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Breach of contract dispute between Oracle and HP heats up

A contract dispute between technology juggernauts Oracle Corp. and Hewlitt-Packard Co. is heating up in litigation. One HP representative claimed in court that his company was “shocked” at Oracle’s abrupt announcement in 2011 that it would no longer offer software support to HP, allegedly breaking its contractual commitment with the company.

The breach of contract allegation comes after years of the two technology companies reportedly working well together without a written contract. The HP representative claimed that long period of cooperation on joint engineering of Oracle software supporting HP platforms came to an end six months after a mutual agreement was reached regarding HP’s former CEO transition to become co-president of Oracle.

It seems that one of the major sticking points between the two California companies relates to that executive’s transition from one company to the other. A former executive vice president for HP (now on the company’s board of directors) stated that she became “concerned” once she discovered that the former CEO was leaving HP. She allegedly feared that he would bear ‘ill-will’ toward the company, along with knowledge of confidential information that could be used to hurt HP. Further, once he moved to Oracle, she worried that the relationship between the two companies might change.

In fact, HP alleges in its 2011 complaint that Oracle’s actions have actually violated a part of the agreement allowing the former CEO to make the switch to Oracle. That agreement includes language that the two California-based companies would reaffirm their commitment to furthering their longstanding relationship of mutual support for their shared consumers, and that Oracle would continue offering its software programs on HP platforms. Additionally, that portion of the agreement stressed that the partnership would continue in a manner as had been the case before Oracle hired HP’s former CEO.

HP claims that it stands to lose somewhere in the neighborhood of $4 billion in damages should the court fail to issue an order forcing Oracle to continue developing software for use on HP systems. The company also seeks approximately $500 million in damages related to the alleged breach of contract. It will now be up to the California judge in this case to determine whether an actual breach of contract occurred.

Source: Bloomberg Businessweek, “HP Tells Judge Oracle Abruptly Broke Contract for Support,” Pamela Maclean and Joel Rosenblatt, June 4, 2012