This is out of left field, but Federal District Judge Kenneth Karas has ordered that Mark Papermaster “immediately cease his employment with Apple Inc until further order of this court.” The issue arises from the basic non-compete clause in his IBM contract, but Papermaster argues that IBM is more big business whereas Apple is obviously consumer-y.
“Electronic devices large and small are powered by the same type of intelligence, the microprocessor,” IBM argued.
While it’s true, you know those dastardly IBM lawyers are going to pick apart every single word of his contract.
His lawyers also argue that making him sit out an entire year in the electronics industry would be detrimental to his career. They also go on to say that he cannot return to IBM and that the position with Apple, which puts him directly under Jobs and in charge of the engineering group in charge of iPods and iPhones, was a “once-in-a-lifetime ‘dream job.’”
Apple immediately complied with the court order saying that once everything was said and done Papermaster would be back to work in Cupertino.
From such actions by IBM’s lawyers, one can’t help but to wonder just exactly what it is that IBM wants to protect that the rest of us don’t yet know about…?
I found the move by Mr Papermaster as ludicrous. If at his level he thought he was just walking out the door his name should have been Dreammaster!Non Competes are very serious and he’s no rookie!
having said that though, it is all how the agreement was worded…I had an employer that tried to get me to sign non compete that stated, I would not work for any directly affecting accounting firm for a year after leaving their employment…local area was worldwide, considering the nature of the business…I laughed when i read it and made him adjust the wording to say that I would not take any clients with me in the local area
“Non Competes are very serious”
Thank you. Too many people live by the “non-competes are not enforceable myth” and find them selves in big trouble when they are not in Kansas anymore. There are a few salient points when it comes to Papermaster.
1) The Jurisdiction of his IBM contract is NY not CA.
2) His agreement is not an employment contract it is an awards contract. There is a huge difference.
3) The biggest point is that this really isn’t IBM v Papermaster anymore. Apple, knowing of his contract, could be hit with a tortious interference claim if they pursue Papermaster at this point (notice how they have backed down).
I have been following this on my blog and have a lot more to say about this if you are interested.
http://www.johnmwillis.com/ibm/ibm-v-apple-the-ironic-twist
john
johnmwillis.com
NON Competes are in most contracts. Mr Papermaster is only grand standing and obviously lied to Apple.
The article says Cupertino where Apple is located. It is illegal in California, even if written in a contract, for non-compete clauses. I know this from leaving a company in California that had this clause in my contact that it was illegal and not enforceable so I decided to move to the competition in California (get paid more.) I believe employers put this in their contacts to put fear into people about leaving who don’t know it can not be enforced. In this case it looks as if Apple was ordered to do what a court told them to do; however, they will easily win in California in the next court appearance.
http://en.wikipedia.org/wiki/Non-compete_clause
The extent to which non-compete clauses are legally allowed varies per jurisdiction. Some jurisdictions, such as the state of California in the US, do not allow non-compete-clauses at all.
Enforceability in the State of California
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.[5]
Out of state agreements are not enforceable
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.
Exceptions – valid non-compete agreements in California
There are limited situations where a reasonable non-compete agreement may be valid in California.
If an owner is selling the goodwill in their business. (Business & Professions Code Section 16601).
When there is a dissolution or disassociation of a partnership. (Business & Professions Code Section 16602).
Where there is a dissolution of a limited liability company. (Business & Professions Code Section 16602.5).
Non-competes may be illegal in California but IBM is based out of Minnesota. So the laws in Minnesota will probably apply. With that said, I have no clue what the law is for Minnesota in regards to non-competes.
This one is different since the individual was involved in classified government work for the NNSA. The National Security Act of 1947 trumps any California law. Spaz be sure you get a license to practice law. Federal laws trump state laws any time. The first clue should have been that the judge is a US District Judge. Any California state judge would be held in contempt if they tried to rule in this case.
Mr. Papermasters patents if any, belong to IBM. IBM has disengaged with the notebook business. So long as specific information, inventions or techniques – all of which IBM is notorious about patenting, aren’t used by Papermaster, what does his work at Apple matter?
Because an individual has some insight, ability to innovate, his abilities should not be tethered for all future invention, innovation or technique development. Clearly he chose to leave IBM for a reason. I suspect this is because he will be able to innovate in a new environment, providing the public and Apple with benefits.
Crushing innovation in the name of business protectionism isn’t fair play. I’m so sick of the bailout mentality, the hiding behind lawyers, the continuous protection of business which simply defied innovation, competition and benefits to mankind.
Let existing patent law – already a huge burden on the public, and crush to innovation – guide the legality of his employment.
let’s get on with moving our planet forward, and slow up lining corporate law pockets.
I would agree with you Alex, if you knew what you were talking about. Patents protect those that invest in innovation. If you think that IBM is developing in someones garage, you are sorely mistaken. With a 5 Billon dollar budget for R&D, I think IBM should be able to protect their investment. Please feel free to reply when you have something worth to say, hippie.
