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Former IBM Exec Ordered To Stop Working For Apple 270

Posted by ScuttleMonkey
from the petty-jealousy dept.
tom_guyette writes "ComputerWorld reports a federal judge has ordered former IBM executive Mark Papermaster, recently hired as Apple's vice president of hardware devices engineering, to stop working for Apple. The judge's ruling is based on a motion for preliminary injunction made by IBM, which states Papermaster's new job violates a non-compete agreement he signed in 2006. In response, Papermaster asserted to the court that 'Nothing about his new job will implicate any trade secrets from IBM.'"
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Former IBM Exec Ordered To Stop Working For Apple

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  • Re:states rights! (Score:5, Informative)

    by Actually, I do RTFA (1058596) on Monday November 10, 2008 @07:11PM (#25712997)

    I could've sworn that non-competes were illegal in California

    I could've sworn IBM was in New York.

    The US Constitution explictly states one state cannot discharge your contractual obligations made legally in another state.

  • Re:states rights! (Score:3, Informative)

    by Rinisari (521266) * on Monday November 10, 2008 @07:14PM (#25713037) Homepage Journal

    You are correct, noncompete clauses are illegal in CA [wikipedia.org]. The decision could be appealed to the SCOTUS, I believe, where undoubtedly it will be reversed.

  • Re:states rights! (Score:5, Informative)

    by tylersoze (789256) on Monday November 10, 2008 @07:16PM (#25713071)

    I could've sworn the matter hasn't actually been decided by a court. From wikipedia:

    "The preeminent court decision discussing the conflict between California law and the laws of other states is Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881 (1998). In Hunter, a Maryland company required that its Maryland based employee agree to a one-year non-compete agreement. The contract stated that it was governed by and to be construed according to Maryland law. A Maryland employee then left to work for a competitor in California. When the new California employer sued in California state court to invalidate the covenant not to compete, the California court agreed and ruled that the non-compete provision was invalid and not enforceable in California. Business and Professions Code Section 16600 reflects a "strong public policy of the State of California" and the state has a strong interest in applying its law and protecting its businesses so that they can hire the employees of their choosing. California law is thus applicable to non-California employees seeking employment in California.

    Whether California courts are required by the full faith and credit clause of the United States Constitution to enforce equitable judgments from courts of other states, having personal jurisdiction over the defendant, that enjoin competition or are contrary to important public interests in California is an issue that has not yet been decided."

  • Re:states rights! (Score:3, Informative)

    by tylersoze (789256) on Monday November 10, 2008 @07:23PM (#25713157)

    Pacific Employers Insurance v. Industrial Accident:

    "...the full faith and credit clause does not require one state to substitute for its own statute, applicable to persons and events within it, the conflicting statute of another state, even though that statute is of controlling force in the courts of the state of its enactment with respect to the same persons and events"

  • NY law applies (Score:5, Informative)

    by UnknowingFool (672806) on Monday November 10, 2008 @07:24PM (#25713165)
    According to the non-compete agreement, NY law applies because IBM is based in NY. However Papermaster worked out of their Austin, TX offices where non-competes are not enforceable. One thing I think that Apple would argue is whether Papermaster is competing at all in his current job. Most non-competes only cover areas of work that are in direct competition. A former GE Energy executive taking a job at Exxon may have an issue. A GE Plastics executive may not have any issues. Right now I've heard two versions of the work Apple hired him. One version says the Papermaster will work as head of their iPod/iPhone line (which does not compete directly with IBM's blade server or chip technology). Another version has him head of the new chip design for iPod/iPhones which is more direct competition.
  • by TechForensics (944258) on Monday November 10, 2008 @07:54PM (#25713565) Homepage Journal
    You're right. IAAL and non-competes, to be enforceable, must be reasonable under the circumstances as to both duration and geographical area. Of course, in this case there will be an issue of fact (namely whether his specific duties are likely to result in transfer of secrets), normally resolved by a jury, but in this case due to the irreparable harm of excluding him from employment for a year, more likely to be decided by a judge on briefed motions.
  • Re:Competition? (Score:4, Informative)

    by sustik (90111) on Monday November 10, 2008 @08:03PM (#25713677)

    Look up: Wii, Xbox, Playstation, Websphere, Cloud computing, ...

  • Re:Lame response (Score:5, Informative)

    by bennomatic (691188) on Monday November 10, 2008 @08:06PM (#25713721) Homepage
    Your post is silly. Companies require these non-comp agreements even where they are not enforceable so that they can bully their employees when they leave, if they leave for a competitive company. Without unionizing everything, few individuals will have the leverage to simply walk away from every company that requires a non-comp, and if they ever have to fight, it'll be expensive even if the law is on their side.

    So in this case, who is lying? The person who signs an unenforceable document because it's a formality which is required in order to get hired, or the company which requires it and can only use it for intimidation because they know if their employee had the resources to fight it, they would lose?

    Couple of things I've learned recently: Lawyers, apparently, never sign these things, but they're kind of special because a good lawyer can just hang out their shingle. Also, in the UK, it's common practice in the financial industry for the hiring company to pay a year's salary or more for someone they are poaching from a competitor to take a nice vacation, so they can come back outside of their non-comp boundaries.

