Back in 2010, Apple, Google, Intel, Adobe, and a few others settled with the US Department of Justice regarding their anti-poaching agreements concerning employees. While the CEOs did a good job of escaping possible prosecution, the affected employees filed a class action lawsuit about this, and judge Lucy Koh has just unsealed a number of emails concerning this case. They paint a pretty grim picture of Steve Jobs and Eric Schmidt engaging in mafia practices, threatening smaller companies with patent litigation if they didn’t agree to the no-poaching agreements, or demanding to handle matters verbally as to not leave a paper trail.
A no-poaching agreement is exactly what its name entails: it’s an agreement between two companies not to hire each other’s current and/or former employees. Courts are not particularly happy with these kinds of agreements because they limit the freedom of employees to seek employment where they desire, and it also keeps the price of labour down. If an engineer working at Apple can get a better deal working for Google, but there’s a no-poaching agreement between the two companies, the value of his labour is artificially being held down. Even if he applies for a job at Google on his own accord, his application will just be ignored.
The act of poaching employees is not illegal. If I see a competent employee working for a competitor, and I can offer him a better deal – higher function, better pay, more benefits, more freedom – I’m entirely within my right to do so. No-poaching agreements are designed to make it harder for employees to switch jobs by creating artificial barriers. This, in turn, could lead to price-fixing and reduced competition in the marketplace for both jobs and products.
As a result, the US Department of Justice investigated the no-poaching agreements in the technology industry. These weren’t official, signed agreements, but rather, “gentlemen’s agreements”. However, several large technology companies agreed on a settlement to escape prosecution. “In 2010, Google, Apple, Adobe Systems Inc, Intel, Intuit Inc and Walt Disney Co’s Pixar unit agreed to a settlement of a U.S. Justice Department probe that bars them from agreeing to refrain from poaching each other’s employees,” Reuters recalls, “The Justice Department and California state antitrust regulators then sued eBay Inc late last year over an alleged no-poaching deal with Intuit.”
However, this wasn’t the end of it. Five employees banded together as they felt that Apple, Google, Intel, and others entered into an “illegal conspiracy to eliminate competition for each other’s employees and drive down wages”. They’re seeking class-action status and requesting damages that could potentially run into the hundreds of millions of dollars. The technology companies had filed requests to keep documents about the case secret, but judge Lucy Koh has denied parts of this request, meaning we now have access to a treasure trove of communications between the accused companies.
For instance, it seems Google’s Eric Schmidt knew perfectly well that what the companies were engaging in was potentially illegal, as in an email Schmidt said that he wants this to be handled “verbally, since I don’t want to create a paper trail over which we can be sued later?” Similarly, Intel CEO Paul Otellini states in an internal email about the gentlemen’s agreements “We have nothing signed. We have a handshake ‘no recruit’ between eric and myself. I would not like this broadly known”.
However, the most infuriating email exchange comes courtesy of Steve Jobs and then-CEO of Palm, Ed Colligan. Steve Jobs had a phone conversation with Colligan, in which Apple requested that a no-poaching agreement be set up between Apple and Palm. If Palm did not agree to this, Apple would file a patent lawsuit against Palm. After – most likely – consulting with lawyers, Colligan replied to Apple’s threat in an email directly to Steve Jobs (the full email exchange is available at Scribd).
I have thought long and hard about our conversation on Wednesday, and I thought it important to let you know my position on the issues we discussed. I hope we can resolve our differences, but it has to be on terms that are right not only for our respective companies, but for the individuals potentially affected. Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal. I even thought about coming back with a proposal about limiting recruitment efforts, but frankly, I did not think it was something you would agree to do.[…]
That said, I want to be clear that we are not intimated by your threat. Palm has a very robust portfolio of patents, having been in the handheld and smartphone business since the early 90’s. In addition, Palm now owns the former Siemens mobile patent portfolio, most recently held by BenQ Corporation. This mobile computing and communications portfolio includes over 1500 patent assets, the majority filed in Europe. If you choose the litigation route, we can respond with out own claims based on these patent assets, but I don’t think litigation is the answer. We will both just end up paying a lot of lawyers a lot of money.
Steve Jobs’ reply to Colligan’s email sent chills down my spine, and fully illustrate everything that is wrong about the technology industry today. Jobs basically states that the patents don’t matter, because due to Apple’s financial reserves, Palm’s patents don’t matter, strong or no. In other words, agree to the non-poaching agreement, or we’ll sue you to death. It’s all quite “magical”.
