Tech

Oracle accused of eating software maker’s lunch with hostile hiring, trade secret theft

CentralSquare Technologies, a Florida-based maker of software for public safety officials, sued Oracle on Tuesday claiming that the database giant has been poaching key employees in an effort to build its business selling software to law enforcement and justice organizations.

The complaint [PDF], filed in US District Court in Orlando, Florida, alleges Oracle has: misappropriated trade secrets by hiring key personnel; enriched itself unjustly by building its business on the relationships, know-how, and proprietary knowledge of CentralSquare employees; interfered with CentralSquare’s business by encouraging recruited employees to violate confidentiality obligations; and engaged in unfair business practices.

“In or about June of 2020, in an effort to strengthen and grow its small public safety and justice business, Oracle began targeting, recruiting and hiring key CentralSquare employees who are devoted to the Public Safety and Justice Unit, including executives, engineers, and designers, all of whom have agreements with CentralSquare containing various restrictive covenant obligations,” the complaint says.

CentralSquare contends that Oracle is trying “to build and expand its public safety and justice organization primarily at CentralSquare’s expense by targeting and hiring away CentralSquare employees in various key executive and technical roles.”

CentralSquare says that it has over 5,000 public agency customers, thanks largely to its Public Safety Suite Pro software. Oracle, the company claims, has far fewer customers in that particular market and has been deliberately trying to recruit CentralSquare employees with knowledge of that product.

Oracle managed to recruit Steve Seoane, CentralSquare’s former President of its Public Safety and Justice Unit, to join the company as senior veep in June 2020.

After that, at least five other CentralSquare employees who worked under Seoane left to join Oracle: a VP of strategy and corporate development; the head of Public Safety and Justice Product Management; a former lead manager on the same team; a regional sales director; and a senior software architect.

The latter architect, it’s claimed, was hired away from CentralSquare’s Sioux Falls, South Dakota office despite an enforceable non-compete contract. Oracle, the complaint says, offered a salary that was significantly above-market as an enticement.

“Oracle appears to be targeting CentralSquare engineers from its office in South Dakota,” the complaint alleges. “Oracle knows that CentralSquare employs all or almost all of the qualified software engineers in South Dakota and other Public Safety and Justice development and design centers who can immediately service the public safety and justice sector. Oracle is only seeking to hire CentralSquare engineers from that market. It is not advertising for any roles in that market.”

CentralSquare’s legal counsel raised the issue with Oracle, expressing concern about the use of its confidential information. The database giant, it’s said, offered vague reassurance but otherwise continued its efforts to build up its public safety sector business.

“Oracle’s counsel’s platitudes that Oracle respects the proprietary information of other businesses is contradicted by its actions otherwise,” the complaint says.

CentralSquare did not respond to a request for comment; Oracle declined to comment.

The industry’s record isn’t great

Retaining key talent, particularly in hard-to-fill technical positions, has long been a challenge for technology companies, one not always met in good faith: In 2015, following a 2010 civil settlement with the US government, Adobe Systems, Apple, Google, Intel Corporation, Intuit, Lucasfilm, and Pixar paid $435m collectively to settle claims that they’d violated antitrust laws by secretly agreeing not to recruit from one another.

The following year, the US Department of Justice and the Federal Trade Commission issued guidance [PDF] that they intended to prosecute wage-fixing and no-poach agreements as criminal antitrust violations. The first criminal indictment for labor market collusion under this policy was issued in January 2021 against Surgical Care Affiliates in Texas.

Despite this, no-poaching agreements and non-compete agreements remain widespread. The Economic Innovation Group (EIG), a non-profit policy advocacy body created by Napster co-founder and Facebook veteran Sean Parker, said in a 2019 report [PDF] that no-poaching agreements affected 60 per cent of major franchises in the US in 2016. The EIG report also said that non-compete agreements bound one in five US workers in 2014.

Like no-poaching agreements, non-competes are under pressure around the country from lawmakers due to public dissatisfaction with post-employment contracts, which limit worker mobility and economic opportunity.

A few states like California, North Dakota, and Oklahoma disallow non-compete agreements; others accept them to differing degrees.

During his presidential campaign, US President Joe Biden has said he hoped to work with Congress “to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets, and outright ban all no-poaching agreements.”

In February, US Senator Chris Murphy (D-CT) and US Senator Todd Young (R-IN) reintroduced the Workforce Mobility Act, “to limit the use of non-compete agreements that negatively impact American workers.”

For businesses seeking to protect intellectual property and limit competition through post-employment covenants, new strategies may soon be necessary. ®

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