As you probably know, HP filed a lawsuit against former CEO Mark Hurd in California seeking to prevent him from going to work for competitor Oracle. The Wall Street Journal has a solid account of the lawsuit and analysis of the claims.
The lawsuit asserts causes of action against Hurd for breach of contract and and threatened misappropriation of trade secrets. California law disfavors non-compete agreements, unlike Texas, so Hurd’s employment agreements are not called non-competes but have the same effect. The “Protective Covenants” section of his employment agreement prevent Hurd from disclosing trade secrets and soliciting HP customers, employees, and suppliers. There is also a provision which has the net effect of a non-compete:
(a) No Conflicting Business Activities. I will not provide services to a Competitor . . . that would involve Conflicting Business Activities in the Restricted Geographic Area (but while I remain a resident of California and subject to the laws of California, the restriction in this cause . . . will apply only to Conflicting Business Activities in the Restricted Geographic Area that will result in unauthorized use or disclosure of HP’s confidential information).
The crux of HP’s claim is that because Hurd was exposed to trade-secrets and business strategies while CEO for HP he will disclose or use that information while working for Oracle – this sounds like the inevitable disclosure doctrine but is styled as threatened misappropriation of trade secrets. What is the doctrine? Here is Linda Stevens take:
There are circumstances in which trade secrets inevitably will be used or disclosed, even if the defendant swears that he or she will keep the information confidential. Courts applying the doctrine have differed over its reach and the circumstances required for its application, but, generally speaking, the doctrine applies when a defendant has had access to trade secrets and then defects to the trade secret owner’s competition to perform duties so similar that the court believes that those duties cannot be performed without making use of trade secrets relating to the previous affiliation.
Texas Court do not recognize the inevitable disclosure doctrine but have come close – California does not appear to either. HP now seeks an injunction to prevent Hurd from working for Oracle based on his contractual obligations and threatened misappropriation of trade secrets.
Hurd was forced out at HP after a sexual harassment scandal, but he was paid millions of dollars.
It will be interesting to see how the Judge balances the equities on this case. Is the protective covenant enforceable under California law? (I’ll leave that to a California lawyer to determine.) Will the Court consider the fact Hurd has been paid a significant amount of money to sign these agreements? Most importantly, will the Court believe he will disclose HP trade secrets at Oracle? We will keep you posted.
