Apple Computer and Jobs Reach Pact Barring Sale of New Machine Until '87

By Patricia Bellew Gray, Staff Reporter
The Wall Street Journal

Cupertino, Calif. -- January 20, 1986 -- Apple Computer Inc. and Steven P. Jobs reached an out-of-court settlement that bars the company's former chairman and co-founder from marketing his new computer until July 1987.

Under the settlement, Apple also has the right to inspect the machine to determine if it uses certain proprietary technology, and Mr. Jobs agreed not to use certain other undisclosed technologies.

But Mr. Jobs said the restrictions won't hamper his efforts to bring to market a sophisticated new computer for universities. "We're quite happy to comply . . . because this is what we said we were going to do all along," Mr. Jobs said. "Apple finally came to the conclusion that what we said was true. We had no intention of using their secrets."

Mr. Jobs said he doesn't expect to start marketing the new machine until late 1987.

Apple sued the 30-year-old former chairman shortly after he resigned in September. In its suit, Apple accused him of "secretly scheming" to use the company's research for a new venture and then luring away key employees to join him. Mr. Jobs, who was stripped of operating responsibilities at Apple in a reorganization last June, resigned in a bitter dispute with management over his computer venture, Palo Alto, Calif.-based Next Inc.

In the settlement, reached late Friday, Mr. Jobs agreed to submit a prototype of his new computer and its software to Apple. Mr. Jobs has said he intends to market a sophisticated "scholar's workstation" that will sell for about $10,000. Apple will have 30 days to inspect the machine to determine whether it uses any of the company's proprietary technology, said Susan Kelly Barnes, Next's chief financial officer.

Negotiating a 30-day limit on Apple's investigation of his machine is regarded by trade-secrets experts as a coup for Mr. Jobs. In disputes over trade secrets, such investigations often can drag on for months, disrupting the new company's marketing plans and leaving it vulnerable to competitors.

Mr. Jobs also agreed not to hire any more Apple employees for six months, Ms. Barnes said. In September, Apple accused Mr. Jobs of raiding the company, after five of Apple's brightest young engineers and managers resigned to join Next. Since September, Mr. Jobs has hired six more former Apple employees, mainly mid-level managers.

The settlement calls for Apple and Mr. Jobs to resolve any future disputes over technology by arbitration under Judge J. Barton Phelps, who was appointed to the special position by the Superior Court of Santa Clara. Apple said Judge Phelps has "full authority to issue all appropriate relief, including injunctive relief," in case of future disputes.

Mr. Jobs said Apple had pressed for the arbitration clause. He added: "I felt the whole (lawsuit) was ill-advised from the start. But once people get started down a road it is hard to stop without losing face. . . . Apple felt it had endured a certain amount of public criticism. In Silicon Valley, the lawsuit wasn't a culturally appropriate thing to do."

"I haven't heard any criticism (of the suit)," an Apple spokeswoman said. "I don't think that is a motivating factor. The arbitration clause gives us the protection we need."

Albert A. Eisenstat, Apple's general counsel and a vice president, said he was "pleased that Apple's objectives in the litigation were achieved and Apple's rights were protected."

Apple dropped its charges against co-defendant Richard Page, formerly a senior engineer with Apple and one of the first to join Mr. Jobs's new venture. Apple had said Mr. Page was involved in designing a new personal computer and had accused him of appropriating confidential information from Apple's research laboratories.

To celebrate the settlement, Mr. Jobs and his employees cracked open a few bottles of champagne Friday. "We were prepared to go to trial and we knew we'd win," Mr. Jobs said. "But the emotional stress of being sued is significant. It's always in the back of your mind."

Apple officials recently made some public overtures to Mr. Jobs, apparently trying to heal the acrimonious rift between the company and its former chairman. But Mr. Jobs said he didn't foresee a reconciliation. "I'm making a space for myself now. I never felt bitterness toward Apple, just toward some people there. I still care a great deal about Apple. It is like an offspring. My genes are there."