Trade Secrets: More Papermaster, IBM and Apple News

I find this case is staying interesting. For example, as MacWorld reports in IBM posts $3 million bond in Papermaster lawsuit the case has some points that apply generally.

The $3 million bond was put in place to pay Papermaster should the court decide IBM’s case is without merit and the injunction against Papermaster shouldn’t have been granted. Final damages will be decided by the court, but they won’t exceed the bond amount.

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He also said that when he accepted the job at Apple, he signed an Intellectual Property Agreement in which he agreed not to disclose or bring onto Apple property any “confidential, or proprietary, or secret information” of IBM.

I have seen a few cases fail at this stage because of the lack of a bond. Indiana Trial Rule 65 deal with injunctions and says this about a bond:

(C) Security. No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. No such security shall be required of a governmental organization, but such governmental organization shall be responsible for costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. The provisions of Rule 65.1 apply to a surety upon a bond or undertaking under this rule.

I would not file a motion for a preliminary injunction without first securing the bond for the injunction. Of course, IBM need not have too much trouble affording the security for a bond.

Meanwhile, Mr. Papermaster reacts to the lawsuit with his own counterclaim. A very good move in my opinion as tactics regardless of its merits (not having read the Complaint or Counterclaim, I am not willing to not put in a qualifier here). Again from MacWorld:

Papermaster countersues IBM in effort to join Apple

In an effort to sever ties with his former employer, Mark Papermaster has countersued IBM, claiming among other things that Apple and IBM are not significant competitors.

Papermaster contends that IBM’s noncompetition agreement precludes him from working for any Business Enterprise or any major competitor of IBM. The lawsuit argues that since IBM business enterprise services and Apple’s business is the design, manufacturing and marketing of consumer electronic products, the two are not major competitors.

Providing further evidence of the noncompetitive nature of the companies,

Papermaster further explains that at IBM he was the vice president of Blade Development, while in his role at Apple he would be in charge of product development for the iPod and the iPhone.

The countersuit asserts the noncompetitive agreement “is unreasonably broad in that it purports to impose an unreasonably lengthy time limitation.

In the world of technology, any trade secrets that Mr. Papermaster
possesses would lose their value prior to the expiration of a year.”

Papermaster says the noncompetitive agreement is flawed in another way. The agreement says that it is “governed by, and construed in accordance with, the laws of the State of New York,” but he worked in Texas and

Apple is in California. Both of those states hold such noncompetition agreements are unenforceable.

This demonstrates a fairly common strategy for employees being subjected to a non-compete agreement. A point to employers who hire from their competitors, budgeting legal fees for defending and counterclaiming a lawsuit from the former employer is a good idea.