[philp]

Appalling.

Maybe somebody with a legal education that eclipses mine can chime in here, but isn't this whole exchange just mired in liability landmines? For starters, Jobs is trying to coerce a non-compete clause out of Colligan. To the best of my knowledge, that is just flat out illegal in California. Then we have the pretty much blatant threat of unrelated patent litigation if Palm chooses not to cooperate with the aforementioned hiring policy. Shouldn't that be regarded as extortion?

Would love to hear an expert opinion on why this exchange even took place in any traceable from. I imagine an Apple lawyer would see Jobs type this up and just burn the whole place to the ground...

[will_brown]

Philip let me address the three legal issues you seemed curious about.

1. Non-compete clauses are not exactly "illegal" in California rather unenforceable. They are put into agreements typically as boiler plate "I agree for a period of 'x' I will not work for a company that competes with employer or start my own." So if you were hired in California and went to work for a competing company in California, it would be safe to say if there was a non-compete" clause in the original contract the courts would not enforce it. However, these are multi-national corporations so non-compete clauses can be enforceable in a lot of jurisdictions outside California.

2. As it relates to the idea that Apple was trying to sign an agreement with Palm not to hire each others employees, anti-compete is between the employer/employee not two competing companies, so the companies have the contractual right to enter into these agreements. *This may be a general rule, but your gut instinct is right on because there are a number of exceptions that would make agreements between competing companies illegal, for example if they had an effect of price fixing.

3. Apple's approach of "threatening lawsuit" for patent infringement is not tactful, but not extortion either. Laws on this point can be very strict, for example you cannot necessarily threaten lawsuit, but Apple is within its right to send cease and desist with formal demand when it feels its patents are being violated. Naturally, part of a demand is agreement to not pursue the lawsuit if the demand is met. It may sound like extortion, but do not forget Palm does not have to agree to the terms of the demand (Palm might not even be violating Apple patents) and Palm can always take its chances in court and even if they lost they could still hire Apple employees.

[philp]

Thank you for your detailed reply Will. Quite astonishing what kind of professional behavior is ostensibly permissible. To the layman, Steve looks like a total crook.

[will_brown]

Thanks I tried to provide an objective legal analysis. That said, I think you raise a very important point just b/c something is legally permissible does not make it moral behavior.

[JL2010]

I'm curious about this bit: Apple is within its right to send cease and desist with formal demand when it feels its patents are being violated. Naturally, part of a demand is agreement to not pursue the lawsuit if the demand is met.

Typically, for patent disputes, the demand is to stop using the particular technology in question or to enter a licensing agreement, is that correct? So would it be legally OK to tack on another demand that is clearly not related to the patent infringement? Such as, mutual agreement not to poach employees. Or do the demands not have to be relevant to the patent at all?

[will_brown]

As bizarre as it sounds the demand can be outside the scope of the patent infringement. You are right, that typically a cease and desist would be along the lines of: 1. you are violating our registered patent(s), 2. we demand you cease and desist and/or begin paying royalties and past royalties calculated to be "$x".

However, you can be very creative and tack on other demands unrelated to the patent infringement. One very important point here, regarding settlements and settlement offers, parties to a lawsuit are prohibited from disclosing settlement offers/settlement discussions to the Court (again like all things in law, this is the general rule and there are exceptions, example if someone violates a settlement agreement and you sue to enforce said agreement obviously you disclose the confidential agreement to the court).

[fizx]

Have you been paying attention?

http://mashable.com/2010/09/24/doj-anticompetitive-employee-...

[will_brown]

Fizx, this article is right on point, I would like to read the actual settlement, but without doing that here is my opinion:

>The Department of Justice has reached a settlement with Adobe, Google, Intel, Intuit, Apple and Pixar that prevents the companies from entering "no-poach" agreements for each other's employees.

So I would still say the general rule is these types of "anti-poach employee agreements" are legal but the DOJ has carved out an exception as it relates to ONLY these six companies, where they cannot enter into said agreements with each other. However, as you notice Palm was not part of the DOJ settlement, so without reading the Settlement itself I would still suggest Apple has rights to enter into such an agreement with Palm or any company not one of the six.

[muyuu]

I think think GP is claiming that non-compete clauses are illegal in California. I think he means that coercing them is.

[walshemj]

are not Cartels illegal under the The Sherman Antitrust Act of 1890 - fixing the price of labor presumably counts.

[will_brown]

Fixing price of labor would be more along the lines of Palm and Apple coming together and agreeing not to pay their employees greater than "$X". This way it would not matter what company Employee goes to work because his salary would be fixed across the industry. (There are always exceptions, for example if you practice law you have to be a member of the State Bar making Bars natural monopolies - and Bars also fix the industry prices by setting the fees lawyers can charge. Yet Bars do not violate the Sherman Act)

Courts will distinguish that type of labor cost fixing from Palm and Apple agreeing to not solicit one anthers employees, which will keep their labor cost down, but this is not the prohibited behavior contemplated by the Sherman Act.

