Another lesson from the Silicon Valley wage theft suit, which I first reported here, is what can happen to even powerful tech CEOs who make the fatal mistake of standing up to monopoly power. It’s a lesson former Palm Inc CEO Edward Colligan learned the hard way.
Court documents obtained by PandoDaily (and embedded below) reveal Colligan as one of the few tech executives who did the right thing and refused to let Steve Jobs bully him into joining the Big Tech wage theft cartel.
In the summer of 2007, when Apple launched the iPhone, Palm Inc—which had been the leader in the domestic smartphone market—hired former Apple executive Jon Rubinstein out of retirement to assemble together what Verge called “arguably the greatest pool of talent in the Valley.”
In August 2007, Steve Jobs called Colligan to complain after Palm poached several engineers from Apple that month. Colligan reminded Jobs that what Palm was doing was hardly unique—Apple had previously poached at least two percent of Palm’s workforce to develop the iPhone.
According to court documents, Jobs proposed “an arrangement between Palm and Apple by which neither company would hire the other’s employees, including high tech employees.”
Jobs’ offer to fix their workers’ wages came with a direct threat to Palm’s business if Colligan didn’t agree:
“Mr. Jobs also suggested that if Palm did not agree to such an arrangement, Palm could face lawsuits alleging infringement of Apple’s many patents.”
Jobs made an offer Colligan couldn’t refuse. But the Palm CEO refused anyway. Colligan told Jobs:
“[y]our 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 can’t deny people who elect to pursue their livelihood at Palm the right to do so simply because they now work for Apple, and I wouldn’t want you to do that to current Palm employees.”
As for Jobs’ threats to retaliate against Palm by filing costly lawsuits that could damage the company’s price of stock and debt, Colligan wrote,
“I want to be clear that we are not intimidated by your threat….If you choose the litigation route, we can respond with our claims based on [Palm’s] patent assets, but I don’t think litigation is the answer.”
Jobs’ response was a brute power play: Apple is more powerful than Palm, therefore Apple dictates the rules. Join the wage-theft cartel, or be destroyed:
“This is not satisfactory to Apple….We must do whatever we can to stop this. I’m sure you realize 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.’… My advice is to take a look at our patent portfolio before you make a final decision [on the wage-suppression agreement] here.”
Jobs’ threat to destroy Palm by filing patent infringement suits is an old corporate monopoly weapon dating back to an earlier, robber baron era in capitalism. As described in Tim Wu’s “The Master Switch,” in the early 20th century, a Film Trust monopoly led by Eastman Kodak, Edison and others strong-armed independent movie theater owners into accepting their terms for dominating the nascent film industry, or else—the threatened patent infringement lawsuit:
“Shortly after its formation, the Trust held a series of meetings to introduce its new rules to the rest of the American film industry, most importantly to the ‘exchanges,’ as the key distributors were then called, and the major theater owners.
“…Only Trust members would be permitted to make films or import them into the United States, the penalty of doing so unsanctioned being a patent infringement lawsuit.”
Incredibly, the Film Trust monopoly threats failed, and new powerful Hollywood companies like Paramount arose in their place. But in 21st century Silicon Valley, the outcome wasn’t a victory for free-market competition. In 2009, Colligan stepped down as CEO of Palm, and left the company. The following year, Palm Inc was bought by HP—now headed by Meg Whitman, another active participant in the Silicon Valley wage-theft cartel when she led eBay.
Today, Palm no longer exists. Meg Whitman is CEO of one of the largest tech firms in the world. And Steve Jobs is an American Hero.