On November 21, 2008, Judge Kenneth Karas of the Southern District of New York published his November 7, 2008 Amended Opinion and Order granting IBM’s Motion for Preliminary Injunction against former IBM executive Mark Papermaster. Judge Karas granted the Motion following extensive briefing from the parties, as well as a November 6, 2008 hearing on the Motion. The parties did not offer in-court witness testimony at the hearing, instead choosing to rely on the affidavits that they had submitted. Interestingly, Judge Karas notes at the outset of the Opinion and Order that IBM learned for the first time at the hearing that Papermaster had started work with Apple.
In the Facts section of the Opinion and Order, Judge Karas synthesizes the numerous affidavits submitted by the parties. Judge Karas does reference IBM’s new type of digital storage device, the mention of which led a number of tech-focused analysts following the case to write about the possibility that IBM’s new “Racetrack” technology is at the heart of the matter. That said, Judge Karas does not reference this technology in the “Discussion” section, indicating that Racetrack is not at the center of the dispute (at least not at present).
In evaluating the legal merits of IBM’s Motion, Judge Karas engages in an analysis of whether Papermaster would inevitably disclose the IBM trade secrets known to him. In so doing, Judge Karas takes IBM’s argument, which had focused on Papermaster breaching the restrictive covenants contained in his Noncompetition Agreement, and shifts it to an inevitable disclosure argument, which is more focused on trade secret misappropriation than breach of contract.
Judge Karas articulates that Papermaster’s new role makes him responsible for improving Apple’s iPods and iPhones, “that is, to make sure that they store more information, do it more quickly, and use less power in doing so.” Judge Karas concludes that Papermaster would inevitably disclose his knowledge of microprocessors and the “Power” architecture in performing the responsibilities of his position at Apple. In support of his conclusion, Judge Karas cites to Apple’s reference to Papermaster’s knowledge of microprocessor design in its internal deliberations prior to hiring Papermaster.
Judge Karas also focuses on the sequence of events that led to Apple hiring Papermaster. Apple initially elected not to offer Papermaster the position heading its iPod/iPhone division in early 2008. Apple then purchased P.A. Semi, a microchip company that competes with IBM in the microprocessor market, in April 2008. Apple subsequently re-interviewed Papermaster and offered him the position of Senior Vice President, Device Hardware Engineering on October 10, 2008. Apple’s change of heart regarding Papermaster after it purchased P.A. Semi led Judge Karas to conclude that Papermaster would inevitably disclose IBM trade secrets in setting the technical specifications for the microprocessors that P.A. Semi may produce for the iPod and iPhone.
Although it is by no means the centerpiece of his Opinion and Order, Judge Karas also addresses IBM’s claim that Papermaster would breach his Noncompetition Agreement by working for Apple. The Judge finds that the Agreement is reasonable in geographic and temporal scope. He also determines that Papermaster would violate the Agreement by working for Apple because Apple competes with IBM in the chip market, especially after purchasing P.A. Semi.
Papermaster filed a Notice of Interlocutory Appeal on November 20, 2008. In that Notice, Papermaster is appealing Judge Karas’s decision granting IBM’s Motion for Preliminary Injunction. The Court has sent the certified record to the Second Circuit Court of Appeals, although the appeal has not yet been docketed.