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Lawsuit shows HP sees Hurd as primal threat

However, the suit against its ex-CEO over confidentiality may not have much of a chance, says one analyst

September 8, 2010 06:00 AM ET

Computerworld - Hewlett-Packard's reaction to the move by former CEO Mark Hurd to the upper ranks of Oracle is one of sound and fury, but mostly fear.

The fear is that it be "impossible for him [Hurd] to avoid disclosing or utilizing HP's trade secrets or confidential information," HP said in a lawsuit filed in a California Superior Court less than 24 hours after Oracle announced, on Labor Day, that it had hired Hurd as co-president.

Indeed, Hurd's ability to damage HP in his new role at Oracle is so great that he emerges as an anti-CEO in the lawsuit -- a person with almost as much power outside of HP as he once held inside it.

Hurd resigned last month following a sexual harassment claim and questions about related expense account reports.

Hurd's new boss, Oracle CEO Larry Ellison, was critical of HP's board for forcing Hurd's ouster.

With Hurd at Oracle, HP faces a loss of customers and technology, as well as "its competitive advantage, its trade secrets and goodwill in amounts that may be impossible to determine, unless Hurd is enjoined and restrained by order of this court," according to legal papers HP filed in California Superior Court in Santa Clara.

Those are strong warnings by HP, but they may matter less in California than in other states, where courts don't recognize noncompete agreements, said legal experts.

It is not uncommon for companies to try to limit the potential risk posed by former employees with agreements, for instance, that bar an ex-employee from taking a job with a competitor for some period of time.

However, under California law, you can't stop someone from going to work for a competitor, "even the most senior executives who may possess a great deal of confidential information," said Michael Rosen, an attorney at Foley Hoag LLP in Boston, who also writes about noncompete law.

In its lawsuit, HP wants an injunction barring Hurd from taking a job at Oracle because of the threat he poses, not what he has done.

"Obtaining such an injunction in the absence of any evidence that he has taken or utilized trade secrets will be very difficult," said Rosen.

The legal argument HP is raising is based on something in California law called the inevitable disclosure doctrine, which argues that there is no way for employees, in some circumstances, to go to a competitor without disclosing confidential information, said business law attorney Peter Berlin.

But Berlin said the problem for HP is that the inevitable disclosure doctrine was overturned. "I'm not sure how far they will get this lawsuit," he said.

Kenneth Chin, an analyst at Gartner, said HP does have a point about the threat posed by Hurd, because he has seen all the product road maps, particularly in the servers and storage areas.

Since Oracle's acquisition of Sun Microsystems earlier this year, Oracle has emerged as a direct hardware competitor to HP.

But the help that Oracle will get from Hurd, at least as far as his knowledge about HP's plans go, also has a time stamp on it of one to two years, as product road maps inevitably change, said Chin.

Chin said he expects that the two firms will reach a settlement quickly to put the dispute to rest.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at Twitter @DCgov or subscribe to Patrick's RSS feed Thibodeau RSS. His e-mail address is pthibodeau@computerworld.com.

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