By Cecilia Kang
Washington Post Staff Writer
Tuesday, September 7, 2010; 10:40 PM
An executive's sex scandal. His ouster. A bombastic billionaire competitor who redeemed him. And now a possible court battle over high-tech secrets.
The stuff of television soap operas rarely comes to Silicon Valley, but that story line continued to develop with Hewlett-Packard's lawsuit filed Tuesday against its former chief executive, Mark Hurd.
One day after Hurd agreed to become president of rival software firm Oracle, HP filed suit to block the move. HP, which had ousted Hurd last month after he allegedly filed inaccurate expense reports to cover up a relationship, claimed the executive would violate a confidentiality agreement by working for Oracle.
Oracle's mercurial and outspoken founder, Larry Ellison, was a surprising defender of Hurd in the wake of the scandal. Last month, Ellison sent an e-mail to HP board members criticizing their actions, saying the dismissal was "the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago."
Even so, Silicon Valley observers were shocked Monday when Ellison announced he had brought on Hurd as president.
"Mark did a brilliant job at HP, and I expect he'll do even better at Oracle," Ellison said.
HP competes with Oracle to outfit Fortune 500 firms, universities and government agencies with giant computer servers and software. At the heart of its lawsuit, the storied printer and computer maker said Hurd took millions of dollars in cash, stock and options over his five years as chief executive with the condition he would protect HP's technology and business secrets, even after he leaves.
Specifically, Hurd signed a contract stating that he would not work or consult for a competitor for up to 12 months after leaving. HP said that as chief executive, Hurd had particular insight and knowledge of the firm's confidential business information, including the design of its 2010 and 2011 business plans. Hurd was also responsible for cultivating customer relationships, which could be at jeopardy if Hurd were to lure them to his new firm, 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," HP said in its suit filed with the Santa Clara County, Calif., Superior Court.
Ellison called the lawsuit "vindictive" and said Oracle has long viewed "HP as an important partner," according to a company statement.
"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," Ellison said.
The employment suit is a run-of-the-mill case in many ways, attorneys said. High-tech firms routinely require employees to sign confidentiality agreements. Start-ups often require venture capitalists to sign non-disclosure agreements before presenting new business ideas for potential investment.
Jennifer B. Rubin, an employment attorney for the Mintz Levin law firm, said the court will look at several factors, such as how long Hurd was chief executive of HP and the knowledge he gained there.
"But ultimately the question will rest on whether Hurd can do his new job without disclosing all the information he learned while at HP," Rubin said. "It's very analytical and fact-based."
Employment and technology law experts say the dispute points to the fiercely competitive landscape for executive talent. Before working at HP, Hurd was chief executive of NCR, a company that provides data warehousing and that competes with Oracle.
Though routine in some aspects, the dispute between the Silicon Valley heavyweights has gained national attention for its dramatic twists and the involvement of some of corporate America's most prominent executives.
Hurd was brought to HP five years ago to help revive one of the industry's original computer makers as it struggled to find a new identity. The marketplace had become less interested in hardware for desktops and servers and more focused on technologies such as cloud computing, mobile phone applications and social networking sites. Hurd succeeded in cutting costs and building the company's software and corporate services division, helping lift its flagging stock.
Then in June, a former marketing consultant complained to HP's board that Hurd had sexually harassed her. The board launched an investigation that did not find evidence of sexual harassment but revealed that Hurd submitted several inaccurate expense reports meant to conceal his relationship. Hurd resigned on Aug. 6.
"Any time the big Silicon Valley elephants go tusk to tusk, it's always exciting," said Eric Goldman, a technology law professor at Santa Clara University. "But it also points to the competition for talent."