Tuesday, November 4, 2008
IBM Seeks to Enforce Noncompete Agreement against New Apple Hire
Just in time to be considered as those of us who teach employment law are writing our finals, IBM filed an action against Mark Papermaster, its manager in charge of IBM’s blade server business. The action seeks to enforce a noncompete agreement between IBM and Papermaster (the agreement can be found here in a post by Seth Weintraub on Computerworld Blogs, Apple Ink), which prohibits Papermaster from working for a competitor for a year. Apple announced today that it it planned to hire Papermaster to run its iPod and iPhone hardware engineering groups.
The noncompete agreement prohibits Papermaster from working for "any significant competitor or major competitor" of IBM or for "any entity that engages in . . . competition with the business units or divisions" of IBM that Papermaster worked in. The parties agreed that the agreement would be governed by New York Law.
So, if the terms of the agreement are reasonable and enforceable, it seems that the key here will be to determine whether Apple is a significant or major competitor of IBM, or whether Apple or any of its subdivisions engage in competition with IBM's blade server business. Weintraub suggests that IBM wants to keep Papermaster from contributing to Apple's chip design:
the terms of the suit . . . seem directly in line with chip design. Apple isn't competing with IBM in the blade field. Nor are they competing directly in the cloud computing space. But they are likely going to be competing with IBM in the chip field fairly soon.
Papermaster is one of the leaders in the chip design field, and Apple recently bought a company called, PA Semi, which was competing with IBM in selling PowerPCs. Another commentator has noted,
It is not clear what Papermaster’s role would be at Apple. But IBM is hell bent on him not joining Apple. The company offered him a substantial pay increase to keep him. Additionally, it is reported IBM offered to pay him one year’s salary if he would just refrain from joining a competitor.
Another tidbit that might prove fruitful for exploration in an exam question are the interests that IBM identifies in the agreement, confidential information that Papermaster has access to:
certain or all of the Company's methods, information, systems, plans for acquisition or disposition of products, expansion plans, financial status and plans, customer lists, client data, personnel information and trade secrets of the Company.
These might prove fertile ground for a trade secrets backup question.
MM
https://lawprofessors.typepad.com/laborprof_blog/2008/11/ibm-seeks-to-en.html
You could say I earned my law degree on the street. I have only signed two non-compete in my life. One was after I left Exxon to go to work for a software company startup. When I left that startup for another startup, I met my "first" lawyer. My new lawyer friend asked me this... You seem like a smart guy right? Then he said, Why in the hell would you ever sign an agreement like this? I have negotiated my way around at least 100 non competes over the last 25 years. Here are some of the things I have learned.
a. Non compete are not enforceable is a myth. Sometimes the question is not if your opponent is going to sue you; the question is whether the con compete holder will sue the company that is planning on hiring you. Obstruction of something of something, not sure. My non formal legal training has taught me a few uncontravertable truths. One, it's not whether your opponent has a gun; it's whether your opponent will use it and if you are feeling bullet proof if they do.
b. At all cost try never to sign a non compete. Try and make it a non negotiable item. This can be difficult if your opponent is a very large company. I always try and spin the question to the non compete requester - Can you afford to not work for a year? If you can't find some middle ground this might not be the best company for you to work with.
c. There are strong non-competes and weak non-competes. My non legal analysis of a strong non compete is when they ask you one final last time ... “Do you understand and agree with this contract?” Or even better, “I have reviewed this contract with a legal advisor.”. An even stronger non-compete is where you are compensated for signing the agreement. My second non compete agreement included stock options and a monthly compensation for my rights to non compete. However, the strongest non-compete is when your opponent is much $larger$ than you.
d. Ninety percent of the time you can negotiate your way out of a non-compete.
e. Try the "I am really stupid" and wear them down approach. Go at least three rounds where you don't even try to sound like you know what you are "legally" talking about. This will frustrate the hell out of your opponents lawyer. Then after you see signs of weakness go for the kill. Oh, by the way this is all before you even show the contract to your lawyer for final approval.
f. Confidentiality agreements can be non competes in sheep's clothing. A non disclosure from IBM could be more lethal than a non-compete. The we do everything and everything you see is confidential kind of stuff can be killer. Addendum's work really well in my non legally trained opinion. You can flip the agreement if you can sneak a few goodies in a well crafted addendum. You are betting on your opponents bureaucracy driven laziness. Yes Virginia, even big time lawyers can be tricked.
Posted by: botchagalupe | Nov 5, 2008 3:43:57 AM