IBM blocks exec's defection to Apple

By Stephen Withers
Wednesday, 05 November 2008 03:33

Opinion and Analysis

Apple has formally announced that it has hired ex IBM vice president Mark Papermaster as its senior vice president of devices hardware engineering. But IBM's efforts to enforce a no-compete clause in Papermaster's contract could throw a spanner in the works.

Apple announced yesterday that Papermaster will join the company to lead the iPod and iPhone hardware engineering teams.

Two weeks ago, IBM filed a suit against Papermaster in the district court for the southern district of New York to enforce a noncompetition agreement.

This led to speculation that Apple would put Papermaster's blade server expertise to work in either the further development of the Xserve line or to bolster the talent behind MobileMe and future cloud services.

IBM has described Papermaster as the company's top expert in the Power architecture and technology, and claims it made significant efforts to retain Papermaster as an employee or at least to refrain from working for a competitor in the 12 months after resigning from IBM.

These incentives included a offer of "a substantial increase in his total compensation package" or "one year's salary in exchange for Mr Papermaster's agreement to respect his contractual obligation to refrain from working for an IBM competitor for one year."

The standing of no-compete agreements varies in different jurisdictions. Some states - and indeed some countries - hold that they are an unwarranted imposition on the rights of individuals to work for their employer of choice and therefore take a very restrictive view. But according to various commentators they are generally upheld in New York.

IBM has brought the case in the New York court as it and Papermaster agreed to that venue for any disputes arising from the no-compete agreement.

Although Papermaster will be working on the iPod and iPhone - a market segment that IBM does not play in - the agreement purports to prevent him from working for a competitor in any capacity.

IBM views Apple as a competitor as they are both involved "in the design, manufacture and sale of electronic devices, including servers, personal computers and microprocessors."

Along with Papermaster's appointment, Apple announced that Tony Fadell, senior vice president of the iPod division is stepping down but will remain with Apple as an advisor to CEO Steve Jobs.

Danielle Lambert, vice president of human resources, will leave Apple at the end of the year. Fadell and Lambert are husband and wife, and according to Apple's statement they are reducing their roles within the company as they devote more time to their young family.

"Tony and Dani have each made important contributions to Apple over the past eight years," said Jobs.