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Commentary: Papermaster not to set foot in Cupertino

Apple looks set to grab one of IBM’s elite vice president-level managers – a 26 year IBM veteran with deep intellectual property history and direct knowledge of IBM chip design strategy. Yet IBM files suit to stop Papermaster from setting foot in Cupertino.

Papermaster and Apple

Mark Papermaster, a senior vice president at IBM, has apparently taken a job with Apple computer and is expected to start working for Apple next month, according to reports. However, IBM has filed suit this week against Papermaster in a US District Court in Manhattan to stop Papermaster from joining Apple. The basis of the case is a breach in Papermaster’s Noncompetition Agreement he signed with IBM in 2006. That agreement states that Papermaster cannot join a firm that competes with IBM within one year of his termination of employment.  Mark Papermaster has been with IBM for 26 years and is a member of IBM’s elite I&VT (Integration & Values Team), which includes IBM’s top 300 senior managers and thus has wide access to company intellectual property and trade secrets, including top secret IBM strategy. 

IBM’s Case: Noncompete Agreement Details

The details of the IBM Noncompetition Agreement are significant. The agreement states that Papermaster agrees that he will not (within 1 year of termination) “engage in or associate with (a) any ‘Business Enterprise’ or (b) any significant competitor or major competitor of the Company…”.  By “Business Enterprise” the agreement means any entity or entity that owns or controls a significant interest in any entity that engages in competition with the “business units or divisions of the Company” (IBM) in which you have worked at any time during the two year period prior to the termination. The agreement further defines “engage in” completely to include both consultant and contractor status, so even if Papermaster didn’t join Apple as an employee he would still be barred from engaging with Apple. 

IBM’s case based on this Noncompetition Agreement seems to hinge on Apple being deemed:

  • a “significant competitor” to IBM
  • a “major competitor of the company” {that being IBM}
  • or an entity that engages in competition with business units or divisions of IBM
Since Apple is a consumer-oriented electronics manufacturer and software company one might argue that Apple cannot be a significant competitor to IBM as the two have no overlapping competitive fields. Companies must be careful about what they say about Apple two. The press has asked Bill Gates and Steve Ballmer on several occasions if Apple was seen a major competitor to Microsoft (the resurgent Apple, circa early 2000’s) and Apple was dismissed. They instead said Linux was viewed a major competitor but not Apple. How many IBM executives have said similar comments to the press about Apple?  These days however Apple owns a subsidiary called PA Semi, a group of elite chip design engineers and computer scientists. This group specifically makes chips based on IBM’s Power Architecture designs. However, it may be deemed that PA Semi does not qualify as being deemed a competitor of IBM’s chip units or divisions. 

Mark Papermaster’s Role at Apple

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. A MacNN post notes that he was expecting to work closely with Steve Jobs.

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