IBM Forced to Pay $3 Million to Ex-Staffer (Papermaster-Apple Case)

Judge rules that IBM pay the server expert a generous bond

By Filip Truta on November 17th, 2008 10:45 GMT
On Friday, last week, a federal judge ordered IBM to provide a $3 million bond by the end of the day to keep the case going, the company and Mark Papermaster, ex blade server expert at IBM. Mark Papermaster was recently hired by Apple as SVP of Devices Hardware Engineering.

For his decision to move to Apple IBM sued Papermaster, claiming he had knowledge of IBM trade secrets and know-how, which, if disclosed to Apple, would "irreparably damage" the Big Blue (as IBM was once referred to). According to Computerworld, the $3 million bond is designed to pay for any costs or damages that Papermaster might suffer, should it be proved that IBM wasn't entitled to an injunction.

Even though Apple knew IBM was suing Papermaster for breach of contract, the company officially announced that Mark Papermaster had joined them as Senior Vice President of Devices Hardware Engineering. A day later, Judge Kenneth Karas (who recently ruled that IBM must pay the $3 million bond) ordered Papermaster to cease all activity at Apple until further notice. One contract Papermaster signed with IBM said that he should wait a year before starting work for a competitor. However, Papermaster argued that Apple and IBM were not rivals.

"Apple and IBM are not significant competitors," Papermaster said. "IBM primarily provides business services, while Apple's primary business is the design, manufacturing and marketing of consumer electronic products.” IBM's former executive added that the non-competition agreement he signed while at IBM as "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."

Now IBM is faced with answering back, as Papermaster countersued by adding another strong argument. The ex IBM staffer noted in his court filing that, when he accepted to work for Apple's Devices division, he signed a confidentiality agreement that prevented him from disclosing any "confidential, or proprietary, or secret information" of IBM. The same documents reveal that "Mr. Papermaster has honored and intends to continue to honor his agreement not to disclose any confidential IBM information," his lawyers say.
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