Jon Rubinstein. Photo: Palm, Inc.

"We must do whatever we can to stop this."

That's how Apple (AAPL) CEO Steve Jobs is reported to have asked then Palm (PALM) CEO Ed Colligan to enter into a possibly illegal agreement to stop trying to hire away each others' top engineering talent.

If accurate, it may be one of the most stilted attempts to collude ever recorded.

Colligan's answer, according to Bloomberg's Connie Guglielmo, who says she has reviewed the two-year-old communications:

"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."

Is this really how conspirators talk?

Apparently so in Silicon Valley, where hiring practices long overlooked have come under increased scrutiny by the Obama administration.

In June the New York Times reported that the U.S. Department of Justice had begun an antitrust investigation into whether Apple and Google (GOOG) had a written agreement not to go fishing in each others' talent pool — a deal that could be considered a collusive restraint on trade.

Google's anti-poaching smoking gun

Such an agreement between Apple and Palm could be even more problematic, since at the time the two were gearing up to compete head on in the smartphone market. In his Aug. 2007 communication, Colligan claimed that Apple had hired away 2% of Palm's workforce to help develop the iPhone.

Palm, meanwhile, had hired Jon Rubinstein, the former Apple engineering VP who headed the team that built the original iPod. Rubinstein, in turn, had begun recruiting Apple engineers and marketing experts to work on the Palm Pre.

That's what Jobs was allegedly trying to stop.

Apple vs. Palm: Geeks with grudges

According to Bloomberg, the exact details of what Jobs proposed to Colligan aren’t known; Jobs didn’t mention a proposal in the communications reviewed by Guglielmo. He did say that Apple had a lot of patents and more money than Palm if the companies ended up in a legal battle.

According to Bloomberg, the Justice Department may investigate the exchange between the companies even though Palm rejected Apple’s proposal.  “If I were at DOJ, I would definitely be interested,” Daniel Rubinfeld, a former deputy assistant attorney general for antitrust, told Guglielmo.

Apple has declined to comment. And Jobs, according to Guglielmo, has not returned her e-mail.

Ever since January when Palm (PALM) unveiled the Pre — the first smartphone to challenge Apple's (AAPL) iPhone with a multitouch screen of its own — the tech press has been waiting for Cupertino to respond. COO Tim Cook made a couple of clenched-teeth threats about companies that rip off Apple's intellectual property, but nothing came of it.

Until now.

On Tuesday, 10 days after the Pre went on sale, Apple published a one-paragraph support article on its website that addressed one of the device's most ballyhood selling points: its ability to sync seamlessly with iTunes. The note doesn't mention Palm or the Pre by name, but it doesn't have to:

Apple designs the hardware and software to provide seamless integration of the iPhone and iPod with iTunes, the iTunes Store, and tens of thousands of apps on the App Store. Apple is aware that some third-parties claim that their digital media players are able to sync with Apple software. However, Apple does not provide support for, or test for compatibility with, non-Apple digital media players and, because software changes over time, newer versions of Apple's iTunes software may no longer provide syncing functionality with non-Apple digital media players. (link)

As John Gruber, the first to spot the snippy missive, put it in his Daring Fireball blog, "Translation: 'Nice iTunes syncing you’ve got, Palm. Be a shame if something happened to it.'"

Other devices can be made to sync with iTunes, of course. Apple used to maintain a list of compatible MP3 players that included the likes of Creative Labs' Nomad and SonicBlue's Rio. And there are plenty of BlackBerry owners who regularly download songs from their iTunes libraries.

But the Pre is different. It presents iTunes with a hardware ID that identifies itself as an iPod — a hack the former Apple engineers on team Pre are well equipped to pull off. Led by Jon Rubinstein, who built the original iPod, they are perfectly capable of engaging in the kind of cat-and-mouse games Apple regularly plays with iPhone jailbreakers.

Indeed, Palm's response to Apple support article HT3642 suggests that it has plenty more tricks up its sleeve.

“Palm’s media sync works with the current version of iTunes,” Palm spokesperson Lynn Fox told Digital Daily's John Paczkowski. “If Apple chooses to disable media sync in a future version of iTunes, it will be a direct blow to their users who will be deprived of a seamless synchronization experience. However, people will have options. They can stay with the iTunes version that works to sync their music on their Pre, they can transfer the music via USB, and there are other third-party applications we could consider.”

Let the games begin.

Image courtesy of the New York Daily News.

See also:

• Scooplet: the Palm Pre syncs with iTunes
• Apple vs. Palm: Geeks with grudges

Jon Rubinstein, the computer engineer credited with building both the iPod and the Palm Pre, has been named chief executive officer of Palm (PALM).

