Apple, A123 To Settle Lawsuit Over Poached Battery Engineers

itwbennett writes: Slashdot readers will remember that back in February, electric car battery maker A123 Systems sued Apple for allegedly "raiding" the Waltham, Massachusetts, company and hiring five employees, including two top-level engineers. The loss of these workers essentially forced A123 to shut down some of its main projects, the suit alleged. Now, according to court documents filed Monday, A123 and Apple "have reached an agreement, signed a term sheet, and are in the process of drafting a final settlement agreement."

Comments

Both ways?

[JBMcB]

Last year: Hey Apple, you can't collude with other companies to prevent poaching from each other!
This year: Hey Apple, you can't poach other company's employees!

Well which is it? Either you can hire other company's employees or you can't.

Re:Both ways?

[rahvin112]

Considering they are two completely different things you shouldn't be struggling with it.

The first, apple colluding with others, was a violation of the law. Market collusion between competitors is illegal, in this case in particular it cost hundereds of people thousands of dollars apiece.

The second, was a civil suit between companies likely for unfair competition. Apple's settlement of suit, rather than just going to court and winning indicates that Apple might have engaged in some improper behavior in acquiring those employees.

The only the first was illegal, the second very well could have opened Apple up to a civil lawsuit or they could have just settled to avoid the legal fees. Here's a tip for you, anyone can sue anyone (including themselves) for any reason. It's not till you get to court that you have to actually justify that suit and present evidence.

Re:Both ways?

[Anonymous Coward]

I feel like there is a grey line between paying engineers exorbitant salaries to shut down a competitor by attrition and offering to pay engineers a marginal increase within a standard deviation or two of the mean. I don't claim to know anything about the case specifics (IANAL, either), but I think that it could be argued that once you get passed a standard deviation or so, your actions become what amounts to anti-competitive tactics. Especially when your targets are effectively strategic assets to the company.

Re:Both ways?

[ozzee]

Being a big company, Apple has many to be careful not to use its size to kill companies. Simply put, if Apple wants A123's tech and it can simply provide key A123 employees an offer they can't refuse, it gives them an unfair advantage and they can do this to any company. A company the size of Apple is able to do this many times over and it simply becomes an unstoppable monopoly which goes against the the whole spirit of capitalism when one company can control everything.

Re:Both ways?

[afidel]

Uh, how is this any different than when Apple ties up all the Gorilla glass capacity, or 1.8" hard drives (original ipod), or Samsung fab capacity for X months, or any other scarce resource that doesn't allow competitors to compete directly with them through contracts and offering a higher price? Oh, it involves non-executives earning a higher wage so therefore it's somehow bad. Pure BS.

Re:Both ways?

[RenderSeven]

Well, the suit claimed that Apple hired Mujeeb Ijaz (in charge of R&D), who in turn enticed his key scientists and engineers to follow him. A123 claims that:
- Ijaz has a non-compete clause in his contract,
- The other employees have a non-compete also
- Ijaz has a non-solicitation clause in his contract
- Apple knew about the clauses and enticed them to break them
- All the employees shared A123 proprietary knowledge and trade secrets with Apple
- Apple orchestrated all this to obtain trade secrets illicitly
- Ijaz attempted to solicit A123 partners on Apple's behalf

Yeah yeah, 'A123 claims' doesnt make it true. And, non-compete clauses may or may not be enforceable, though this type of situation may be one of the rare cases where it is. Still, if Ijaz had a contract to not solicit his former employees, thats enforceable, as is violating confidentiality, as is enticing people to break the law, as is conspiring to do so. I'd say it was far from a slam-dunk dismissal and there was enough risk that they settled. While A123 may have not had the resources to fight a protracted legal battle, their Chinese buyer apparently did.

Re:Both ways?

[RenderSeven]

Non-competes are basically unenforceable in California

Thats my understanding as well, which is why A123 sued in Massachusetts, and Apple tried (unsuccessfully) to move the case to California. According to Wikipedia the current applicable MA law states “A covenant not to compete is enforceable only if it is necessary to protect a legitimate business interest, reasonably limited in time and space, and consonant with the public interest”. The most recent test case I could find is IBM v. Papermaster (2009) involving (perhaps not coincidentally) Apple poaching. The court backed IBM and granted an injunction against Papermaster, citing and expanding "inevitable disclosure". Papermaster & Apple settled before trial, just like they did with A123.

Google, Microsoft, Apple and so on have all settled these cases in the last 10 years or so, so nothing has gone to trial so no case law has been established, but IBM v. Papermaster lays the groundwork for more enforcement of non-competes in some cases. IANAL but it seems the anecdotal assumption that "non-competes are basically unenforceable in xxx" may not be as absolute as we engineers assume it is.

