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 !!!
1/24/2013 5:37:50 AM
Haha, let's not get carried away. Apple has $130B+ in cash, so the rest of the company plus future profits would have to be worth only $70B for it to drop down that low. (1B shares x $200/share = $200B market cap).
APPL won't go below $300 for a decade unless they really screw up. Even $400 is extremely improbable.
RE: BOOOOOOOOM !!!
1/24/2013 10:43:41 AM
Also, they just came off their second most profitable quarter ever. Stock prices are a weird thing.
Not a big fan of Apple Corp., but honestly it might not be a bad time to buy some AAPL to sell in the short term once it starts going back up again (and it will, at least a little bit).
RE: BOOOOOOOOM !!!
1/24/2013 11:32:05 AM
And they you get hit with the new and improved Capital Gains Tax rate.
Better make sure you hold onto that stock for at least 1 year.
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