    The latter (UK financial) happened to a cousin of mine. The former I learned from my wife, who recently left the DOJ and was heavily courted by an HR consulting company. They practically begged for her to join, but they could not guarantee a minimum amount of consulting work, and also required a non-comp. Her reaction? "I believe slavery is still illegal in the US." No go.
  • Re:Big deal (Score:1, Informative)

    by Anonymous Coward on Monday November 10, 2008 @08:15PM (#25713815)
    They gave the ThinkSecret guy six figures to shutter the site. I'm sure he could have fought them with free EFF lawyers til the end of time, but he accepted a payout.
  • Re:Compensation? (Score:5, Informative)

    by Trojan35 (910785) on Monday November 10, 2008 @08:46PM (#25714175)

    FTFA:

    In September, Apple again contacted Papermaster, which led to more meetings with Jobs and others in early October. After he declined a counteroffer from IBM and another, separate offer to "sit out" for a year in exchange for his current base salary, Papermaster told IBM he had made up his mind and was going to Apple.

  • Re:states rights! (Score:4, Informative)

    by corbettw (214229) <corbettw@@@yahoo...com> on Monday November 10, 2008 @08:49PM (#25714193) Journal

    He went to work in California. The question is whether a contract signed in New York is enforceable in California, and that's not a clear-cut case. There are two competing cases referenced above about this very thing.

    His problem is that IBM filed the federal lawsuit in New York. Following the Erie doctrine, that state's laws will be used to determine the outcome. If he had sued first, in California, he would've been on much more solid legal ground.

  • Re:Lame response (Score:3, Informative)

    by mrchaotica (681592) * on Monday November 10, 2008 @09:55PM (#25714901)

    On the other hand, I could argue that non-competes are unconstitutional and void since 'life, liberty and the pursuit of happiness' are _unalienable_ rights.

    "Life, liberty, and the pursuit of happiness" is in the Declaration of Independence, not the Constitution.

  • Re:Lame response (Score:5, Informative)

    by KiahZero (610862) on Monday November 10, 2008 @10:23PM (#25715113)

    Lawyers don't sign non-competes because they're barred by ABA Model Rule 5.6(a).

    Not that I just finished taking the MPRE or anything.

  • Re:bs (Score:3, Informative)

    by $random_var (919061) on Monday November 10, 2008 @11:21PM (#25715627)

    I can't sign a loan for a million dollars and then say you didnt really think I was going to pay you back did I?

    But if you're a "too-large-to-fail" insurance company, and it's $123 billion, it's A-OK. :-(

    More to your actual point though, you are assuming that employment is a perfectly competitive market, which it is not. There is potential for huge information asymetry (both ways), unequal bargaining power, high search and switching costs, and so on.

  • Re:bs (Score:4, Informative)

    by precogpunk (448371) on Tuesday November 11, 2008 @02:48AM (#25716917) Journal

    "The person is lying, no one forces you to sign anything. Employment is at will, if you don't like it negotiate it or don't sign it."

    From personal experience, the situation is often more complex than this. In my previous job the company was growing quickly and HR was not in place to cope. One year later a new head of HR reviewed everyone's file and required some employees to sign a new non-complete. At that point it would have been *very* hard for me to go back to freelancing and build up my old client base. I was also in management so refusing would have been awkward to say the least.

    Two years go by and I was taking a job at another company working for one of my previous employer's clients. In my city about 50% of companies in the industry work for this client. I didn't maintain any key relationships nor was I stealing any secrets but I got slapped with the non-complete. Lucky for me, the new employer stuck their best lawyers on it to review the merits of the case and sided with me.

    It's very hard to get out of signing a non-complete, or altering it, unless you have a strong position of negotiation (read: they need you more than you need them). Imagine you've accepted a job, told your employer, and then you learn you need to sign one. Imaging you have a job and are asked to after a period of employment. Imagine you're trying to break into the industry, or got laid off, and this is your first job offer in four months.

    It's not so cut and dry-- I wish our government would do more to protect Joe the Developer's rights to "live liberty and the pursuit of happiness". I also take offense that you think someone who's a EVP, or pulls six figures, could be significantly hurt monetarily but this. Do you know for a fact that Apple is paying his legal bills? It's the individual getting sued in most cases and the result could seriously devastate his professional career.

  • Re:Lame response (Score:1, Informative)

    by Anonymous Coward on Tuesday November 11, 2008 @03:07AM (#25717023)
    In the UK this would be construed as "constructive dismissal", how does this concept translate to other countries?
  • Re:states rights! (Score:3, Informative)

    by profplump (309017) <zach-slashjunk@kotlarek.com> on Tuesday November 11, 2008 @03:25AM (#25717125)

    In general it is a clear-cut case -- contracts signed in other states *are* enforceable. And that's probably the case here too.

    But CA law may grant him relief against certain aspects of the agreement -- specifically he may still be able to work for Apple, even if the contract is generally valid, because that particular method of enforcement is not allowed in CA.

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