On the Sept. 8, 2010, front page of the Wall Street Journal, an article described how Hewlett-Packard was suing its former CEO, Mark Hurd.

Hurd had taken a severance package from HP, and in exchange had signed a document in which he had promised not to reveal confidential information.

He did not sign an agreement not to work for a competitor, a so-called “non-compete” agreement. Upon cashing his check for over $40 million, Hurd announced that he was going to work as president of a unit of Oracle, the leading database company, which has just entered the hardware business in which it will compete with H-P.

The lawsuit alleges that by working in his new position, Hurd will inevitably use information that he has in his head that belongs to HP.

The legal doctrine upon which HP is relying, is known as “inevitable disclosure." The doctrine holds that even if a person does not explicitly reveal secrets that he holds from a prior position, his actions and choices will be influenced by that knowledge simply by performing his job in his new position.

Michigan courts have not yet decided whether to adopt inevitable disclosure in the interpretation of trade secret litigation. Michigan generally allows employers more protection to prevent former employees from using their knowledge to compete because Michigan courts explicitly allow “reasonable” non-compete agreements. This is in contrast to California, which disfavors such agreements.

The argument in favor of non-compete agreements and legal doctrines such as inevitable disclosure are clear. People should not be able to use information that does not belong to them against the employer that shared the information with them.

The argument against such doctrines is equally clear. In a capitalist economy with a free labor market, employers should not be able to prevent employees from earning a living by working wherever they choose to do so.

That argument holds more force when employers mandate that employees sign non-compete agreements as a condition of keeping their job, as is commonplace among many Michigan engineering companies.

Employers should have a right to purchase an employee’s agreement not to work for a competitor, but the price should be reasonable and not serve to prevent the employer from having to pay a competitive wage to keep a star employee.

The real question—who owns information that is inside someone’s head?—as we enter the newest phase of the information economy, the courts are full of decisions trying to answer that question in one form or another.

As we strive to develop a vibrant technology sector in the Ann Arbor area, companies and employees will be dramatically affected by the development of the law as it affects the definitions of ownership of information.

David Nacht is an attorney in Ann Arbor. He can be contacted at 734-663-7550.