This is not satisfactory to Apple.It is not just a matter of our employees deciding they want to join Palm. They are being actively recruited using knowledge supplied by Jon Rubinstein and Fred Anderson, with Jon personally participating in the recruiting process. We must do whatever we can to stop this. I’m sure you realise the asymmetry in the financial resources of our respective companies when you say: “We will both just end up paying a lot of lawyers a lot of money.”
Just for the record, when Siemens sold their handset business to BenQ they didn’t sell them their essential patents but rather just gave them a license. The patents they did sell to BenQ are not that great. We looked at them ourselves when they were for sale. I guess you guys felt differently and bought them. We are not concerned about them at all. My advice is to take a look at our patent portfolio before you make a final decision here.
The sheer mafia-like feel of all this is stunning. Schmidt and Otellini want to avoid papertrails because they knew full-well what they were doing would have legal ramifications. Steve Jobs threatened to sue a small company – which Palm was at the time – into oblivion if Palm didn’t agree to a likely illegal no-poaching agreement. By this point, anybody who still claims the patent system works as intended is not just delusional, but an actual idiot. This is not what patents were meant to do.
Of course, the people responsible for this – Jobs, Schmidt, Otellini, and others – have already escaped any form of scrutiny by agreeing to a (likely secret) settlement with the DoJ, but the people who were actually affected – the employees – have to fight expensive legal battles against the largest companies in the world, with the best lawyers and giant financial war chests.
As these documents show, this industry is sick. To its very core. These companies have become so powerful and so rich they essentially operate outside of the law. Even if their shady practices get investigated – as happened in this case – their lawyers make sure nobody gets in trouble, while smaller companies or individual employees are discarded like used toilet paper.
I’m pretty sure some will just call this “business” – but with that attitude nothing will ever change. This is not good for employees, not good for the market, not good for consumers, and not good for innovation, and thus, the progress of mankind. This must be stopped. I hope Koh elevates this to class action status, and that the affected employees get their hundreds of millions of dollars. It would be a drop in the ocean for these companies – further illustrating they essentially operate outside of the law, since punishments mean nothing to them – but at least it would set some sort of example.
And, in one instance, by dying. The lengths some people go to …
Huh, I guess that would make Jobs the Jim Savile of tech CEOs.
Such a world away from the cuddly hipster family friendly cool ethical with-it fashionable middle-class-friendly enterprise ….
An imagine, of course, manafactured by mostly old men in grey suits round an oak table…
“As these documents show, this industry is sick. To its very core.”
There may be some industries, but my feeling is that most industries and individual companies are places where things happen that aren’t legal or moral.
In this case it’s about a number of employees not getting the job and money they want or could have, but the food and pharmaceutical industries are a threat to our healths and governments are maybe even worse.
So this industry is sick, and so are all others. Not helpful.
I wonder if there’s a saner method of treating this sickness (across all industries and other branches of power) than by guillotine.
It’s not likely to ever get solved, but you can realize that this is how the world works and don’t waste energy being surprised, angry or disappointed when another story arrises.
Perhaps we should send only nice people to Mars and start over there.
Then again, look up how much we, the world, spend on weapons to kill each other and how much we spend on science. Should we have spend it all on science we would have a clean world with green energy and a couple of moon and Mars bases.
There is no reason to be surprised when Steve Jobs’ name is right there in the title. That guy was a grade-A dick, didn’t give a damn about right and wrong. One down, …many more to go. Problem is, more will just pop up in their places, so as you said… it will not likely end. That’s just human nature. This kind of crooked behavior might as well just be expected.
It’s funny how more and more of his dark sides appear after death. A wonder what Apple fans are thinking of their god now… they probably have to change their interpretations of the sacred words contained in their Fruity Bible.
Edited 2013-01-23 19:55 UTC
I don’t think Steve has godlike status amongst Apple fans, save for the insane ones. He was the personification of Apple and its biggest salesman. He hyped a crowd that wanted to be hyped.
But that happened maybe twice a year. The other 363 days Apple users use Apple stuff, that’s what they want and they can still do that even now Steve is gone.
Whatever dark secrets of Steve are revealed, I don’t think anyone would care that much. Considering that he could be unpleasant on a consistant basis I’m sure their are plenty of stories about him that aren’t flattering.
In the end because of him there is Apple stuff and that’s what most people really care about.
I’d heard of it. But seeing some of the evidence is enlightening, to say the least.
