinka Adegoke and Bill Rigby; editing by John Wallace, Richard Chang and Andre Grenon)

FILED UNDER: