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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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  • states rights! (Score:5, Insightful)

    by mactard (1223412) on Monday November 10, 2008 @07:08PM (#25712963)
    I could've sworn that non-competes were illegal in California. States rights need to be preserved!
    • 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: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: (Score:3, Informative)

          by tylersoze (789256)

          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"

        • Re: (Score:2, Insightful)

          by Pincus (744497)

          The US Constitution explictly states...

          From wikipedia:

          Which is the more reliable documentation?

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

        by Maudib (223520) on Monday November 10, 2008 @07:21PM (#25713131)

        Either way it doesn't matter. This was a federal court, not state.

        • JUICHE! I think it means '42' in North Korea.

          Reading your sig, all I can think of is that old disturbing Flash fanimutation, Hyakugojuuichi! [google.com] If your "juiche" is from that, then it means "11" (eleven) in Japanese. :)

          The original song in the Flash video is a children's song from Japan that talks about having 111 friends, with the chorus something like "tomodachi ga hyakugojuuichi" ('friends [subj marker] 111' = 'I've got 111 friends'). The PeeWee-Herman-on-crack video version is much funnier, but I refus

          • by PitaBred (632671)

            I now hate you more than I ever thought it was possible to hate someone.

            I am sending that link to as many of my enemies as possible in order to try to cleanse myself of it.

      • by Rinisari (521266) *

        IANAL.

        Actually, CA courts ruled that the state has an interest in protecting business interests within the state. If my understanding of the Wikipedia summary of non-compete clauses [wikipedia.org] is correct, being that the individual in question, as well as his destination is in CA, CA court could claim jurisdiction.

        U.S. Constitution Article I, Section 10, Paragraph 1 states No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any

      • by BronsCon (927697)

        If the non-compete is not legal in CA, then it may be discharged by the state of NY, as the obligation was not made legally in CA.

      • Re: (Score:2, Flamebait)

        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.

        I could have sworn that "Constitution" thing was made illegal by the Patriot Act.

      • by conlaw (983784)
        Drat, I hate to give up my mod points on what promises to be an interesting discussion after the chaff is sorted from the wheat. Where do you think that you read that in the US constitution?
    • Re:states rights! (Score:5, Interesting)

      by spire3661 (1038968) on Monday November 10, 2008 @07:14PM (#25713029) Journal
      So what, the guy cant work in his professional field anymore? I get that you want to protect your IP, but not at the cost of a very highly qualified individual's livelyhood. If Nvidia makes an infringeing part, you sue them, but you dont stop people from taking jobs. Chilling effect indeed! I have friends that would think twice about working for Big Blue now. Makes me nervous of the thought of signing your brain over to a corporation.
      • So what, the guy cant work in his professional field anymore? I get that you want to protect your IP, but not at the cost of a very highly qualified individual's livelyhood

        RTFA

      • Re: (Score:3, Insightful)

        by DWIM (547700)

        So what, the guy cant work in his professional field anymore? I get that you want to protect your IP, but not at the cost of a very highly qualified individual's livelyhood.

        I am sure a guy with his qualifications understood completely that he signed a non-compete with IBM to advance his livelihood as an employee of IBM.

        I have friends that would think twice about working for Big Blue now. Makes me nervous of the thought of signing your brain over to a corporation.

        An entirely understandable, reasonable response to this. I wouldn't sign with them either (unless I desperately needed the work or they waved obscene money at me or gave me some other reason to sell my soul).

      • by perlchild (582235)

        It doesn't say he can't work, but it certainly makes me wonder if the goal of the non-compete clause was to protect trade secrets, or just to get to pick who he gets to work for if he leaves... Quite a few companies seem to think the latter... I can't wait to see them disabused, but I'm not holding my breath. If the trade secret, and not the contract, was the meat of the issue, the audience would show it neh?

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

        by kae77 (1006997) on Monday November 10, 2008 @07:45PM (#25713421)
        This is standard corporate procedure. You work with a company, they reveal trade secrets, you sign a clause saying that you won't work in the same industry or with a direct competitor for a year. This guy was treated more than fairly. They didn't kick him to the curb, they offered him a years paid salary to sit out, and he still left the company. When you take into consideration that Apple recently dumped IBM's processors, and some lingering animosity from that, it's no wonder why IBM is being aggressive in it's approach. While I'm no fan of corporate overlords, you don't just let some high level shirt walk off with all of the trade information about your current and future plans to a competitor and sit idly by. This guy knew exactly what he was doing and decided to roll the dice.
        • Or you walk into the contract negotiations with a red pen and cross out the 12 month extension beyond employment termination.

