By John | November 7, 2008
I can’t help it, I get caught up in these kinds of stories. I guess it’s because I have wasted so much money on bad legal advice over the years and have been forced into a “Do it yourself lawyer” many times. Ok, by now most people have heard of Mr. Mark Papermaster, the ex-IBM’r who IBM is suing over a non-compete. Papermaster has taken a job with Apple and IBM is suing him for breaching a non-compete agreement. The ironic part is that Papermaster is replacing a guy (Tony Fadell), who Apple is planning on paying $300k a year for the next two years, plus stock options, because Apple doesn’t think his non-compete is enforcible.
In my opinion, this is another clear case where Apple has one up’d IBM. Although, I believe IBM has every right to purse their suit against Papermaster, the fact is that Apple’s actions have a far better appearance. Philosophically, if you don’t want an ex employee to work for a year, you should pay them a fair market price to stop them from working (as in the case of Apple/Fadell). Unfortunately , philosophy and law have not been dance partners for many years now. In the case of IBM, Papermaster signed an awards agreement that had a non compete clause in it. That is far different, legally speaking, from an employment agreement with a non-compete clause. In other words, it is sometimes difficult to enforce a non-compete if the sole benefit to the employee is getting the job. However, in the case of Papermaster, he did not sign a non-compete as part of his employment contract. He agreed to get special award compensations in return for signing an awards agreement with a non-compete clause. There is a huge difference between the two types of agreements when it comes to non-compete enforcement. Another huge factor in the difference between Papermaster and Fadell, is that Papermaster’s agreement jurisdiction is NY and Fadell’s is California. California is very friendly to employees with non-compete “Employment” contracts. Not so sure about awards contracts.
In the end I agree that Papermaster should get an equal compensation to Fadell if IBM really wants him to not work for a year. Unfortunately the LAW doesn’t work that way. The truth is that IBM is more likely on a fishing expedition to find out what Apple is up to more than anything else. However, the lesson learned on all of this is , always understand any contract you sign and don’t be fooled by the “non-compete” is not enforceable myth. Sometimes it is and sometimes it’s not.