Papermaster countersues IBM in effort to join Apple

Jim Dalrymple
17 November, 2008
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In an effort to sever ties with his former employer, Mark Papermaster has countersued IBM, claiming among other things that Apple and IBM are not significant competitors.

Apple announced earlier this month that Papermaster, a former senior executive at IBM, would join Apple as senior vice president of Devices Hardware Engineering. However, IBM took issue with Apple hiring Papermaster and launched a lawsuit to block it from happening.

At the core of its case IBM says Papermaster has knowledge of “significant and highly confidential IBM trade secrets” that would “irreparably harm” the company if he is allowed to work for Apple. Papermaster also signed a noncompetition agreement in 2006 pledging not to work for competitors for one year after the conclusion of his employment with IBM.

Ultimately, a judge agreed with IBM. Judge Kenneth Karas told Papermaster to “immediately cease his employment with Apple until further order of this court.”

Papermaster contends that IBM’s noncompetition agreement precludes him from working for any Business Enterprise or any major competitor of IBM. The lawsuit argues that since IBM business is enterprise services and Apple’s business is the design, manufacturing and marketing of consumer electronic products, the two are not major competitors.

Providing further evidence of the noncompetitive nature of the companies, Papermaster further explains that at IBM he was the vice president of Blade Development, while in his role at Apple he would be in charge of product development for the iPod and the iPhone.

The countersuit asserts the noncompetitive agreement “is unreasonably broad in that it purports to impose an unreasonably lengthy time limitation. In the world of technology, any trade secrets that Mr. Papermaster possesses would lose their value prior to the expiration of a year.”

Papermaster says the noncompetitive agreement is flawed in another way. The agreement says that it is “governed by, and construed in accordance with, the laws of the State of New York,” but he worked in Texas and Apple is in California. Both of those states hold such noncompetition agreements are unenforceable.

When he accepted the job at Apple, Papermaster said he signed an Intellectual Property Agreement in which he agreed not to disclose or bring onto Apple property any “confidential, or proprietary, or secret information” of IBM.

Papermaster is seeking a declaratory judgement that the Noncompetition Agreement is unreasonably overbroad and unenforceable.

Computerworld also reports that the judge ordered IBM to put up a $US3 million bond by 5 PM eastern Friday to keep the case going. The $US3 million bond is designed to pay for any costs or damages that Papermaster might suffer if it’s later determined that IBM wasn’t entitled to an injunction.

Karas noted that district courts are allowed “wide discretion” in setting the bond’s dollar figure, then added: “Based on a careful reading of the letters sent by the parties to the court, which are being filed under seal, the court finds that a bond in the amount of $3 million is appropriate to guarantee payment of the costs and damages that defendant may suffer, if the injunction should not have been issued.”

[Gregg Keizer contributed to this story.]

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