It’s sad, but it looks like the only company that failed among those involved was Palm, which coincidentally was the one whose CEO had a higher standard of morality and was trying to do the right thing. Come on, he was thinking about the *individuals* involved!
(And I finish writing this while I grab my Pre 2
)
And today’s lesson is:
If you’re the small guy, demand a paper trial. Cut down whole forests if you have to.
I was thinking more of not saying via email you don’t want a paper trail AND indicate you know it’s probably not legal what you are planning.
And this surprises who exactly?
If this was the worst they were doing I would be surprised.
Don’t worry guys, our local Apple Defense Brigade will be along shortly to explain why we should bend over backwards to give Jobs the benefit of the doubt over this. And if that fails, there’s always the old standby of “But… but…. but other companies have done the same thing”. Remember, you just need to find another company that’s done something as bad or worse, and that (somehow) makes it OK for Apple do the same thing.
I’m sure they just need a few more minutes to get the apologetics engine warmed up.
The words of an oracle. Just look below.
I am not excusing or condoning this behaviour but just to be accurate this statement is inaccurate:
The agreements were not that an individual employees who decided to leave one company to apply for a job in another company would be blocked or refused employment, the agreement was that the companies concerned would not actively seek out and then entice employees to switch jobs to another company through the use of offers and inducements. At least that’s my understanding of the case.
Then you misunderstand. It was both no-poaching and no-hiring. Check the linked articles and sources, and even the quotes (which mention hiring and poaching):
“Your [Jobs’] proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.”
Edited 2013-01-23 17:29 UTC
You are right but based on a cursory skim through the documents it seems that the practice of blocking individual applicants (rather than blocking poaching) was uneven, not all companies did this. Murky business.
Sorry. It’s downright evil.
I’ve actually had this agreement used against me and a few friends…
“Steve Jobs and Eric Schmidt engaging in mafia practices threatening smaller companies with patent litigation”
This is completely incorrect : only Steve jobs engaged in threatening smaller companies, such as Palm, with Patent wars.
What’s this ? Another attempt at pretending to be “fair & unbiaised” by artifically darkening one side ?
There is no evidence that Eric Schmidt did the same, and certainly this was not in the culture of Google back in the time, since they came to buy Motorola patent folio due to the fact they did not developed their own and underestimated the value of such a “thermonuclear weapon”.
You’re missing part of the sentence there.
“They paint a pretty grim picture of Steve Jobs and Eric Schmidt engaging in mafia practices, threatening smaller companies with patent litigation if they didn’t agree to the no-poaching agreements, or demanding to handle matters verbally as to not leave a paper trail.”
Don’t mix up everything in the same sentence, you know full well this is on a completely different “evil” scale.
What about “Steve and Thom are criminals, accused of murder and rape, and suspected on lying to an Attorney” ? This is just horrible to mix up so different level of criminal activities, one is beyond any scale, and the other is almost minor. Yet, the sentence is built to make them look they are both the same.
Edited 2013-01-23 17:59 UTC
Eric and Steve both went over the line regarding restricting the freedom of their employees. Steve made threats, that he didn’t execute when Palm refused. It’s a step worse, but nothing of the “scale”. It’s not like they murdered people.
The sad thing is that Palm went down, while Apple and Google continued to grow.
Nice people don’t get rewarded often, certainly not in business.
I think to be at the top of it all you need to be mean sometimes (or often perhaps), even go beyond moral and even law. It’s not fair when we hear or read about it, but sadly that’s how life is.
Big corporations can get away it more easy than smaller ones. They settle or just pay up. And really, doesn’t the government and justice department prefer that than a big economic force go bust? They give work to people, create jobs at other companies, make money go round, pay taxes. You want them to play fair, but don’t kill them if they don’t. So they can get away with breaking a law once in a while.
“Evil will always triumph because Good is dumb”
– Dark Helmet
Apparently, according to researchers, people who cheat in school and at exams are more successful in life than those who don’t.
Cheaters bend the rules or break them to achieve goals.
So in a way you and Dark Helmet are right.
MOS6510,
“Apparently, according to researchers, people who cheat in school and at exams are more successful in life than those who don’t.”
That would be a very interesting read, can you provide a link?
A quick search didn’t find anything. It may have been a podcast, but I’ll do some mors searching later or tomorrow on a bigger screen.
Sadly I can’t find it, but you have to trust me on this.
The gist of it was that people who cheat in school or are more likely to break rules to get to their goals tend to be more successful (not necessarily happier) in live.
