The poison pill that PeopleSoft is using to fend off a hostile takeover by Oracle is ingenious and historically noteworthy. (Described in the Nov.11th NY Times and WSJ.)

PeopleSoft is writing agreements with clients which offer 2 to 5 times the amount of the client contract as a refund if changes in PeopleSoft over the coming two to four years result in a decline in service.

We’ll see what the Delaware courts have to say. In the past the Delaware courts have ignored the worst and most flagrant poison pills. This is the first poison pill that seems to be in the customer’s interest.

The history of poison pills is that it takes a few years before a counter-poison pill strategy emerges or Boards of Directors find them “not in the Boards’ interest.”