Apple 2.0

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IBM must put up $3 million in Papermaster case

November 14, 2008: 11:54 AM ET

$3 million bondIBM only had to pay a $350 filing fee to sue Mark Papermaster, the 25-year IBM (IBM) veteran hired by Steve Jobs last month to run Apple's (AAPL) iPod and iPhone division.

It's going to cost the company a lot more to pursue the case.

Last Friday, U.S. District Judge Kenneth Karas granted Big Blue the preliminary injunction it sought -- based on a noncompetition clause signed in 2006 -- and ordered Papermaster to stop working for Apple immediately. See The Papermaster chronicles.

On Tuesday, the judge ordered IBM to put up a bond to cover any costs or damages Papermaster might suffer should it turn out that the injunction should not have been issued. Noting that district courts are granted "wide discretion" in determining how big a bond to require, Karas writes:

"Here, based on a careful reading of the letters sent by the Parties to the Court, which are being filed under seal, the Court finds that a bond in the amount of $3,000,000 is appropriate to guarantee payment of the costs and damages that Defendant may incur..."

On Wednesday, Papermaster's lawyers filed their answer to IBM's suit and filed counterclaims of their own. They admitted only those facts that were indisputable and denied pretty much everything else -- including the fact that Papermaster worked for IBM.

IBM and Apple aren't competitors, they claim, and even if they were, Papermaster has been hired to do work that has nothing to do with IBM. And even if it did, IBM's noncompetition agreement is unreasonably broad, Papermaster's lawyers assert. What's more, they argue, it doesn't apply in Texas (where Papermaster worked for 17 years) or California (where Apple is based) -- neither of which honor such agreements.

A status conference is set for Tuesday, Nov. 18 at 10 a.m. in the U.S. District Court, Southern District of New York, White Plains.

Below the fold: links to the key court documents.

  • IBM's complaint: [PDF]
  • Papermaster's declaration [PDF]
  • Judge Karas' order [PDF]
  • Papermaster's objections [PDF]
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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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