Cisco Calls Out HP For Suing Former Employees Who Leave HP To Work For Cisco

Legal Issues

from the sullying-the-hp-brand dept

We’ve written, in great detail, about the research that shows that the ability for employees to switch jobs freely almost certainly contributed massively to the huge success of Silicon Valley. Multiple studies, looking at multiple different factors, have shown that a simple legal issue — the fact that non-compete agreements are unenforceable in California — was the key driving factor in Silicon Valley’s success. Sure, other things were important: good universities, investors, etc. But other areas had that too. What set Silicon Valley apart was the fact that employees switch jobs much more frequently.

As for why that has such a massive impact on innovation and economic growth, it has to do with the sharing of ideas. While traditional economic theory might suggest companies are better off hoarding information on new products, that’s not true in many cases. Take, for example, an emerging market where multiple players are on the verge of key breakthroughs — but the market won’t really emerge until that breakthrough is complete. What studies have found is that the more minds thinking about a problem and cross-pollinating ideas, the faster it is that the necessary breakthrough can happen. Now, companies may not work directly together on solving the challenge, but when employees shift regularly between companies they act to pollinate the ideas from one organization to another, helping those organizations reach the breakthrough point sooner, creating those large new markets. This isn’t a bad thing. Speeding up the process of innovation and creating large new markets is a non-zero sum game, so the fact that an employee leaves can actually help spur a huge market that the employee’s former company can take advantage of too. At the same time, it allows companies, who might be upset about losing certain employees, to similarly hire people away from other competitors.

So, it always strikes me as a bit strange when companies get so worked up about an employee leaving to join a competitor — especially in California. However, Cisco General Counsel Mark Chandler is directly calling out HP for a series of lawsuits against employees who left HP (a company clearly in turmoil) to go to Cisco. Chandler highlights the fact that noncompetes are unenforceable in CA, but notes that (even though both companies are headquartered not far from each other in California), HP has used the fact that it has locations elsewhere to file lawsuits against former employees three times. And the stories suggest that HP is really going overboard in these efforts:

In the first of the three cases, HP was so persistent in the litigation and so threatening, that the individual, who had retired from HP months before even talking to Cisco, withdrew. There seemed to be little concern with the stress that a big company turning its legal guns on an individual can cause. In another case, an employee who worked in HP?s financial services group was sued to block her from working in Cisco?s customer finance group, even though there was no argument whatsoever that relevant intellectual property at stake. She persisted and HP relented. In the most recent case, just last week, the employee, who?d given HP over two decades of loyal service, had moved to California before starting work at Cisco. He asked a California court to declare that he was protected by California law and that HP could therefore not enforce its non-compete. A court hearing was scheduled in California, we notified HP and HP retained counsel. Cisco also reached out to senior legal staff at HP to try lay out some voluntary steps to avoid further litigation and to give further reassurance that the employee wouldn?t even inadvertently leverage any HP confidential information.

HP?s reply was to file an action in Texas against the employee and schedule an ?emergency? hearing to try to enjoin the employ from working with Cisco, seeking to have a judge issue the injunction with no notice and no opportunity for the employee to be represented. Fortunately, an eagle-eyed Texas lawyer working for the employee saw the filing appear on line and showed up in court. Given that the matter was already in front of a California court, with HP fully represented, in a hearing scheduled for two hours later, the judge in Texas was not impressed by HP?s effort to get her to act without a hearing. She refused to proceed. And the California judge issued an order allowing the employee to begin his new career at Cisco.

There’s no way to look at this and not wonder what is going on at HP. The company is flailing. It’s been firing CEOs left and right — and paying them ridiculous sums for failing in the process. Why not just spend some of the money that’s being wasted in these silly and damaging lawsuits to actually innovate? In his post, Chandler also notes that HP has been on the other end of similar fights, which makes this even more bizarre. He closes with a pledge that, no matter where they are, Cisco will not use litigation to stop employees from working elsewhere, and challenges HP to do the same:

Cisco?s promise to those looking to work in the networking industry is that no matter which of the fifty states you live in and work for Cisco, if you come to work for us we will apply California?s rule in favor of employee mobility nationwide. We know that employee retention is a matter of fair compensation and career opportunity, not litigation. And we challenge HP, with new leadership deeply steeped in Silicon Valley?s environment of mobility and opportunity, to step up and support employee freedom and stop suing employees just for leaving.

Filed Under: freedom of employment, innovation, lawsuits, noncompetes, working
Companies: cisco, hp