HP sues Hurd to stop him from joining Oracle

By Julianne Pepitone, staff reporter

NEW YORK (CNNMoney.com) -- Hewlett-Packard has filed a lawsuit against Mark Hurd, its former chief executive, to block him from joining Oracle as co-president.

Oracle (ORCL, Fortune 500) announced late Monday that it had hired Hurd, and that he will sit on the company's board of directors. In court documents filed on Tuesday in California, HP said it believes Hurd has put its "most valuable trade secrets and confidential information in peril."

Oracle and HP compete in markets including computer servers and data storage.

HP (HPQ, Fortune 500) didn't have an explicit non-compete clause in its employment contact with Hurd, who stepped down last month in the wake of a sex scandal. Such clauses are typically very hard to enforce in California, where Hurd lives and where both companies are based.

"In California, non-compete clauses are generally null and void," said Nancy Abrolat, an employment lawyer at Abrolat & Associates in California. "Some other states do allow those kinds of restrictions, but California's statute against them is pretty straightforward."

But HP did have confidentiality agreements that Hurd signed annually, and the $12.2 million severance deal he struck requires him to continue abiding by those agreements. Those trade-secret "protective covenants," quoted in HP's lawsuit, require that for 24 months after leaving HP Hurd refrain from "conflicting business activities" with HP rivals that would result in the disclosure of confidential information.

HP thinks that's inevitable if Hurd joins Oracle.

"Hurd's position as a President and a member of the Board of Directors for Oracle puts HP's trade secrets and confidential information in jeopardy," the company wrote in its legal filing. "He will be responsible, in whole or in part, for the direction of the company. As a competitor of HP, he will necessarily call upon HP's trade secrets and confidential information in performing his job duties for Oracle."

Hurd's confidentiality agreement also prohibits him from communicating on behalf of an HP rival with any HP customer he had business contact with in the past two years. But because of California's employee-friendly non-compete rules, the deal has an exemption: As long as Hurd remains a California resident, he can have any contact he wants with customers that isn't made with the "unauthorized assistance" of confidential HP information.

Even if HP is able to constrain Hurd's activities for the next year, Oracle may have decided it's worth snapping Hurd up now and waiting out the restrictions. In Oracle's announcement of Hurd's hiring, co-president Safra Catz said she looked forward to working with him working with him "for years to come."

Oracle did not respond to a request for comment on the lawsuit.

It's another twist in the ongoing dramatic saga that began early last month with Hurd's sudden resignation. HP executives said Hurd, who is married, failed to tell the board about a "personal relationship" with Jodie Fisher, an actress who was working as a female marketing contractor for the company.

Fisher later came forward and said there had been no sexual relationship, but the HP board said that Hurd violated the company's code of ethics by filing inaccurate expense account reports in a bid to keep the relationship secret.

Hurd's insider access: HP's lawsuit alleges that Hurd, along with the rest of HP's board of directors, received a "highly competitive internal analysis of Oracle" in March. It noted that Hurd was in charge of developing strategic plans "to compete against HP's competitors, including Oracle."

HP's complaint also blasted Hurd for "failure to provide notice of [his new position] before it was publicly announced by Oracle."

Hurd had been credited with reviving HP following the tumultuous tenure of his predecessor, Carly Fiorina. HP shares have more than doubled since he took the reins in April 2005.

In his statement announcing Hurd's new position, Oracle CEO Larry Ellison slammed HP's decision to force its chief out.

"Mark did a brilliant job at HP and I expect he'll do even better at Oracle," Ellison said. "There is no executive in the IT world with more relevant experience than Mark."

In ane-mail to the New York Times last month, Ellison called HP's move "the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago." To top of page

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