Friday, November 14, 2008, 02:00 pm

New Apple hire fights back in countersuit against IBM

By Katie Marsal

The tug of war over the future of Mark Papermaster, an executive hired away from his post at IBM to head up Apple's handheld efforts, got a bit nastier on Thursday when the microprocessor expert countered a lawsuit from his former employer with one of his own.

Earlier this month, Apple conclude a year-long search to replace outgoing iPod chief Tony Fadell by appointing Papermaster its new chief of devices hardware engineering overseeing both the iPod and iPhone. IBM was none too thrilled over the poaching and quickly sued its former employee, alleging that he was in violation of his noncompete agreement with Big Blue by joining one of its 'competitors.'

U.S. District Judge Kenneth Karas last Friday issued a temporary injunction ordering the executive to immediately cease work at Apple until the court could come to a decision on whether his employment there breaches clauses in his contract with IBM that prompted a lawsuit. Apple responded to the move by removing Papermaster's bio from its website, presumably as part of standard procedure.

But in a 16-page countersuit [PDF] filed by Papermaster on Thursday, the exec argues that Apple and IBM are not significant or major competitors. "IBM primarily provides business enterprise services, while Apple’s primary business is the design, manufacturing and marketing of consumer electronic products," he said.

Papermaster also claims that certain clauses in his contract with IBM, such as the "significant competitor or major competitor” prong, are unreasonably broad in that they aim to restrict him from going to work for one of the company's competitors even if what he'll be working on is completely unrelated to the work he was doing at IBM.

"The Noncompetition Agreement is also unreasonably broad in that it purports to impose an unreasonably lengthy time limitation," his attorneys added. "In the world of technology, any trade secrets that Mr. Papermaster possesses would lose their value prior to the expiration of a year."

Papermaster's counsel further argued that provisions in his non-compete agreement are unenforceable in that they're "governed by, and construed in accordance with, the laws of the State of New York."

"Mr. Papermaster has no substantial relationship to New York, in that he has resided and worked in Texas for the past 17 years, and he is going to work for Apple, which is a California corporation," the suit says. "Mr. Papermaster therefore has the most significant contacts with Texas and California. Both states hold that such noncompetition agreements are unenforceable as a matter of public policy."

On Tuesday, Judge Karas ordered IBM to put up $3 million bond to cover any costs or damages Papermaster might suffer should it turn out that the injunction should not have been issued.