Ex-IBM veteran countersues former employer

Apple hire says non-compete clause with Big Blue unenforcable

Apple's newest executive, barred earlier this month by a US federal judge from working at the Apple due to a non-compete clause in his contract with IBM, his former employer, has countersued IBM, arguing that the non-competition agreement is unenforceable and too broadly written.

Mark Papermaster, a 26-year veteran of IBM, filed the countersuit less than a week after US District Court Judge Kenneth Karas ordered him to "immediately cease his employment with Apple". Karas' temporary injunction on November 7 was in response to a lawsuit IBM filed in late October, when it charged Papermaster with violating a 2006 non-competition deal by accepting a position at Apple to head its iPod and iPhone development.

In the countersuit, Papermaster again argues that Apple and IBM are not really rivals. "Apple and IBM are not significant competitors," he says in the filing. "IBM primarily provides business services, while Apple's primary business is the design, manufacturing and marketing of consumer electronic products."

Papermaster also asserted that the non-competition agreement he signed while at IBM was "unreasonably broad" because it tried to restrict him from working 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."

IBM has charged that Papermaster, who during his career with IBM was involved in the development of the Power line of microprocessors and in charge of the company's blade server development, might be working on similar ventures at Apple. In April, Apple bought PA Semi, a chip design firm that creates high-end, low-power processors, a fact IBM mentioned in its lawsuit. Papermaster denies that his duties at Apple will include anything related to PA Semi, or to personal computer design.

Ultimately, the non-competition agreement is unenforceable, Papermaster's lawyers argued, because of where he lives and where Apple is located. The agreement, they noted, is governed by the laws of the state of New York, where IBM is headquartered, while Papermaster lives in Texas and Apple is based in California. "Both states hold that such non-competition agreements are unenforceable as a matter of public policy," the countersuit says.

Papermaster also says that when he took the Apple job, he signed a confidentiality agreement there that forbade him from bringing to the company any "confidential, or proprietary, or secret information" of IBM.

"Mr Papermaster has honored and intends to continue to honor his agreement not to disclose any confidential IBM information," the suit states.

When Apple hired Papermaster to run its iPod and iPhone engineering group, IBM claimed that he had information of "highly confidential IBM trade secrets" that would "irreparably harm" the IBM if he is permitted to work for Apple.

In an earlier filing, Papermaster said that IBM had accepted his offer to continue working for another two weeks, and that during that time, IBM had not restricted his access to the IBM computer network or asked him to turn over his files. "IBM allowed him to continue working at IBM for two entire weeks, with unfettered access to all of his files and to IBM's entire computer network — hardly what one would expect when an executive is leaving for a competitor," Papermaster's filing earlier this month says.

Judge Karas ordered IBM to post a US$3 million (NZ$5.45 million) bond to continue the case. The bond, common in such cases, is intended to pay for any costs or damages that Papermaster might suffer if the injunction is later overturned.

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