Apple's Papermaster countersues IBM
Apple's iPhone man-in-waiting, Mark Papermaster, has filed a countersuit against his former employer in a dispute over a noncompete agreement.
InformationWeek spotted the court documents filed late Thursday in federal court in New York claiming that IBM's noncompete agreement with Papermaster shouldn't apply to his potential employment at Apple, since the two companies are not competitors in the arena where Papermaster will be employed. In October, Apple hired Papermaster to replace outgoing iPod executive Tony Fadell and lead the development of future versions of the iPhone, but IBM is suing to prevent him from working for Apple for a year.
Papermaster's counterclaim focuses on the clauses of the noncompete agreement, arguing that it is too broad and would not permit Papermaster to work for any technology company anywhere in the world for a year following his departure from IBM.
The "Business Enterprise" restriction is unreasonably broad in that it purports to restrict Mr. Papermaster from going to work for any company that engages in competition with his former business unit to any extent, even if Mr. Papermaster will not be working for the part of the company that does so. Likewise, the "significant competitor or major competitor" prong purports to restrict Mr. Papermaster from going to work for one of these companies even if the work that Mr. Papermaster will be doing is completely unrelated to the work he was doing at IBM. These provisions are not necessary to protect any legitimate interests of IBM.
The Noncompetition Agreement is also 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. The purported geographic scope of the "Restricted Area" is similarly unreasonable. Mr. Papermaster has resided and worked in Austin, Texas for the past 17 years, yet the language of the Noncompetition Agreement purports to restrict him from working anywhere in the world based on the global scope of IBM's business. Again, these restrictions are not necessary to protect any legitimate interests of IBM.
IBM has successfully obtained a preliminary injunction preventing Papermaster from reporting for duty at Apple, but it seems that's a pretty standard decision in cases such as these. The two parties are scheduled to have a status conference regarding the case on Tuesday.
Tom Krazit writes about the ever-expanding world of Internet search, including Google, Yahoo, online advertising, and portals, as well as the evolution of mobile computing. He has written about traditional PC companies, chip manufacturers, and mobile computers, spending the last three years covering Apple. E-mail Tom. 
This must be thrown out of court immediately, its sad when judges don't know a thing about technology. Its also shameful for IBM once a partner of Apples on the processor front to not respect this decision.
When you are good at management, it's unreasonable for your employer to try to restrict you to non-management positions because to do otherwise might give another company a competitive advantage.
This is different with regards to managers or executives who deal not with ideas but business strategies.
Stop whining and take the year off as you agreed. It sucks, but it was a possibility you should have considered before signing the non-compete AGREEMENT.
Unlike the situation in other states, non-compete agreements are illegal in California and against public policy except in statutorily provided circumstances. (California Business and Professions Code Section 16600). See, e.g., Raymond Edwards II v. Arthur Andersen, LLP, Cal. Sup. Ct. (August 7, 2008). They were outlawed in 1872. Therefore, Papermaster will succeed, and IBM will be thrashed in the news for their incompetence when it comes to understanding law.
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.
Essentially, both Apple and IBM are going to look bad in all of this. IBM for trying to enforce and Apple not defending. I say shame on both of them, and let other companies take over.
- by paulej November 15, 2008 6:26 PM PST
- Having worked for IBM and seen some of their agreements, I can fully believe that the agreements were too over-reaching. In fact, I refused to sign my employment agreements. I was part of an acquisition and would just as soon be fired as to agree to the terms they had. They were so restrictive that, if you read them to the letter, if you produced a child with your spouse, the child is the property of IBM. Actually, I think some employees of IBM should make use of those clauses and demand child support from IBM. ;-)
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