          The problem with non-competes is that they are so vaguely written that it can cover pretty much any new job in the field you're trained for. Sure, you can bring it to litigation to prove otherwise, but what employer would be willing to risk taking a new employee that might have a possible contractual obligation?

          • by Adambomb (118938)

            what employer would be willing to risk taking a new employee that might have a possible contractual obligation?

            Chili Palmer.

        • by i_b_don (1049110)

          actually your post just goes to the argument that this should be thrown out. Where's are the two compaines competing that is causing this friction? If a guy can't walk out of IBM a massive chip and mainframe company and into apple, a front end MP3 player, computer maker, and computer maker without some conflict then the idea of his non-compete is too broad.

          IBM and Apple don't compete any more than a any other two massive tech companies and less than most. These two companies are about as far apart as you

      • The paper-less office comes to Apple. By the way, what kind of name is "papermaster". Is this some old english skill-based name or some ellis-island mistranslation?
    • Re: (Score:3, Informative)

      by Rinisari (521266) *

      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.

    • by jlarocco (851450)

      Okay, I RTFA. Where does it say anything about California?

      • by compro01 (777531)

        Apple's headquarters (presumably where a VP would work) is located in Cupertino, California.

        • by jlarocco (851450)

          So? If he signed the contract in New York, where the lawsuit was filed and where IBM's headquarters is located, then it has nothing to do with California.

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

            by corbettw (214229) <corbettwNO@SPAMyahoo.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: (Score:3, Informative)

              by profplump (309017)

              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.

  • by Sponge Bath (413667) on Monday November 10, 2008 @07:15PM (#25713047)

    An executive named Papermaster?

  • by sleeponthemic (1253494) on Monday November 10, 2008 @07:15PM (#25713053) Homepage
    As "food and beverage technician".
  • Slave (Score:3, Funny)

    by GrahamCox (741991) on Monday November 10, 2008 @07:19PM (#25713097) Homepage
    Next, he'll be changing his name to 'squiggle' and carving 'Slave' on his face. That usually works.
  • by Anonymous Coward on Monday November 10, 2008 @07:19PM (#25713107)

    ...starts litigation against a guy named Papermaster?

  • 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.
    • Re: (Score:3, Interesting)

      by fermion (181285)
      And here is the hypocrisy. Texas is a right to work state, which means that it is illegal to set up impediments that prevent a person from working. While this is narrowly interpreted, and largely intended, to prevent the workers in a free market from engaging in the same type of activities that employers do to keep profits at a reasonable level, there is no reasonable cause for such interpretation. Right to work should be right to work. No one, not the union, not the corporation, not the government, sho
      • Unless Papermaster has assets or other property interests in the State of New York or is a resident of that state then he could probably just ignore the orders of the NY court since this is not a criminal matter, but an issue of differing state contract laws (IANAL). Apple, on the other hand, has a very nice store in downtown Manhattan and probably has other business and financial interests in New York as well (NYSE for example). I am not sure what the repercussions of that might be, but it probably is impo
    • Re:NY law applies (Score:4, Interesting)

      by chefmonkey (140671) on Monday November 10, 2008 @08:27PM (#25713963)

      Ummm... non-compete agreements are perfectly enforceable in Texas [smith-robertson.com] so long as certain requirements are met (agreed-upon timeframe, agreed-upon geographical location, agreed-upon activities). There's some degree of latitude in what those requirements are, depending on the type of job the non-compete is attached to -- I've had lawyers confirm that "worldwide" is likely sufficient qualification to meet the "geographical location" criteria in certain circumstances.

      And that's ignoring that, with sufficient compensation, the "at-will" nature of employment can actually be transcended. In layman's terms, if they pay you enough, then you can agree to almost anything, and it will be legally binding. It's guaranteed not to be an issue for most people, but it can make a difference once you're playing at the "executive in a large company" level.

  • by NoobixCube (1133473) on Monday November 10, 2008 @07:25PM (#25713191) Journal

    A non-compete seems to me the perfect way to pay your best employees peanuts. If you sign a non-compete, then you're basically trapped at one company, and can never get a job in the same industry again. Using that information, your employer could pay you as little as they want and never fear you leaving for another company.

    • I would imagine that non-compete clauses would have some kind of expiration date. It would be completely insane for someone to sign a neverending non competitive agreement in their field of expertise.
      • Re: (Score:3, Informative)

        by TechForensics (944258)
        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.
      • by digitalchinky (650880) <dtchky@gmail.com> on Monday November 10, 2008 @08:21PM (#25713881)

        Some really do last a lifetime, I have a non-compete agreement in my secret 3 letter agency clause that says: "We, as in a bunch of guys with guns and the keys to all the jails and stuff, will come get you no matter where you are in the world if you don't keep your mouth shut about our government secrets until you die. If you work for someone else in the trade we might even hang you until you are dead, then put you in jail for 322 years just to make sure"

        Sign the delta brief and you've signed on for life.

