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IBM Files Suit to Keep Chip Exec From Apple

IBM could have jokingly called it an iSuit, but Big Blue doesn't seem in the mood for laughs when it comes to protecting its trade secrets, especially with chips and blade systems.

That's one reason the computer giant has filed a lawsuit against a former executive, Mark Papermaster, to prevent him from joining Apple (NASDAQ: AAPL) and honor a non-compete clause in his employment contract.

Until recently, Papermaster was IBM's vice president of microprocessor development and had been at the company for 26 years. The lawsuit claims that Papermaster signed a non-compete agreement in 2006 that stipulates that he won't go work for the competition for a year should he leave the company.

According to the complaint, Papermaster informed IBM that he'd accepted a senior executive position at Apple that involves working closely with CEO Steve Jobs, providing technical and strategic advice.

On October 20, IBM made a last ditch effort to keep Papermaster from joining Apple, offering him one year's salary if he would "respect his contractual obligation to refrain from working for an IBM competitor for one year" whether or not he continued working for IBM.

Papermaster responded he needed time to consider the offer, but a day later, October 21, submitted his resignation without agreeing to IBM's terms.

IBM filed suit on October 22 in U.S. District Court for the Southern District of New York. Papermaster is expected to join Apple officially next month, but not if IBM can prevent it.

"Mr. Papermaster's employment by Apple is a violation of his agreement with IBM against working for a competitor should he leave IBM. We will vigorously pursue this case in court," Fred McNeese, director of corporate media relations at IBM (NYSE: IBM), said in a statement to InternetNews.com.

IBM's lawsuit said Papermaster is the company's "top expert in Power architecture and technology, and he is privy to a whole host of trade secrets and confidences belonging to IBM … to design, develop and manufacture its products."

As long as he is employed by Apple he "will inevitably use and/or disclose IBM trade secrets for his own benefit and the benefit of Apple."

Papermaster's expertise may help connect some dots regarding Apple's surprise purchase of chip design firm PA Semiconductor earlier this year for $278 million.

PA Semi was developing processors based on IBM's Power line of processors. Ironically, Apple once used Power processors before switching to Intel a few years ago.

Given Papermaster's deep understanding of the Power architecture, it's possible Apple has development plans on the mobile and server side based on that technology. But the suit also notes Papermaster has most recently been involved in IBM's blade server line which uses both Power and competing chip architecture. At least one analyst doubts Apple will be going back to Power, but does have a need for Papermaster's know-how.

"I think the whole idea behind buying PA Semi was to get Dobberpuhl and his crew to build an ARM processor for mobile and get an advantage they wouldn't have going to the normal semiconductor suppliers," Nathan Brookwood, founder of chip consultancy at Insight64, told InternetNews.com. Dan Dobberpuhl, the founder of National Semi, is a veteran chip designer behind the highly regarded Alpha and StrongARM processors in the 1990s.

"If PA Semi isn't working on something low power for Apple, I'd be very surprised," said Brookwood. He also speculates Apple CEO Steve Jobs may be bringing Papermaster in to help him manage and direct PA Semi's work for Apple.

Apple already uses an ARM processor in the iPhone.

An Apple spokesman said the company had no comment on IBM's legal actions which is directed at Papermaster and not, for now, Apple.

Analyst Roger Kay thinks Apple is hoping to continue to build on its engineering design advantage by bringing in Papermaster. "Apple has essentially the same OS running on the iPhone that runs on its computers; no one else is doing that," Kay, president of Endpoint Technologies Associates, told InternetNews.com.

"Steve Jobs knows the hardware view of the world, that if you can attain the right price/performance level you can blow the competition away," Kay continued. "Jobs is good at making the 'we can change the world' pitch and this hiring sounds like a real coup for them if it goes through."