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Apple, Palm and the 'No-Poaching' Non-Agreement

By Richard Adhikari MacNewsWorld ECT News Network
Aug 21, 2009 4:00 AM PT

When Apple CEO Steve Jobs suggested to Palm that the two companies refrain from hiring away each other's top employees, as reported by Bloomberg, was he committing an illegal act?

Apple, Palm and the 'No-Poaching' Non-Agreement

Or will he skate by because Palm CEO Ed Colligan rejected the proposal, so nothing really happened?

Let's Not Reach Out and Touch Someone

The incident occurred two years ago, shortly after Palm had hired former Apple executive Jon Rubinstein, according to a report published by Bloomberg.

Rubinstein, a computer scientist and electrical engineer, was deeply involved in the creation of the first iPod in 2001; he is now CEO and executive chairman of the board of Palm.

Concerned that Rubinstein was recruiting Apple employees, Jobs suggested to Palm's then-CEO, Colligan, that the two companies do whatever they could to stop the poaching. Colligan rejected the suggestion, calling it wrong and possibly illegal, according to communications obtained by Bloomberg.

In addition, Jobs pointed out that Apple had patents and more money than Palm if the two companies ended up in court, Bloomberg reported.

However, this alleged poaching wasn't all one-sided -- in his communications with Jobs, Colligan said Apple had hired at least 2 percent of Palm's workforce while working on the iPhone, according to the report. Apple sold its first iPhone in June 2007.

Neither Palm nor Apple had responded to requests for comment by press time.

What Is the Law?

It's uncertain whether authorities would go after Jobs or Apple for suggesting what appears to be collusion.

The suggestion could be construed as allocation of markets under Section One of the Sherman Antitrust Act, Bert Foer, president of the American Antitrust Institute, told MacNewsWorld. That's one of the illegal actions, together with group boycotts and price rigging, mentioned in the act.

However, Colligan apparently rejected the idea immediately -- thus no actual collusion. "This is only an attempt, and it didn't succeed," Foer said. "Section One of the Sherman Act doesn't cover attempts."

Jobs' worries about employee poaching was well-founded, Scott Christie, a partner in law firm McCarter & English, told MacNewsWorld. "Given that they're fierce competitors in many areas, it's not surprising that there's a concern about poaching of employees," he said.

However, such an agreement, if it had gone forward, would have raised a more troubling problem, Christie said. "The bigger issue is, would it have unnecessarily and unfairly restricted the marketability of the employees?"

Men of Zeal

Apple and Palm have been at loggerheads for the past few years. In January, when Palm first unveiled the Pre, Apple COO Tim Cook told analysts Cupertino would go after companies that copied the iPhone's features. It wasn't an explicit threat, but it was widely interpreted as a shot across Palm's bow in regard the Pre's multitouch capabilities.

In addition, the Pre was built to be able to sync with iTunes, a move Apple later blocked by bringing out a new version of the iTunes software. Palm promptly created a workaround to this.

Palm also opened up its Mojo Software Development Kit to all app developers, taking it out of its limited release, last month. It is trying to lure app developers to work on apps for the Pre, offering them 70 percent of earnings off their apps in its app store. That store, the Palm App Catalog, is scheduled to go into beta mid-September.

Other Deals?

Apple and Google had an unwritten agreement not to poach each other's staff while Google CEO Eric Schmidt was on Apple's board of directors, according to a TechCrunch report from earlier this month. The difference between that and the proposed deal with Palm is that each company's staff could approach the other company for a job on their own.

Google also refrained from adding a multi-touch feature to Android at Apple's request, according to the report. In addition, Google reportedly dropped plans for a Latitude native iPhone app and worked on a Web app instead because Apple asked.

It would be hard to pin anything on either company, however, because antitrust laws are not cut and dried, the Antitrust Institute's Foer said. "If it's not clearly per se illegal, then it's going to be hard to prove," he said.

Google did not respond to a request for comment by press time.

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