Apple...

[bobbied]

Dirty rotten poachers.... Who would have guessed?

Actually, this was about Apple helping these guys break non-compete agreements. As long as they moved to Cali, I don't see how this is a legal issue for Apple. Non-competes for employees are not enforceable in Apple's home state, so just move the employees there until the terms of the non-compete agreements laps. I guess if you cannot go after the ex-employee, go after their employer if they are a competitor...

From what I know about this, Apple was in the clear and despite my general negative feelings about the company, I don't think they did anything wrong. Why are they settling?

Re:Apple...

[PopeRatzo]

In the U.S.A. it is a lot cheaper to settle than go to court.

Not if you have an in-house legal department.

The settlement could well be because Apple fears what might come out in the discovery phase.

Re:Apple...

[slew]

If I had to speculate (and /. is the place to do so), I would guess that it was likely that at least one of the Engineers...

* Recruited another employee in violation of a no-solicitation agreement.
* Had a "choice-of-law" provision attached to their employment agreement (and were originally employed outside of California)
* Had some ownership stake in the A123 which had some restrictions which Apple volunteered to buy-out. (which would be stupid for apple to do, but you never know).

As I understand it, Apple was in process of petitioning for a change of venue (to California). Although California law is clear that no-compete employment agreements cannot be enforced, it less clear when no-competes agreements are entangled with ownership changes or in the case of no-solicitation so as to avoid any distraction to their new employees, they probably just decided to settle (for the right price)...

Re:Here's the thing

[Anonymous Coward]

everyone has a price, and if you have the dollars, you can use the dollars from your monopoly to poach anyone. This isn't an anti-collusion suit; this is a civil suit about monopoly abuses.

So employees are property?

[trout007]

You don't own your employees and there is no such thing as poaching them. Offering a better deal is a perfectly legitimate business move.

Re:So employees are property?

[Harlequin80]

No but you can have agreements to not approach employees of another company to come work for you. This is different to "We will not employ your staff" which is what Apple got in trouble for previously.

You see "do not poach" clauses as a regular component of contracts where two companies are working very closely on a project together. The no-poach agreement usually runs for the duration of the project plus a period of time (usually 6 or 12 months)

Re:So employees are property?

[Harlequin80]

No sorry you misunderstand.

You want to come work for me you are absolutely more than welcome. In fact I would LOVE you to come work for me. I have no restrictions on hiring you at all. As long as you make the first move.

What I have is an agreement with your current employer that I wont walk up to you and say "So TomPaulco, what is it going to take for you to leave your current work and come over to me?"

As I said there is nothing stopping you coming and working for me, nothing stopping you from your rights to pursue happiness. The restriction is on my ability to tempt you to come work for me.

non-compete agreements

[Harlequin80]

For this to work A123 would have to successfully argue that Apple had a binding non-compete, common for companies that work together, and that poaching those staff was specifically to compete with A123.

I'm not a lawyer but I work in recruitment & employment, it is no uncommon for one company to poach a large part of a team from another. Generally you start with the leader and then work your way through the best people in the team.

smart

[Anonymous Coward]

A123: We will sue you
Apple: What we are doing is legal bring it on
A123: In the lawsuit we will publicly release the projects they are working on

Profit

Re:It still amazes me that we treat labor as pawns

[Registered Coward v2]

It's obvious that the A123 employees left of their own accord. A123 doesn't hold any exclusive rights to those folks unless their under contract. If these folks were "at will" employees then by all means if a new deal comes along they should go. All of this begs the point that Apple shouldn't be paying a dime to A123 in this case. Employees are not slaves and it's time to get out of the mindset that they are pawns that can be traded or kept at the whim of some task master.

Exactly. It's called employment at will. Revenue down? Layoff staff? Can't pay your bills? Sorry, not my problem. Better job offer? Leave company. Can't complete important projects? Sorry, not my problem. Absent an enforceable non-compete it works both ways.

Re:It still amazes me that we treat labor as pawns

[Virtucon]

non-solicits/non-competes should be illegal, period. If a company wants to raid, let them. This is part of the problem when you talk about tech talent that nobody likes to acknowledge. Because of soft handcuffs, you're not truly mobile depending on who your work for or who you'd like to transition to. I've had it happen twice in my career and it's bullshit. These employees didn't agree to indentured servitude and I doubt that A123 had them under contract.

Re:Here's the thing

[citizenr]

AFAIR they got $250K no questions asked transfer bonuses and +20% pay bump, who would refuse that?