[walshemj]

Interesting I suppose a "resonable person" would think suppressing the wage bill counted but as ever one rune for you and me one for the employer.

Though this does reduce the state tax take which I know that individual states can get quite litigious over this issue

[pekk]

Is the antitrust act used at all any more?

[will_brown]

Yes, as you might recall Google was just under investigation by the DOJ and FTC for the last 2 years for potential anti-trust violations(Google recently settled this matter). Generally Google was accused of using its search power to gain an edge of market rivals.

An example of the type of alleged behavior, say you were in the coupon business and you bought ads on Google it would have cost "x", but Google used its knowledge of search and saw coupons was big business so Google created Google Offers and began buying its own ads effectively driving up the cost of your ads to "1000x".

So maybe your right, can anyone say Anti-Trust Act is used at all if some companies can set aside $500 million to make anti-trust investigations disappear? (Google is publicly traded so the $500 million set aside to settle this investigation is public record with FTC).

[ajsharp]

I'm no lawyer, but I'm pretty sure what Jobs was suggesting was some form of collusion. I don't know that his threats could be held up as extortion, but collusion is a prosecutable offense. My question is, what might be the statute of limitations on something like this? Does it disappear with the passing of Jobs, or could Apple still be held responsible for this?

[dworin]

That's exactly what he's accused of doing, although it's an anti-trust case, not collusion. This e-mail came out as evidence in a lawsuit where former employees allege that major tech companies agreed not to cold call each others employees, to the detriment of those employees. A Department of Justice investigation into the practice was settled a few years ago with the companies agreeing to discontinue the practice.

Since it's the company that's liable, not Jobs personally, it doesn't matter that he isn't the CEO anymore.

[josephlord]

I'm sure Apple could be held responsible. What I don't know is if attempting to collude to distort the market is illegal or just actually making such an agreement. As the answer was no are Apple technically in the clear?

[djt]

He was CEO at the time so the company would be liable.

[smackfu]

>Would love to hear an expert opinion on why this exchange even took place in any traceable from.

Notice that the initial contact came from Steve via phone, and the Palm email is intentionally saying "no" in a traceable form since they are not doing anything wrong. A "yes" would probably have been by phone. Steve also doesn't say anything incriminating in his email response, just vague threats.

[riazrizvi]

"Then the Palm CEO sent a traceable 'no', in the hope that the Apple CEO would be intimidated into silence. Instead Mr Jobs consults with his lawyers on wording and replies 'I am well aware I threatened you, and here is my threat in black and white'." from the book 'When Elephants Play Chicken' by J.R. Hartley.

[daltonlp]

That sounds like a book I would read. Oddly enough, I can't find it on amazon or goodreads. Or google. Is this a real book that actually exists?

[autodafe]

Seems to be a fictional character [1] from a UK advert [2] though unfortunately I don't understand the reference in this context.

[1] http://en.wikipedia.org/wiki/J._R._Hartley

[2] http://www.youtube.com/watch?v=1ILi7UIkqdQ

[ghshephard]

"Jobs is trying to coerce a non-compete clause out of Colligan. To the best of my knowledge, that is just flat out illegal in California."

Non-compete clauses aren't enforceable, but I don't think agreeing to them, or requesting that you agree to them, is in violation of any State law. It certainly was the case that every severance agreement that I've ever signed had a non-compete clause - which I happily signed as I was aware it was completely unenforceable.

[OafTobark]

There are very rare instances where non-competes are enforceable but generally are more for founders than employees for anyone reading this.

[rmrfrmrf]

There's nothing appalling about this. Apple has every right to defend its patents, just as Palm has every right to attempt to poach Apple's employees. Jobs offered an agreement and Colligan declined, so Steve threatened to take alternative measures to discourage Palm from poaching its employees.

[bishnu]

Wow, so "threatened legal action to coerce illegal activity" is "offering an agreement" now? This email is appalling.

[parasubvert]

What Jobs offered wasn't necessarily illegal. This email is normal business practice, anywhere.

[bjt]

If Palm had agreed "we won't hire anyone coming from Apple", that would be illegal under antitrust law. If they had agreed not to actively recruit Apple employees, that might be OK but would still look sketchy.

[parasubvert]

Agreed on the former. I don't think the latter would be sketchy considering anti-soliciation is quite often enforceable throughout the USA. Just not in California, so you resort to other means (that, yes, might run afoul of antitrust, but that's what you do when you're competing...)