As long as they file suit in Minnesota and not in California. It is all decided on which court the petition is filed in.
The jurisdiction of the court and the choice of law are completely different questions. A California court can apply Minnesota law, if necessary, and vice versa. Normally, the parties to a contract can agree which state’s law will control, but they cannot confer jurisdiction on any particular court.
Sounds like Papermaster (an appropriate man for someone about to get buried under a mountain of legality) screwed and didn’t think his move through before taking on his once in a lifetime chance.
IBM is trying to narrow the world around them for their employees. Most of the tech companies around the world are IBM competetors. When I left IBM they asked me to sign the non-competetor contract again which I refused to sign ( why should anyone sign a contract upon leaving). IBM’s highly paid lawyers are trying hard but I hope at the end freedom to ‘work at will’ will prevail. IBM talks about open source and open technology for technology but won’t do anything.. IBM cuts employees salary benefits, pension, retiremnet etc every year but employees cannot leave and work for better company !! This is kind of creating technolology slaves in 21 st century..
Mr. Ha’s comment about the order coming out of left field is a sure sign of legal ignorance. Non compete agreements are limited both in time and scope. Given Mr. Paperwriter’s very senior position at IBM a world wide clause is appropriate and one year is not an onerous time period. Those are the only two bases to void the non compete clause. In this case, Mr. Paperwriter has an additional burden of proof having worked on several classified NNSA projects. Mr. Paperwriter was very involved in the Roadrunner project at Los Alamos National Lab and there are architecture issues associated with the Cell chip that clearly overlap with the Ipod and Iphone added features. The other problem which has not been raised yet is the notice requirements that Mr. Paperwriter had to go through under the terms of his US government security clearance. There is a mandatory 6 month cooling off period there. Since Apple also uses and consults with Intel on cpu’s, Apple is obligated under the National Security Act of 1947 to build Chinese walls around him so he has no contact with ANY ONE who has any responsibility for or contact with the MAC. Neither Intel nor Apple maintain the necessary security clearances for Mr. Paperwriter’s work on NNSA projects. Since he reported to Mr. Jobs maintaining a Chinese wall is an impossibility. So a 12 month lock out is entirely reasonable and Mr. Paperwriter might should consider the consequences of violating the terms of his security clearance.
I make this comment as a retired US Government contract lawyer at the nearby Sandia National Lab and with direct knowledge of the issues at hand. There is no excuse for Apple’s lawyers not knowing the restrictions that apply. They should be fined and suspended from the practice of law under FRCP 11d for making frivolous claims in court and wasting the court’s time. This one is very cut and dried since the non compete language comes directly form IBM’s contracts with the US government and became binding as soon as he got his security clearance.
Sure sign of parkinsons . The above should read Mr. Papermaster not Paperwriter. Beatles’ on the brain. Paperback Writer in the back ground as I write this.
It’s out of left field because it shouldn’t have taken this long for IBM to have taken action. It’s not like his move to Apple was top secret until last week.
What was he thinking? That non-compete applied to everyone but him? Contract law 101. You sign a contract, you abide by it.
Not a masterful move signing his name on a paper contract. In the end… IBM will win, Apple will hire someone else, and Mr Papermaster ends up in the shredder.
WoW, what a bunch of expert lawyers. “You sign it you abide by it” blah blah blah… When was the last time you guys compared an iPhone to an IBMphone. What??? IBM doesn’t make mp3 playing phones? Probably because they don’t compete. It’s like saying that Harley-Davidson competes with Ford. Because both use internal combustion engines? It’s idiotic. I question Ed as an expert. “US government security clearance. There is a mandatory 6 month cooling off period there.” BS, I’ve been in Gov work over 25 years. I’ve switched programs and employers and have never had to stay unemployed 6 months between jobs. Also Ed, don’t give Spaz a hard time. Half the time your confusing the non-compete with IBM with Mark’s Non-disclosure with the NSA.
Nobody can win against IBM lawyers, I can guarantee.
I think that non-compete is a fair requirement; a VP in a comapany has access to top confidential information and the risk of being “stolen” to a competitor is big. However, inmany countries (including the one I live in, Israel) when you go to court, they will not enforce it.
Interesting to see what happens in a few days/weeks, expcially in this economy.
my comments at http://www.commentino.com/orim
I think everyone is overlooking the obvious: IBM does business-oriented work. Apple does the hip, trendy consumer thing.
What better way to fully exploit the iPhone, iPod Touch and integrated data distribution network iTunes than to crack the business market and displace Windows/WinMo?
And wouldn’t Pagemaster be just the right person with the perfect resume and background to lead the Apple/Jobs revolution in that market?
Steve Jobs is a smart guy. If I can glance at the situation and see it, you know it has more than merely crossed Jobs’ mind, and apparently IBM sees it, too.
For an expert on microchips and technology, he doesn’t seem that smart.
Sure, he couldn’t have foreseen with absolute certainty that he would be in this situation, but he had to have known it would be a possibility.