Sunday, September 12, 2010

WSJ: HP and Oracle

The Wall Street Journal this week talked about HP suing its former CEO for joining competitor Oracle in an executive position. HP alleges that Mr. Hurd is in breach of contract (the "exit agreement"). His firing from HP was all over the news recently, after some alleged --and inscrutable -- expense account irregularities, as well as a sexual harassment issue, which HP objected to on the grounds that Mr. Hurd settled the matter in person without HP's knowledge or help.

Everything I read makes the matter of Mr. Hurd's dismissal fishy and apparently a massive waste and destruction of true company value (administrative issues permuted into the hackneyed corporate PR issue of a CEO's alleged fiduriary duty to appear to be ethical, whether he was ethical or not and whatever the scale of the issue). 

But what I find interesting here is several aspects of the lawsuit.  As I see it it falls under the general topic of intellectual property rights.  Is is possible to define objective boundaries to the use of one's knowledge, boundaries enforceable by law?  Regardless of the lawsuit's merits, it looks like HP is in an uphill battle -- because of obstacles from Oracle's CEO Ellis, and because of California law.

Oracle's Ellis -- a software man who livelihood depends on intellectual property -- is quoted solely as saying he doesn't like the matter because it's a "vindictive lawsuit"  and makes it "impossible for Oracle and HP to continue to cooperate."  It may be the shortcoming of the report, but what about the validity of HP's claim -- what doesn't Ellis say something about that?  Is it because he doesn't believe in such confidentiality agreements?  How can he find it so apparently ridicilous that HP would pursue their rights , rights that they objectively tried to secure ahead of time? 

And California courts, says HP's lawyer, also make the lawsuit difficult because "in California, it is hard to sue a former employee who leaves for a competitor", since the courts "typically frown upon on agreements that limit employees' ability to switch companies."  HP's lawyer adds, "I think a judge would be more open to an argument that there is a real and imminent danger that trade secrets would be in inherently disclosed."

What??  Lawyer double-speak.  As the article summarizes well, Mr. Hurd holds deep knowledge of HP's operations that cold prove useful at Oracle, including HP plans for future products, pricing information, details about component and product costs.  Mr. Hurd "has put HP's most valuable trade secrets and confidential information in peril."  This is obviously exactly what HP wanted to limit Mr. Hurd from using as part of his new job for a certain delimited period of time. 

What beyond the basic principles would a court adduce as evidence of "real and imminent danger" to its trade secrets?  But HP themselves seems to be buying into the bureaucratic guagmire, asking in its lawsuit for the court to assign a "special master" to regularly review Mr. Hurd's compliance with his confidentiality agreement.

It is likely that Mr. Hurd is in fact proving to be immoral once and for all in this case, plainly breaking a signed agreement and flaunting intellectual property rights.  Such agreements have no escape clauses to the effect that, "oh sure, sometimes it's ok to go ahead and work immediately in a leadership position for a competitor, as long as your daily job doesn't typically require you to rely upn or reveal upon our secrets."

Ellis and Hurd and California courts remind me of the Libertarian position, which disdains contracts that constrain, on principle, the use of intellectual property.  They often point to how "society" is hurt by limiting the "free flow" of information, including secrets (for the same reason, Libertarians also hate copyright laws).  Such disdain also relies on other non-objective concepts, such as privacy-comes-before-property-rights, and antitrust laws' disdain of exclusive contracts and love of spreading information among competitors (a la "perfect competition" model taught in all economics courses.)

By the way, a good Objectivist intellectual who is now working full time in making intellectual property rights objective is Dr. Adam Mossoff, now a full professor at the wonderful George Mason U.  I heard him speak in Chicago a few years back on the history of intellectual rights in AmericaAnother is Dr. Amy Peikoff, now at Chapman University in Orange, CA, my first hometown in America.

They argue that attacks on intellectual property (e.g. via the issue of privacy, which was corrupted and cemented into American law and thinking by Justice Louis Brandeis) was the beginning of attacks on all rights.

-- Stephan