He replaces Ed Colligan, who led the company for 16 years.

Rubinstein, 52, once one of Steve Jobs' closest advisors, left Apple (AAPL) in 2006 with stock holdings reportedly worth $26 million. He is said to have clashed with Jobs over the wisdom of building the iPhone.

He was recruited as executive chairman to help turn around Palm, once the leader in hand-held personal digital assistants, after the private equity firm Elevation Partners made a significant investment in the company.

The Pre, which Rubinstein introduced in January to great fanfare, is considered the strongest competitor to the iPhone to date. It was released last week, two days before Apple unveiled the iPhone 3G S.

Rubinstein's elevation to Palm's CEO completes his takeover of the company.

“I am very excited about taking on this expanded role at Palm,” said Rubinstein in a prepared statement. “Ed and I have worked very hard together the past two years, and I’m grateful to him for everything he’s done to help set the company up for success."

Colligan plans to take some time off, then join Elevation Partners. He issued a statement in which he declared himself "very proud of what Palm has accomplished so far."

Palm's press release is available here.

See also:

• Apple vs. Palm: Geeks with grudges
• The Pre’s soggy debut – Updated

It came up briefly at CES in January when a Palm (PALM) representative let the cat out of the bag (see here). Nobody followed up.

But with more and more Palm Pres appearing in the wild — in the hands of Palm employees, Elevation partners, one of my high-school buddies, even the Boy Genius — we can now confirm this little secret:

Plug a Pre into a Mac and it syncs, seamlessly, with Apple's (AAPL) iTunes.

In fact, the iTunes Store treats the Pre just as it would an iPod or an iPhone with one two exceptions: it can't handle old copy-protected songs or, naturally, iPhone apps.

Third party programs that sync music with various non-Apple MP3 players — including the Palm Treo and 700p –  have been available for some time. But team Pre has apparently built the necessary code right into the device's firmware.

They certainly have the know-how. The team is chock-a-block with former Apple employees and is led by Palm president Jon Rubinstein, who built the original iPod for Steve Jobs.

How Apple legal will respond to a presumably unauthorized invasion of their music store remains to be seen.

Asked about the Pre during a quarterly earnings call in January, COO Tim Cook said Apple would use whatever weapons it has at its disposal to fight companies that rip off its intellectual property.

An Apple spokesperson, reached for comment earlier this week, would only say that the company does not respond to rumor and speculation.

UPDATE: From John Paczkowski's coverage of the Pre demo given Thursday afternoon by Palm's Jon Rubinstein at D7: All Things Digital:

• Plug the Pre into a PC and you’re offered the option of using the device as a USB drive, charging it or beginning a “media sync.” Interesting, using media sync the Pre does indeed sync with iTunes, though it’s hamstrung by Apple’s DRM protected songs. Can’t imagine Apple’s too happy about that. Presumably, Apple legal is already drafting a letter. Pre appears to make iTunes think it’s an iPod.
• How is Apple going to feel about that, asks Walt. Rubenstein dodges a bit noting that there are a variety of ways of getting music out of iTunes. Walt pushes back pointing out that this is the first non-Apple device that is recognized as an Apple device by a Mac. Rubenstein dodges again. McNamee jumps in, refers to Apple as a monopolist and says people should be able to use music that they purchase in what ever way they see fit.
• Media sync feature also works with iPhoto and syncs photos to the Pre. That’s not likely to go over well at Apple either.

For an explanation of how the Pre does this — and how it is different from how, say, RIM and Nokia translate iTunes library files — see Jon Lech Johansen's primer here.

UPDATE 2: Palm lists "Palm Media Sync" first among the features it trumpets in its post D7 press release:

Palm media sync is a feature of webOS that synchronizes seamlessly with iTunes, giving you a simple and easy way to transfer DRM-free music, photos and videos to your Palm Pre.⁽²⁾ Simply connect Pre to your PC or Mac via the USB cable, select "media sync" on the phone, and iTunes will launch on your computer desktop. You can then choose which DRM-free media files to transfer.

See also:

• Apple vs. Palm: Geeks with grudges
• Palm Pre set to upstage Apple iPhone on June 6
• Palm Pre launch plans leaked
• Palm Fights Back (Against Apple)

The bad blood between Apple (AAPL) and Palm (PALM) that bubbled to the surface last week has a history that long predates Palm's launch of the Pre, a smartphone that flatters Apple more sincerely than any of the other iPhone imitators.

