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HP Sues Ex-CEO to Keep Him from Joining Oracle

By Stephanie Robinson

On September 7, 2010, Hewlett-Packard sued its former CEO, Mark Hurd, in California state court for alleged breach-of-contract and threatened misappropriation of trade secrets. HP is seeking to keep Hurd from joining rival Oracle, which recently offered to hire Hurd as a top-level executive following his publicized departure from HP over claims that he altered expense reports to cover up a personal affair. (A copy of the complaint is available here.) Trade secrets-related disputes often follow the departures of executives from the companies they lead, especially when, as in this case, the departure is less-than-amicable. However, non-compete agreements are usually very difficult to enforce in court to the extent that they can be construed as an unreasonable restraint on a former employee?s ability to find a job. Moreover, in California, almost all non-compete agreements are void by operation of state law. Even if the agreement HP is seeking to enforce is not a non-compete agreement on its face, if the effect of HP?s requested remedy would be the same as traditional non-compete agreement, it likely will be extremely difficult for it to achieve the result it allegedly is seeking. However, both sides of this dispute clearly have heavy war chests from which to pay their attorneys, so what seems like a predictable result probably will end up being anything but predictable. Nevertheless, to the extent that any business with trade secrets needed one, the case is a good reminder of the importance of taking a holistic approach to the protection of those assets. In many cases, restrictive covenants in employment contracts simply will not get the job done. With some employees, like Hurd in HP?s case, it may be next to impossible to defend against some kinds of misappropriation. In those cases it becomes all the more important to incentivize compliance in the terms of a well crafted severance package. And, where doubt arises, as always, consult with knowledgeable counsel in order to determine what will and will not be enforceable if the relationship turns sour.

Full post as published by Business and Technology Law on September 20, 2010 (boomark / email).