In my November 18, 2008 (Apple and IBM mix it up), I wrote about a lawsuit filed by IBM against Mark Papermaster, its guru of IBM’s Power Architecture and X-64 Blade Servers. The gist of the lawsuit was that Papermaster allegedly violated his non-competition agreement with IBM when he accepted a position with Apple that gave him oversight of the iPod and iPhone. Apparently, IBM felt that Apple really hired Papermaster to expand its server business by using confidential information Papermaster acquired while working at IBM. IBM won the first round by convincing a judge to issue a preliminary injunction that prohibited Papermaster from moving to Apple. As a condition of getting a preliminary injunction, IBM had to post a $3 million bond to protect Papermaster from financial loss in the event the judge would later determine the injunction should not have issued.
At the time I wrote the November 18, 2008 post, I suspected that this case would be “resolved to the satisfaction of the parties.” Translated into plain english that means that someone paid a lot of money to make the case go away. No one is talking money, although IBM has issued a statement outlining some of the parameters of the settlement. (To read about the settlement terms and get additional details of the litigation click here.) As a lawyer, I was selfishly hoping that this case would not have settled because it was fascinating to watch the tactics employed by the parties. Never the less, it is best for the parties to settle the case.
Always, always, always think about what you are going to sign and get legal advice before you sign a non-competition agreement. There is no such thing as a “standard agreement.” Often employees sign a non-compete with no thought of what will happen in the future. While you may be excited about that job and the pay increase, life ain’t always gonna be a bowl of cherries. Once you sign, you are bound and you won’t get a do over. Management and the direction of the business may change and you may not like those changes. If that happens, you do not want to be out of a job, without an income and considering accepting a position making caramel apples at the local amusement park to make ends meet. Here are just a few things to consider before signing a non-compete:
1. Are you being compensated during the period in which you can’t compete?
2. Is the non-competition agreement valid in the case your company is sold/acquired?
3. Are there any circumstances under which the agreement will not be enforced?
4. If there is a dispute, what court will hear the dispute and what state’s law will apply?
Don’t plagiarize a non-compete used by a colleague and don’t use a form you find on the web. Although courts will enforce non-competes, they are reluctant to do so. You need to have a non-compete that is narrowly tailored to your business needs. While it may feel good to prohibit an employee from competing with your business anywhere in the universe for the next 10,000 years, that type of over broad approach will not endear you with the judge. A judge, however, will enforce a tightly drafted agreement that is relatively finite in duration, limited in geographical scope, and supported by consideration. It short, have your lawyer draft the non-compete.
Employers and Employees:
When you approach a non-compete, remember the lyrics of the old song, “You can’t always get what you want, but if you try some time, ……(you know the rest)”