Microsoft is a nice example (even though it’s not a person, but run by persons). They did some nasty things, got punished a few times, but in the end they are a multi billion company. If they played it fair and moral they’d probably be a computer shop in Seattle selling no-brand PCs.
Steve, Bill, Mark, they all did “unfair” things, all got their fingers burned or have been frowned upon, but they’re at the top (well, one is at the bottom, but he was right up there). Apple, Microsoft, Google, Facebook, Amazon, they all cross the line sometimes, but the rewards are higher than the fines or settlements.
Us fair people don’t think that’s fair, but being nice and fair doesn’t get you that far in this world. Now I don’t want to turn to the Dark Side, but I do think it’s good to realize that this is just how it is. We can be surprised and upset each time a story comes out, but there is a lot more and everybody is doing it. From beggars to presidents, from family homes to governments. Even the church does it!
Also kind of related it has shown that doing well in school depends more on motivation than I.Q. So if you wondered why some seemingly dumb people do have a higher degree than you, now you know.
http://www.forbes.com/sites/daviddisalvo/2012/08/18/why-jerks-get-a…
Depressing.
Jeez – Apple hatred rots the brain. I swear that if there was an earthquake in California it would be the fault of Apple somehow.
It seems this practice of blocking poaching was widespread across across the industry.
All big companies strong arm smaller and weaker companies at some point, Google have done this many times, it’s a rough tough grown up world where people fight to win.
This is not an ‘Apple is Evil’ story.
Yep, that’s right. This is Google is Evil, Apple is Evil, Intel is Evil, the company X is evil… and more importantly Schmidt is evil, Jobs was evil and Ottelini is evil.
And that Palm wasn’t evil.
There is no evidence that Eric Schmidt did the same, and certainly this was not in the culture of Google back in the time
Google apologizers are the worse, no doubt.
Any person emotionally vested in a corporation, who they have no direct link with other than as consumers, displays ill adjustment to the whole endeavor of being a human being. Regardless of the corporation…
You obviously decided to concentrate on the unimportant part of the message. This is a classic way to produce noise, in a deliberate attempt to obfuscate the main message.
One is taken “hand in the bag” bullying a smaller competitor with written threat beyond acceptable level. The other is mailing to a collaborator that he prefers not to write about non-recruitment agreement (and by saying so, he leaves a trace).
In what way is this “comparable” to the point of deliberately mixing the two to make them look like equal ?
Oh i see, since we don’t know what the second did, it must have been as terrible as one can imagine certainly ! No proof, so no limit to imagination.
..That being that human beings can and will basically do.. “whatever the hell they want” IF THEY DON’T THINK THEY’LL GET CAUGHT
which realistically means that for just about every law enacted we need proper watchdog’s with a pro-active attitude and willingness to bite (with the necessary TEETH that they need).
I have to say…..I a *little* surprised by this bit of news. But also, not at all../.
I believe Google has done less wrong than Apple here, though they have all sinned. Jobs just got caught severely red handed being a bully.
There’s no doubt in my mind that all companies employ heavy handed tactics, but nonetheless, it is not an excuse for this behavior.
Jobs using patent litigation as a club to beat Palm with is reprehensible and disgusting. It is one thing to protect your IP, it is another thing to threaten to drown someone in litigation until it is economically unfeasible to fight on.
Is there anything intrinsically wrong with poaching? To me, it encourages competitive wages and places upward pressure on wages for talent.
I believe Google has done less wrong
I wrong is a wrong, period, there is no such thing as “less wrong”, I find amazing how Google apologizers distord reality to have Google not look to bad.
I find it amazing that you think I’m a Google apologizer.
Get a grip.
I find it amazing that you think that I think you are Google apologizer.
I’ve never heard the word “amazing” so much since Steve’s last presentation.
Did he threaten to sue you with Apple’s patent infringement to say that?
No, but he did give me some Apple stickers.
I never know what to do with them, so I have a box full now. Clearing the attic recently I even found a number of retro ones (with the colors).
Those stickers are like the Black Spot…
Then I think you confusingly replied to my comment. I forgive you.
Yes, there is such a thing. That’s why there are very different penalties for, say, graffiti vandals and murderers or kidnappers.
This is pretty disgusting… Non-competes are bad enough, but at least you have to be coerced into signing one. This is like your employer enforcing a non-compete behind your back. Sick.
