Image: Mark Hurd
Paul Sakuma  /  AP
Mark Hurd received a severance from HP that could top $40 million after he resigned amid scandal.
updated 9/7/2010 6:01:37 PM ET 2010-09-07T22:01:37

Hewlett-Packard Co. is suing the chief executive it ousted last month, Mark Hurd, to stop him from taking a top job at rival Oracle Corp.

The lawsuit, filed Tuesday in a California state court, came a day after Oracle hired Hurd as co-president to help lead the database software maker's efforts to steal business from HP. HP claims that Hurd won't be able to perform his job at Oracle without spilling HP's trade secrets and violating a confidentiality agreement.

This type of complaint isn't unusual in the technology world, nor is the confidentiality agreement that Hurd had signed as part of a severance package from HP that could top $40 million.

Technology companies often require such agreements because workers walk out the door with valuable technical information.

But the stakes are higher with Hurd than a rank-and-file employee, and the lawsuit may delay when Hurd could start his new job.

The latest lawsuit shows the growing rancor between HP and Oracle.

The companies have worked together for 25 years to make sure that their products work well together. But that relationship is straining now that Oracle, like HP, sells the computer servers that power companies' back offices. Oracle got that business through its $7.4 billion purchase of Sun Microsystems last year.

Oracle is mostly known for its database software, which many people use every day but likely don't know it, such as when they're pulling money out of a bank or booking a flight. The software helps companies organize and access their data. It essentially gives them a map to all their information, so their computers know exactly where to find things.

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Oracle is the world's No. 1 database software maker, and with the Sun business, Oracle is now among the world's top seller of servers, as is HP.

As HP's CEO for five years, a stint that ended after a sexual-harassment investigation, Hurd was responsible for preparing HP's strategic plans and has intimate details about HP's profit margins and special deals it has offered customers, according to HP's lawsuit.

HP also insisted that Hurd was privy to a "highly confidential" analysis of Oracle's competitiveness against HP.

"Hurd's actions are a serious threat to HP's business," HP lawyers wrote in the lawsuit, which was filed in California Superior Court for Santa Clara County.

Read the filing as a .pdf file

Unless stopped, HP said, Hurd would diminish the value of HP's trade secrets, hurt customer relationships and "give Oracle a strategic advantage as to where to allocate or not allocate resources and exploit the knowledge of HP's strengths and weaknesses."

Hurd and Oracle declined to comment.

These types of cases often end up with a court ordering disputed executives to stay away from certain parts of their new employers' businesses. Hurd's deep involvement with all aspects of HP's businesses could complicate his case.

Still, the lawsuit may only delay Oracle's ability to put Hurd to work.

"In the end, it is likely going to be difficult for HP to prevail," said Kenneth Freeman, dean of Boston University's School of Management. "It's usually a very difficult area to enforce."

HP itself was on the other end of this type of case last year, after it hired David Donatelli, a veteran of the data-storage industry, from EMC Corp. HP was temporarily prohibited from letting Donatelli start work as an executive vice president because of a lawsuit by EMC. A court later ruled that Donatelli could work for HP, but under certain restrictions that split up some of his responsibilities.

Hurd resigned from HP last month after an investigation uncovered inaccurate expense reports connected with Hurd's outings with an actress and HP contractor named Jodie Fisher, who later claimed that her work helping organize HP events dried up after she rebuffed Hurd's advances.

Hurd, 53, who is married with two children, denies making any advances on Fisher. Hurd also insists he didn't prepare his own expenses and didn't try to conceal his outings with Fisher, which often included dinner after the events Fisher helped organize and that Hurd attended.

Ellison loudly came to Hurd's defense after Hurd was forced out of HP last month.

Ellison has said the HP board's decision to publicly disclose the harassment claim against Hurd amounted to "cowardly corporate political correctness," as the board had found that Hurd didn't violate the company's sexual-harassment policies.

HP has emphasized that its board voted unanimously for Hurd's resignation.

Shares of HP, which is based on Palo Alto, fell 42 cents, or 1 percent, to close Tuesday at $39.92. Shares of Oracle, based in Redwood City, increased $1.34, or 5.9 percent, to $24.26.

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Video: CNBC's Jon Fortt on the suit

Vote: Vote: Who made the right call on Mark Hurd?

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