Apple's Steve Jobs Used Patent Lawsuit Threat to Bully Palm Into No-Hire Policy
January 23, 2013 4:12 PM
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Employee lawsuit brings startling document to light
You have to admire Apple, Inc.'s (
) chutzpah. Many would argue that the company's well-known iPhone "grid of icons" look is deeply derivative of Palms handheld PDAs -- the protosmartphones of the 1990s. But despite Palm's role in trailblazing the technology that would one day send Apple stock soaring to new heights, Apple co-founder and CEO Steve Jobs allegedly had the audacity to threaten to
sue Palm for patent infringement
unless Palm agreed to a questionable no-hire policy.
I. Palm Rejected Jobs' Threats
Back in 2007, Palm CEO Edward Colligan was actively courting Apple engineers, looking to draw them away. Palm would go on to
launch the "Pre" smartphone
in June 2009, which many view as the first serious competitor to the Apple iPhone. While the Pre's successors
driving Palm to
a fire-sale to Hewlett-Packard
), the initial Pre was an important device in setting a roadmap that would later be embraced by Android OEMs who would eventually greatly surpass Apple in unit sales.
The secret threat by Mr. Jobs to Mr. Colligan was rumored of, but never officially confirmed until now. Palm would later
address publicly employee "poaching" concerns
, but until now the earlier exchange was never tipped.
A group of five tech workers have filed suit against Apple, Google Inc. (
), Intel Corp. (
), and others over a string of closed-door no-hire agreements that limited job mobility for talented engineers.
Apple CEO Steve Jobs was allegedly outraged that Palm stepped up to his threats, but realized a lawsuit campaign would be too dangerous. [Image Source: Telegraph UK]
The case is being contested in the
U.S. District Court for the Northern District of California
Judge Lucy Koh
. Judge Koh is perhaps best known for presiding over the famous and controversial
$1.05B USD infringement verdict
against Samsung Electronics Comp., Ltd. (
), which was sued by Apple.
a sworn statement
obtained by the plaintiffs, Mr. Colligan recalls, "Mr. Jobs also suggested that if Palm did not agree to such an arrangement, Palm could face lawsuits alleging infringement of Apple's many patents."
He says that he responded that such an agreement was "likely illegal" and that Palm would not be "intimidated" by Apple or Mr. Jobs. He recalls warning Mr. Jobs, "If you choose the litigation route, we can respond with our own claims based on patent assets, but I don't think litigation is the answer."
When it came to Palm, Mr. Jobs seemed to recognize that he was a chihuahua biting a bulldog: Apple never did file litigation against the rival gadget maker. But allegedly, Mr. Jobs' threat was more effective against greener partners, or companies that were more dependent on Apple and its iTunes distribution network.
II. Evidence of Secret Deals Mounts
U.S. Department of Justice
found evidence that Google, Apple, Adobe Systems Inc. (
), Intel, Intuit Inc. (
), and The Walt Disney Comp.'s (
) Pixar unit had agreements (mostly brokered by Apple) not to poach each others employees. While formal charges were never brought, the respective companies were forced into a settlement in which they promised not to enforce such a no-hire pact.
Intuit would eventually get eventually dragged into a DOJ antitrust suit in 2012 after it allegedly broke its word and signed a no-hire agreement with eBay, Inc. (
). Californian state antitrust regulators have also filed suit over the alleged agreement.
The dispute over no-hire agreements is currently proceeding down two tracks. On the one route you have government antitrust efforts. EBay, currently a defendant in the Intuit case, is very unhappy with those efforts. Its spokesperson griped to
, "[U.S. antitrust law] does not exist to micromanage the interaction between the officers and directors of a public company."
A second route is civil litigation from workers in the tech sphere, who may have suffered from the possibly illegal agreements. Judge Koh has yet to decide whether to allow the current lawsuit against Apple,
. to proceed to trial.
But already the case is dredging up lots of interesting details, and not only on the
late Steve Jobs'
infamous bully streak
. Google is also implicated. A former Google Human Resources director recalls
[former Google CEO] Eric Schmidt
urging him to effectively cover up a no-cold call agreement (a form of no-hire agreeement). He says he asked Mr. Schmidt whether he could share the agreement with competitors and he recalls, "Schmidt responded that he preferred it be shared 'verbally, since I don't want to create a paper trail over which we can be sued later?"
Erich Schmidt (right) reportedly sought to cover up his no-hire agreement with Apple BFF Steve Jobs (left) so Google didn't get "sued later". [Image Source: BusinessInsider]
Google spokeswoman Niki Fenwick in a comment did not directly address that remark, only saying that Google had "always actively and aggressively recruited top talent."
The plaintiffs' lawyers will get to grill Mr. Schmidt next month, which should make for some entertaining courtroom drama.
It's always tough to say whether individuals will be able to push a case against large corporate interests through the federal court system, given the tremendous monetary obstacles to such a quest. However, based on the currently released information it appears the plaintiffs have a healthy body of relatively compelling evidence, details that give a fascinating look at a seedy tech industry practice which may have played an important role in shaping the electronics and internet software landscape over the past half decade.
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RE: BOOOOOOOOM !!!
1/23/2013 6:33:13 PM
We'll see if that happens. I'm not sure they'll "stoop down" to selling lower end devices; they pretty much own the high end and chasing marketshare at the bottom has never really been their game. The 4S by itself outsold the popular GS2, GS3, and GN2 combined, and the 5 has been selling even faster. The low end of the market doesn't seem like its worth their time no matter how big it is.
Apple's problems come from new devices that are initially more expensive to produce.
It also really shows how much profit they were able to squeeze out of the 4S. By then they'd figured out how to make tons of them for cheap (similar chassis with new guts) and last year's stock price was a reflection on that.
Either way, they sold more stuff and made the same amount of money while doing it. That's a negative indicator in the short term, same thing happened in 2010.
RE: BOOOOOOOOM !!!
1/23/2013 9:23:26 PM
Don't forget the competition. In previous years the competition was behind and now they are ahead of Apple. I know you may not agree with that specific point, but you at least have to look at today's 5 inch 1080 p androids running jelly bean and see that the competition is a helluva lot stronger than it used to be... At the very least you have to agree to that.
RE: BOOOOOOOOM !!!
1/24/2013 1:30:13 AM
They've been doing a good job catching up, HTC devices like the Droid DNA are very nice. Apps and support are another matter, but at least catching up in hardware performance seems inevitable (it has to, right?).
From a marketshare standpoint I'm not sure this is relevant to Apple's high-end segment. Most of where Android is carving itself out globally is in the low end. The iPhone makes up over half of smartphones in the US and it is all in the high end. The high end on the Android side has mostly been Samsung (at the expense of Motorola and HTC), and those devices are far outsold by the iPhone.
Neither is going anywhere, and that's good, there's certainly room for both ecosystems to compete and they should. This has all really been at the expense of RIMM, Symbian, and WP.
RE: BOOOOOOOOM !!!
1/25/2013 4:48:52 PM
That depends on where your market is. In the US, Apple has the high-end market because people are willing to spend what it costs to get an Apple product. But outside of the US, Apple's market share isn't doing as well. For Apple to have any significant growth outside of the US, they will have to cater to cheaper devices because that is what the market wants outside of the US.
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