When asked at Apple's earnings call last Wednesday how the iPhone was going to going to stay ahead of competitors nipping at its heels, you could hear the heat in acting CEO Tim Cook's answer.

"We think competition is good. It makes us all better. And we are ready to suit up and go against anyone.

"However," he added, his voice rising, "we will not stand for having our IP [intellectual property] ripped off, and we'll use whatever weapons that we have at our disposal. I don't know that I can be clearer than that." (link)

Cook had been asked about the Pre's multi-touch interface, whose technology Steve Jobs insists is heavily protected by multiple patents and which other iPhone competitors — Google's (GOOG) Android, for example — have been careful not to use.

Palm was quick to respond to what it perceived as a shot across its bow.

"If faced with legal action," a spokesperson told Digital Daily, "we are confident that we have the tools necessary to defend ourselves."

But the bad blood between Palm and Apple goes deeper than a patent dispute, as my colleague Brent Schlender presciently pointed out when the venture capitalists at Elevation Partners made their first big investment in Palm — a $325 million cash infusion just a few weeks before the iPhone hit the market.

In a column written at the time of the loan, Schlender noted that both the giver — Elevation partner Fred Anderson — and the receiver — Palm executive chairman Jon Rubenstein — had long, complex relationships with Apple.

Anderson, who was Apple's CFO from 1996 to 2004, before he became a venture capitalist, had just reached a settlement with the SEC over his alleged role in backdating Apple stock options — including hundreds of millions of dollars worth for Steve Jobs. At the time of his settlement, Schlender reminds us, Anderson "denied any wrongdoing, paid a fine, and issued a vaguely antagonistic statement disputing Jobs’s account of the options backdating. Clearly Anderson felt he had been thrown under the train."

Rubenstein's relationship with Jobs is even older and more complex. It dates back to 1990, when Jobs asked him to run hardware engineering at NeXT. Rubinstein came to Apple with Jobs' return in 1997 and played a key role in developing some of the revitilized company's most profitable products. As Schlender tells it:

"Rubinstein … who was instrumental in developing the iMac, the PowerBook, the Power Macintosh, and the iPod, retired quietly a little over a year ago, on April Fools Day, 2006 — the 30th birthhday of Apple. Interestingly, about six months before that, he gave a rare interview to the Berliner Zeitung in which he threw water on the idea of converging a cellphone and an iPod media player into a single device — basically what is now the iPhone. “Is there a toaster that also knows how to brew coffee?” he asked. 'There is no such combined device, because it would not make anything better than an individual toaster or coffee machine,' Rubinstein argued. 'It works the same way with the iPod, the digital camera or mobile phone: it is important to have specialized devices.'

"Strange words, considering that Apple’s iPod group was already working on what would become the iPhone. Stranger still, when you look back and see that Apple publicly announced Rubinstein’s upcoming 'retirement' less than three weeks after that interview. I think you can safely surmise that Ruby, who had been with Jobs for more than 15 years at both NeXT and Apple, wasn’t on the same page with his boss." (link)

At the unveiling of the Pre at the Consumer Electronics Show three weeks ago, Rubinstein introduced the device by first talking about how he retreated with his family to Mexico after he left Apple to lick his wounds — a surprisingly personal way to launch a new cellphone. (You can watch him here in the Palm-supplied video that shows us more of Rubinstein than we ever saw in his years at Apple.)

Once at Palm, it didn't take Rubinstein long to start raiding his former employer for engineering and marketing talent — including senior vice president for product development Mike Bell (a 16-year Apple veteran), director of software Chris McKillop (of the iPhone and iPod team), and spokesperson Lynn Fox (out of Apple PR).

So did Palm, in fact, rip off Apple's intellectual property? Patent attorneys could be arguing that question for years to come. Meanwhile, Palm partisans have begun laying the groundwork for their defense, leaking to reporters a white paper prepared by Microsoft's Bill Buxton that traces the history of multi-touch back to IBM's Type and N-key Rollover. (link)

Meanwhile, the exuberance with which the tech press initially greeted the Pre (it won Best in Show and rave reviews, for example here and here) is being tempered by the sour reaction of Apple partisans. Perhaps the sourest of the lot is Daniel Eran Dilger's long screed in Roughly Drafted Magazine, in which he repeatedly refers the still-unreleased Pre as a "demo" and compares it to a "bald man's combover." (See The Emperor's New Phone.)

The Pre is scheduled to go on sale in the first half of 2009. A price point has not been announced, although outsiders have speculated that it will be somewhere between $249 and $399. The iPhone retails for $199 (8GB) and $299 (16GB).