I expect no less than a serious public apology from Eric Schmidt for going along with this… He was originally a software engineer for God’s sake! Jobs sort of started his career as an executive so to speak – I think the man always had a distorted, selfish view of the world… He’s dead now, so that is that – not much that I can expect from him to make up for it.
Schmidt worked his way up to it and should know better… SHAME!
I hope some heads roll, and I hope some good people at Google go elsewhere. This kind of thing should not happen.
No surprise here. In the U.S., “free markets and competition” applies to everybody except the big dominant corporations. DOJ (Dept of Justice) has little interest in breaking up the “trusts” these days.
Free markets do apply to big corporations. That’s how they get so big in the first place. Growing big is a common outcome of natural selection and possibly the easiest defence to evolve against nature and competitors.
There is no, and there has never been, such thing as a “free market.”
Drawing equivalences between evolutionary processes and human economics is also not a good idea. Especially when using language like “evolve against nature…”
Like it or not, the equivalence is there.
Language like “evolve against nature” is just a convenient shorthand for processes that would take longer to describe in non-anthropomorphic terms and should not be any problem in a discussion without a creationist or eugenicist.
But that is what I am trying to let you know: the equivalence is not there. You’re simply propagating a set of misconceptions about what natural evolution is and how it works. A principal misconception being the assumption that evolution is about the “survival” of the individual organism. BTW, that is how we ended with the concepts like Social Darwinism, which are directly attributable to economists misunderstanding of evolution (the concept of “fitness” in particular), interestingly enough.
For example, given how most of life in the biosphere is (and has been) in the form of microorganisms, single celled in particular, and with the very large multicellular organisms being far rarer in number than the very small (e.g. there are very few blue whales but a shit load of amoebas). And how the smaller organisms have always being able to weather mass extinctions better than their larger brethren. I could turn part of your argument upside down and make a case about how small companies are a natural consequence of evolution, since obviously evolution seems to “favor” the small companies over the very large corporate giants.
It would be flawed of me to make that case. Just as it is flawed for anybody else to misrepresent evolution in order to comply with a narrative from an unrelated field.
Except none of that is present in any of my comments.
No, the concept that the weak should die was around longer than Darwinism. Namely feudalism, the divine right of kings, the aristocracy and the church deserving to be where they were because they were “better”.
None of Nazi Germany’s or the US’s eugenics programs were based even on a misunderstanding of Darwinism, but on Mendelian genetics and the decidedly religious fixation on purity and perfection, and possibly Lamarckism. Darwin’s works were banned in Germany, USSR and were/are not well received in the US either.
First, I didn’t say growing big is the only solution. I’m saying it is historically prevalent. You can’t deny the fact.
Second, I didn’t say growing in size is the only way to grow big.
Third, I didn’t say growing big is the best solution. I’m saying it obviously works, from an evolutionary point of view. When I say “from an evolutionary point of view”, that OBVIOUSLY implies the fact that evolution is short sighted. It works in the short term, even though as you say they don’t weather mass extinctions that well.
Fourth, I’m not saying we SHOULD organize our economies in a Darwinian way. I’m saying it is INESCAPABLE that a large free system with independent players ultimately behave in a Darwinian way and become non-free.
Fifth, you can’t say that I’m spreading a misconception that evolution works on individual survival, when your own example would spread the misconception that evolution works on group survival.
Sixth, you can talk about Evolutionarily Stable Strategies outside of the context of biology. The keyphrase there is “Stable Strategies”. Strategies are not bound by biology. Stable Strategies certainly isn’t. Strategies that are Stable by being able to weather change are thus Evolutionarily Stable and need not imply anything about organisms or memes. The only thing that matters is whether a strategy weathers most kinds of change – if it does, it’s an Evolutionarily Stable Strategy.
The main point is, to the original comment I replied to, that the free market won’t solve anything because it is subject to Darwinian progression leading to the non-free market state we see now.
No, you’re reading things into my comments that aren’t there.
This obviously goes against “Don’t Be Evil.”
It’s just a marketing thing.
And it’s been very effective. A lot of people see Google as the good guys mainly because of that slogan.
January 23, 2013, 01:15 am
From: Shona Brown
To: Eric Schmidt
Makes sense to do orally, I agree.
On 10/5/05 Eric Schmidt wrote:
I would prefer that Omid do it verbally since I don’t want to create a paper trail over which we can be sued later? Not sure about this .. thanks Eric
Reading this story is exactly why my attorney is a delegate on my calendar and answers all my emails for me!