Apple's new VP could cause 'irreparable harm' to IBM, says judge

Unsealed opinion spells out concerns over former IBM exec's role

A federal judge ordered Apple Inc.'s newest executive to leave the company just five days after starting work because he might cause "irreparable harm" to his former employer, IBM, unsealed court documents show.

Although U.S. District Court Judge Kenneth Karas ordered Mark Papermaster, a 26-year veteran of IBM, to stop working for Apple on Nov. 7, his opinion explaining the decision was made public only on Friday and posted to the federal court system's database yesterday.

In the opinion, Karas explained why he granted IBM's request for a preliminary injunction that blocked Papermaster from working for Apple, where he was to head iPod and iPhone hardware development. Last month, IBM sued Papermaster, claiming that a noncompetition agreement he signed in 2006 barred him from working for competitors for a year after leaving the company. According to IBM, Papermaster had information of "highly confidential IBM trade secrets" that would "irreparably harm" the company if he's allowed to work for Apple.

Karas said that that the injunction was justified. "Because Mr. Papermaster has been inculcated with some of IBM's most sensitive and closely guarded technical and strategic secrets, it is no great leap for the Court to find that Plaintiff has met its burden of showing a likelihood of irreparable harm," Karas wrote.

Elsewhere in the opinion, he dismissed Papermaster's contention that Apple and IBM are not competitors, and expressed concern that while Papermaster would not be designing chips for Apple -- something IBM claimed, based on Apple's acquisition of P.A. Semi, a small processor design firm, last April -- his background in processor design at IBM would play a part in his new job.

"It is likely that Mr. Papermaster inevitably will draw upon his experience and expertise in microprocessors and the 'Power' architecture, which he gained from his many years at IBM, and which Apple found so impressive, to make sure that the iPod and iPhone are fitted with the best possible microprocessor technology and at a lower cost," Karas said.

"Indeed, any claim that he would merely use general engineering skills is belied by Apple's focus on Mr. Papermaster's 'spot on' knowledge of semiconductors and microprocessor design," he added.

For the majority of his years at IBM, Papermaster worked in processor design, and eventually became IBM's vice president of microprocessor technology development. Most of his work was on IBM's Power line of CPUs. Ironically, until early 2006, when Apple switched to Intel Corp. processors, its desktop and laptop systems ran on IBM's PowerPC chip.

Karas called the Power processors one of IBM's "crown jewels," and said that though there was no evidence Papermaster had disclosed any trade secrets so far, he might still damage his former employer.

"The harm to IBM, however, is more likely to derive from inadvertent disclosure of the IBM trade secrets that have defined Mr. Papermaster's long career," said Karas. "Put another way, what other base of technical know-how could Mr. Papermaster draw upon to perform his new and important job?

"Thus, while the Court ascribes no ill-will to Mr. Papermaster, the Court finds that the likely inevitability of even inadvertent disclosures is sufficient to establish a real risk of irreparable hard to IBM," he said.

The opinion also revealed that IBM did not know Papermaster started working at Apple on Nov. 3 until three days later, at a hearing before Karas.

Karas was not unsympathetic to Papermaster's plight, and told both parties that he intended to run the case on a fast track. "The Court has ordered that an expedited discovery schedule be arranged and that the trial take place as soon as practicable after discovery is completed," he said.

Papermaster has countersued IBM, arguing that the noncompetition agreement at the heart of the dispute is unenforceable and too broadly written. IBM, meanwhile, has had to post a $3 million bond in the case to cover any costs or damages that Papermaster might suffer if it's later determined that IBM wasn't entitled to the injunction.

Copyright © 2008 IDG Communications, Inc.

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