        My choices were quite limited after resigning. People don't want to employ former spies. The best I could manage were a few low paying industrial espionage gigs. So I put ~disgruntled former spy~ in the resume and my troubles went away overnight.

        • Hmm. I Suppose agreements for government/intelligence related clearance would have an nda & non-compete attached that does not expire.

          But other than government contracts, I'd expect any private sector work to have a considerably shorter applicable non-compete time.
    • A non-compete seems to me the perfect way to pay your best employees peanuts.

      Up to a point. Smart, motivated types will either break the non-compete (as this guy may be able to do) or find something else worthwhile to do with their time. Can't keep a good man down, I say.

  • by goodmanj (234846) on Monday November 10, 2008 @07:32PM (#25713283)

    Wait, hunh? What market do IBM and Apple compete in, anyway?

    Apple:
    Desktop PCs
    Desktop operating systems
    Media Players
    Phones
    Artsy Pretentious Attitude

    IBM:
    Semiconductors
    Server hardware
    Point of Sale crap
    Overpriced IT services for senile old corporations
    Lawyer zerg rushes
    B-school Pretentious Attitude

    The only possible overlap was in desktop PCs, and IBM sold that division to Lenovo.

  • by cdrguru (88047) on Monday November 10, 2008 @07:38PM (#25713335) Homepage

    Sure it would be nice if such non-compete agreements could not be implemented. From what I have seen in the past it was unusual that an employer would get themselves into this situation in the first place - if a possible non-compete problem existed they just didn't bother with that applicant.

    Once you start opening the door to such things, it is very difficult to just sue the company. What the non-complete may be relevent for may be something that is buried deep in the processes of the company and not at all apparent in the resulting product. And besides, that just opens the door to exploratory lawsuits because the person that got hired might be disclosing information they have no right to disclose.

    This isn't just "personal knowledge" either. It is often "organization knowledge" that you have to know about in order to do your job at Company A. Upon going to Company B it is clear that if they only knew what your former employer did, they would get more sales, make products faster and cheaper, whatever.

    Where some co-workers got themselves into trouble was (a) not disclosing there was a non-complete agreement in the first place and (b) trying to find out how much this knowledge might be worth to their new employer. As in "I might be able to offer some advice on how to do this better for $5000." Yes, I heard about that offer once. It was a while ago and resulted in immediate (same hour) termination of the employee.

  • I didn't know IBM trade secrets had a shelf life of 365 days. Are the added preservatives healthy? More seriously, with a company the size of IBM... he might as well just take a one year vacation because everyone in IT is a competitor to them in some market or another. This guy will probably do just that too, since the cost of litigation is so expensive. So what IBM has effectively done then is snub Apple, at the expense of this guy's career. How very mature of them.

  • If he was moving from IBM to Sun or from nVidia to AMD/ATi I would understand that. Please correct me if I am wrong but they are only just in the same business

    IBM mostly focus on professional services and stuff that goes in the server room (servers, mainframes, storage etc) while Apple focus mostly on desktops, laptops and digital music. Both companies IMO make great products and provide good services but are mostly in two completly different markets.

    In my line of work (UNIX servers) I would work wi
  • Compensation? (Score:5, Insightful)

    by JakiChan (141719) on Monday November 10, 2008 @08:07PM (#25713735)

    I think if a company wants to force someone not to work in their area of expertise for a year then they should be forced to compensate that person for a year. They should match Apple's compensation and benefits and the guy doesn't have to work. That seems fair.

    • 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.

    • by CODiNE (27417)

      It depends on the state. I know that in Oregon for example what you said is actually the law and they have to pay a certain % of your wages for an entire year while you are on the non-compete, OR they can choose not to enforce it.

    • by GreatDrok (684119)

      "I think if a company wants to force someone not to work in their area of expertise for a year then they should be forced to compensate that person for a year. They should match Apple's compensation and benefits and the guy doesn't have to work. That seems fair."

      In the UK this is referred to as 'Garden leave'. Basically, if the company wants to enforce the non-compete, they have to continue to pay you even while you sit in the garden and watch the grass grow. If they won't pay you not to work then they ha

  • to I'm Being Managed
  • With a name like that you would think he would be working for Special Operations Division of the British Library. [wikipedia.org]

  • by gelfling (6534) on Monday November 10, 2008 @10:07PM (#25714981) Homepage Journal

    Working for zero wages and being told to be happy they have that job. Awesome.

The more cordial the buyer's secretary, the greater the odds that the competition already has the order.

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