TMO Reports - IBM Sues Executive to Prevent Move to Apple

by , 2:00 PM EDT, October 31st, 2008

IBM has sued Mark Papermaster, a former executive of Big Blue's that quit the company on October 21st in order to accept a position at Apple Inc. The lawsuit seeks to prevent Mr. Papermaster from taking that position on the grounds that he is violating a non-compete contract he signed with IBM.

Mr. Papermaster was most recently Vice President of Blade Development at IBM, and he also spent some of his 26 year career at IBM developing IBM's Power line of processors, the same family Apple in its Macintosh and Xserve computers used until the Switch to Intel in 2005. Court documents filed by IBM call him the company's "top expert in 'Power' architecture and technology."

IBM also called Mr. Papermaster a member of its "elite Integration & Values Team (I&VT), a group comprising the 300 senior managers of [IBM]." As such, according to the company, Mr. Papermaster has gained access to all manner of trade secrets, information on IBM's business strategies, and other information he will inevitably disclose when working as an executive of Apple.

Hence the non-compete contract that he signed in 2006 that stipulated he would not work for a competing company -- with IBM calling Apple a competitor in both the server markets (Xserve) and in microprocessors (Apple bought P.A. Semi, and plans on using chips from the company in the iPhone and iPod lines) -- for one year.

"In his current capacity," IBM wrote in its lawsuit, "Mr. Papermaster has access to confidential know-how and other sensitive information that the company uses to manufacture its 'blade' servers. The confidential information to which Mr. Papermaster has become privy on his membership of I&VT and employment with the company represents the product of IBM's substantial investment in research and innovation and is critical to IBM's success."

According to court documents, IBM offered Mr. Papermaster a "substantial increase in his total compensation package" (i.e. a big raise), and failing with that tactic, offered to pay him a year's salary to simply not work for a competitor for one-year in compliance with his non-compete contract.

Neither offer was as tempting as working for Apple, however, and Mr. Papermaster resigned from IBM on October 21st (effective October 24th), and told IBM he would begin work at Apple in November. IBM said that he will be working directly with Steve Jobs, and alleges that this work will include server-related or microprocessor-related areas.

Which brings us to the question of what Mr. Papermaster will be doing for Apple. There is already speculation on the Internet that this move means Apple is ready to get serious (again) about the server market, but the reality is that after a big push when the Xserve and Xserve RAID product lines were introduced several years ago, that Apple has largely paid little public attention to these lines, going so far as to cancel the Xserve RAID.

The other likely area of interest to Mr. Papermaster would be Apple's P.A. Semi microprocessor family, and the application of those processors to future generations of iPhone and/or iPod.

Mum's the word from Apple, however, and as of right now, we only have IBM's thoughts on what Mr. Papermaster will do at Apple, if IBM's lawsuit fails to delay his employment in Cupertino.