Oracle Charges HP With Fraud, Defamation In Itanium Case Countersuit

Oracle is accusing Hewlett-Packard of fraud, defamation and libel, interference with business and other charges in a countersuit in the on-going dispute between the two companies surrounding Oracle's decision to stop developing software for HP's Itanium-based servers.

Oracle filed the countersuit late Monday, along with a response to HP's original lawsuit in which Oracle denies Hewlett-Packard's breach-of-agreement claims and other charges. The response and countersuit were filed in California Superior Court in Santa Clara where HP filed its suit in June.

Oracle's response and countersuit are the latest developments in the dispute that began in March when Oracle announced it was halting development of its software for the Itanium platform. That decision was widely seen as having the greatest impact on HP, which bases its Integrity Unix servers on Intel Itanium processors.

In a statement responding to the countersuit, an HP spokesperson said: "Rather than focusing on what is right for our joint customers, Oracle is relying on invented excuses to cover up its blatant disregard for its legal obligations. HP is resolved to enforcing Oracle’s commitments to HP and our shared customers and will continue to take actions to protect its customers' best interests."

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Relations between one-time allies Oracle and HP have been deteriorating since Oracle acquired Sun Microsystems in early 2010, making Oracle a competitor to HP in the server hardware arena. Later that year Oracle hired former HP CEO Mark Hurd as president, a move that resulted in a lawsuit by HP against Hurd that was resolved out of court.

A significant portion of Oracle's 20-page countersuit details the events leading up to that lawsuit and the negotiations to resolve it in September 2010.

"HP signaled its desire to settle the Hurd action two days after it was filed," the Oracle suit documents state. "At the time, this appeared to be no more than an acknowledgement that HP had no chance of winning the case.

HP at the time was just weeks away from hiring Leo Apotheker as its new CEO and naming board member Ray Lane as HP's non-executive chairman. Apotheker had previously served as CEO at SAP, Oracle's biggest rival in the applications market, and Lane had once been president and COO at Oracle under CEO Larry Ellison. The Oracle countersuit said that Lane "had a well-documented animosity towards Oracle CEO Larry Ellison, traced to his firing from Oracle in 2000."

"In retrospect," the countersuit continues, "the conclusion seems inescapable that HP had an additional hidden and more strategic agenda: HP had been considering and was on the verge of hiring and elevating into its most senior leadership positions two people – Leo Apotheker and Ray Lane – who HP knew would ensure the complete destruction of what was left of the Oracle-HP relationship.

"Knowing that Messrs. Apotheker and Lane were toxic to any 'partnership' with Oracle, HP tried to use the settlement of the Hurd litigation as a last-chance vehicle to, among other things, induce Oracle to make hard contractual commitments both to continue developing software for the Itanium platform and to lock in favorable pricing on Oracle’s software for the Itanium platform," the countersuit argues.

Next: Oracle Explains Its Itanium Decision

The Oracle countersuit charges that HP attempted to include language in the Hurd settlement, initially negotiated between Oracle Co-President Safra Catz and HP executive vice president Ann Livermore, specifically committing Oracle to continue development of its database, middleware and application products for HP's Unix servers. Oracle said it rejected that language and the final agreement simply re-affirmed the two companies' partnership.

HP is arguing that the Hurd agreement commits Oracle to continuing its development for Itanium – an argument Oracle rejects. "Oracle emphatically denies that HP has any rights to continued software development," the countersuit states.

Oracle said HP "fraudulently induced Oracle" into the Hurd lawsuit settlement, based on what Oracle argues was HP's "deliberate and active concealment" of its plans to hire Apotheker and elevate Lane to chairman, "the intended consequence of which was to move HP into a new strategic direction less complementary to and more competitive with Oracle's business."

"The Oracle-HP relationship has not been the same since HP hired Messrs. Apotheker and Lane," the countersuit said.

The countersuit also outlines Oracle's reasons for discontinuing its development for Itanium. Oracle said it "was one of the last major software companies to announce that it would end new software development for the Itanium platform" and that the decision was made "because it no longer makes sense to devote software development resources to a dying platform that has been eclipsed by Intel's newer Xeon chips employing the x86 architecture."

Oracle's charges of defamation and libel stem from what the countersuit calls HP's "widespread campaign to vilify Oracle" for its Itanium decision, including "planting anti-Oracle stories in the press and releasing defamatory statements to the public and to Oracle's customers."

The suit also charges that HP's actions, which the countersuit refers to as "a smear campaign," damaged Oracle's relationships with its customers, constituting "intentional interference with contractual relations" and "intentional interference with prospective economic advantage."

Oracle is asking the court to rescind the Hurd agreement and award "general and special damages" as well as punitive damages, although the countersuit does not specify a dollar amount.

In its five-page response to HP's original lawsuit, Oracle said it "generally denies each and every allegation of HP's complaint" and adds that "the damages alleged by HP in the complaint … were caused, in whole or in part, by HP's own negligence and comparative fault."