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11/7/2008
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Apple iPhone Chief Claims He Didn't Violate IBM Contract

Mark Papermaster says in court papers that the two tech vendors are not direct competitors.

Apple's newly appointed chief of iPod and iPhone engineering said his move to Cupertino does not violate a noncompete contract he signed with former employer IBM because Apple and IBM are not competitors.

"To the best of my knowledge, IBM does not design, manufacture, or market consumer electronic products," Mark Papermaster said in a court document filed Thursday. "Instead, IBM focuses on high-performance business systems such as information technology infrastructure, servers and information storage products, and operating systems software.

"Apple, on the other hand, is in the business of designing, manufacturing and marketing consumer-oriented hardware and related products," Papermaster said in documents filed in U.S. District Court in Manhattan.

"Aside from the divested IBM personal computer business and a single sale several years ago of Apple's Xserve product to a university, I do not recall a single instance of Apple being described as a competitor of IBM during my entire tenure at IBM," Papermaster stated.

The executive claims that he was not actively looking to leave IBM until he was headhunted by Steve Jobs' company and offered "a once-in-a-lifetime opportunity."

Apple earlier this week named Papermaster senior VP for devices hardware engineering -- a position that gives the 26-year technology veteran oversight of iPhone and iPod development. "Mark is a seasoned leader and is going to be an excellent addition to our senior management team," Apple CEO Jobs said in a statement Tuesday.

Papermaster replaces iPod senior VP Tony Faddell. Apple said Faddell wants to spend more time with his family and will take a reduced role in the company.

Papermaster's employment at Apple won't last long if IBM has its way. Papermaster was part of IBM's elite Integration & Values team until last month and is a top expert in IBM's Power microprocessor architecture. Big Blue claims Papermaster signed a noncompete contract that forbids him from joining a rival tech vendor within a year of ceasing employment at IBM.

IBM sued Papermaster last week. The company is asking the court to enjoin Papermaster from working at Apple. Papermaster's position at Apple violates "his contractual obligation to refrain from working for an IBM competitor for one year" after leaving the company, IBM stated in court papers.

IBM said it fears that Papermaster could help Apple develop rival server and chip products, and noted that Apple earlier this year acquired P.A. Semi with an eye to expanding its presence in those markets. IBM also claims that Apple considered replacing the IBM Power chips used in some of its computers with chips made by P.A. Semi.

In his response, Papermaster says his new job at Apple does not require him to work directly with P.A. Semi assets or technology. Papermaster also revealed that IBM has placed a block on stock options and other benefits he accrued at Big Blue.

In its court filing, IBM said it offered Papermaster "a substantial increase" in his compensation package to stay with the company.

The efforts were to no avail. Papermaster submitted his resignation on Oct. 21 and informed IBM that he intended to start employment with Apple beginning in November. IBM sued Papermaster the following day.

Note: Story updated at 3:05 p.m. Nov. 9 to expand Papermaster's comments on the competitive relationship between IBM and Apple in order to provide greater context.

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