Trade Secret News: IBM, Apple and a Papermaster

An IBM executive moving to Apple and what happens? Litigation!

From Computer and Technology News:

The complaint says Papermaster was IBM’s top expert for its Power microprocessors and the vice president of IBM’s blade server development unit, until resigning on Oct. 21. Papermaster is also a member of IBM’s “elite” Integration & Values Team, a group of 300 senior managers charged with developing corporate strategy.

“Recently, Mr. Papermaster informed his superiors at IBM that he intended to accept a position at Apple,” IBM’s complaint states. “On information and belief, Mr. Papermaster will become a senior executive and corporate officer at Apple and will work very closely with Apple’s Chief Executive Officer in providing to Apple technical and strategic advice on a variety of issues.”

Apple competes against IBM in developing servers, PCs and microprocessors, IBM says, referring to Apple’s Xserve line of servers and Apple’s acquisition of P.A. Semi, a semiconductor that IBM also considers a competitor. (Compare server products.)

IBM says it tried to lure Papermaster back with a substantial pay raise, and offered to pay him one year’s salary in exchange for Papermaster “refrain[ing] from working for an IBM competitor for one year.”

I think out of all the news, Networkworld hits on the exact point where Mr. Papermaster's going to Apple rubs against trade secrets:

Apple competes against IBM in developing servers, PCs and microprocessors, IBM says, referring to Apple's Xserver line of servers and Apple's acquisition of P.A. Semi, a semiconductor that IBM also considers a competitor. (Compare server products.)

The All Things Digital Blog has a great headline (The Papermaster Chase) puts this into context of the industry and some quotes from the complaint:

Apple’s efforts to build its own chip development brain trust out of its acquisition of P.A. Semi have run afoul of IBM. Mark Papermaster, a 26-year IBM veteran and vice president of its Blade Development unit–a division that designs corporate data centers, plans to take a new job with Apple (AAPL) in early November, and Big Blue is doing its damndest to stop him. The company has filed suit against Papermaster, claiming his noncompete agreement with IBM prohibits him from taking a job with Apple.
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As a member of the IBM (IBM) elite Integration and Values Team, Papermaster had broad access to the company’s intellectual property, trade secrets, and more. From the complaint:

The I&VT is charged with addressing the most difficult and important issues facing IBM, such as developing corporate strategy and driving innovation and growth and I&VT team members work with the most sensitive strategic information the Company possesses.

In his capacity as a member of the I&VT, Mr. Papermaster has gained access to confidential information concerning the Company’s strategic plans, marketing plans and long-term business opportunities, including the development of specific IBM products.

… Mr. Papermaster is IBM’s top expert in ‘Power’ architecture and technology, and he is privy to a whole host of trade secrets and confidences belonging to IBM that the company uses to design, develop and manufacture its products.”

Internetnews.com also relates the case to the industry:

Papermaster's expertise may help connect some dots regarding Apple's surprise purchase of chip design firm PA Semiconductor earlier this year for $278 million.

PA Semi was developing processors based on IBM's Power line of processors. Ironically, Apple once used Power processors before switching to Intel a few years ago.

Given Papermaster's deep understanding of the Power architecture, it's possible Apple has development plans on the mobile and server side based on that technology. But the suit also notes Papermaster has most recently been involved in IBM's blade server line which uses both Power and competing chip architecture. At least one analyst doubts Apple will be going back to Power, but does have a need for Papermaster's know-how.

"I think the whole idea behind buying PA Semi was to get Dobberpuhl and his crew to build an ARM processor for mobile and get an advantage they wouldn't have going to the normal semiconductor suppliers," Nathan Brookwood, founder of chip consultancy at Insight64, told InternetNews.com. Dan Dobberpuhl, the founder of National Semi, is a veteran chip designer behind the highly regarded Alpha and StrongARM processors in the 1990s.

"If PA Semi isn't working on something low power for Apple, I'd be very surprised," said Brookwood. He also speculates Apple CEO Steve Jobs may be bringing Papermaster in to help him manage and direct PA Semi's work for Apple.

Apple already uses an ARM processor in the iPhone.

An Apple spokesman said the company had no comment on IBM's legal actions which is directed at Papermaster and not, for now, Apple.

Analyst Roger Kay thinks Apple is hoping to continue to build on its engineering design advantage by bringing in Papermaster. "Apple has essentially the same OS running on the iPhone that runs on its computers; no one else is doing that," Kay, president of Endpoint Technologies Associates, told InternetNews.com.

"Steve Jobs knows the hardware view of the world, that if you can attain the right price/performance level you can blow the competition away," Kay continued. "Jobs is good at making the 'we can change the world' pitch and this hiring sounds like a real coup for them if it goes through."

Apple does not lack money or lawyers which leads me to why I chose to focus on this case. See, IBM does not lack money either. I say the real question for Apple is time. If Apple needs Papermaster's expertise to get product development started then protracted litigation means delays that may outstrip the benefits that Papermaster represents. A deal in the offing or will Apple forget about Papermaster?