HP sues Hurd in hurry

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HP sued Hurd in Santa Clara County Superior Court on Tuesday, claiming that he is breaching confidentiality clause reached in the severance agreement by accepting the post at Oracle, one of its rivals.

It would put "HP's most valuable trade secrets and confidential information in peril," the company said in a statement. Oracle's Ellison termed HP's move as "vindictive". In a swift response, he said in a statement, "The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace," a possible hint that Oracle's alliance with HP would end soon.

Will it stand the court scrutiny? The major focus is on the doctrine of "inevitable disclosure" that came into light last year and in which the defendants won the case against the company and walked away with $1.6 million as attorney fees.

However, HP's lawyers are apparently hopeful that the notification clause in the exit agreement would save them. The company's lawsuit said that Hurd failed to provide HP with sufficient notification of his new employer and new position under Section 9 of the Trade Secret Protection Agreements.

It also stated that the new position will "make it impossible for Hurd to avoid disclosing or utilizing HP's trade secrets or confidential information" which it says violates Sections 2 and 7 of the Trade Secrets Protection Agreements.

"By working at Oracle, he cannot help but utlize and disclose HP's trade secrets and confidential information, including the trade secrets and confidential information contained in the FY 2010 and FY 2011 business plans...

Hurd agreed to keep HP's trade secrets and confidential information protected and confidential both during and after his employment with HP, pursuant to Section 2 of the Trade Secret Protection Agreements."

NOT ORACLE

The company also sought an injunction from the court to stop Hurd from taking up the job at Oracle. It stated, "On March 18, 2010, Hurd was presented, along with the other members of the HP Board of Directors, with a highly confidential competitive internal analysis of Oracle."

Further down, referring to Oracle press release on Hurd joining it, HP argued that his quote: "I believe Oracle's strategy of combining software with hardware will enable Oracle to beat IBM in both enterprise servers and storage," contravenes the exit agreement.

Hurd referred to Exadata saying, "Exadata is just the beginning. We have some exciting new systems we are going to announce later this month at Oracle Open World. I'm excited to be a part of the most innovative technology team in the IT industry."

But HP took exception to the quote and stated: "As Hurd well knows, IBM and HP are competitors of Oracle in the enterprise servers and storage business. Hurd's clear effort to avoid mentioning HP is telling in light of Oracle's own SEC filings identifying HP as a competitor. What Hurd and everyone else also knows is that the Exadata server mentioned in his quote is a direct competitive product to HP's Proliant Server."

INEVITABLE DISCLOSURE ARGUMENT ?

Essentially, HP's argument is around the doctrine of inevitable disclosure though it was directly not mentioned in the lawsuit.

"As a competitor of HP, he will necessarily call upon HP's trade secrets and confidential information in performing his job duties for Oracle... He cannot perform his job at Oracle without disclosing or utlizing HP's trade secrets and confidential information," HP argued in its lawsuit.

But legal experts say that it would be difficult to prove. "HP is facing an uphill climb," said a report in The Recorder quoting Cooley litigation partner Frederick Baron. "California has a strong public policy against enforcing non-compete clauses," he noted.

Since the case was filed without any evidence of Hurd having violated the agreement, it may not withstand the court's scrutiny, goes the other argument.

"There has to be some kind of smoking-gun evidence," insisted Tyler Paetkau of Hartnett, Smith & Associates in Redwood City, California. But he did not rule out the possibility of the court granting a temporary injunction that would keep Hurd on the sidelines for a few months, according to the report.

Without any strong evidence of wrong-doing, the court is unlikely to grant an injunction to stop Hurd from working at Oracle, said the report quoting another expert David Burtt at Ongaro Burtt & Louderback in San Francisco. "HP is trying to take Hurd out of his job in the absence of evidence of actual wrongdoing," he pointed out.

Last year, in a similar case Flir Systems vs. Parrish, the second District Court of Appeal in California had rejected the argument as a "misappropriation case" that was brought before it "in bad faith" as defendants who were former employees did not begin their planned business involving cheaper version of microbolometers.

Moreover, the court found enough evidence that Flir had an anti-competitive motive in filing the lawsuit. Since the California Uniform Trade Secrets Act allows for an award of attorney fees, the defendants were paid $1.6 million.

Surprisingly, HP argued in its lawsuit that Hurd's joining Oracle would pose problem to its Proliant servers, not bothering that it would attract the court's attention to possible anti-competitive motive. It stated that Hurd's knowledge of its Proliant specifications, which it said would be revealed by the defendant at his new company Oracle, which is bringing out competing product Exadata.

No wonder, media reports have been describing the lawsuit as an uphill task for HP lawyers.