They sued him for violating his noncompetition agreement ... because he was going to work for the competion and/or customer of IBM.
No, this is not accurate. A noncompetition agreement does not mean you can't
compete with your former employer--anyone with a given skill set is going to be hired to utilize that skill set and thus will inevitably be competing with his former job. A noncompetition agreement is designed to prevent
improper competition, in an efficient, effective, and manifestly fair manner.
As a result of corporations taking advantage of the arrangement and forcing noncompetes on non-sensitive employees, and gradually expanding the terms so as to make it difficult for employees to leave, they were proscribed in California and several other states, but always with exceptions. This has the effect of forcing the employer to demonstrate the need for the agreement, rather than forcing the employee to prove its unfairness, which is known as burden-shifting in the legal profession.
So they did break a big portion of the noncompetition agreement -- upholding the NDA section.
Your pronouns are incorrect. 'They', meaning IBM, sued for a violation of the noncompete. 'They', meaning the court, did
not "break" a big portion of the noncompete--it's still in force, as Papermaster is still not permitted to
compete improperly. When you settle something, it involves compromise on the original terms, and IBM accepting a sworn declaration in lieu of a one-year sabbatical means that everyone walks away a winner--if the value proposition of the settlement is a loss, it isn't agreed to by a rational actor.
The purpose of the noncompete is to protect industrial property, and the means by which it does that is through an NDA and prohibiting close-sector employment. If IBM can protect its interests through an alternative arrangement, it wins. Getting a court order for every sensitive former employee is not possible, which is why the general prohibition on employment is part of the separation terms. They are all simply proxies of the goal.
Edit: really hurts IBM since it turned a 1 year noncompete into a 6 month one, so who gets the 3 million dollars the court was holding.
It doesn't hurt IBM at all. They protected their interests to their satisfaction, hence the resolution of the litigation. There is no intrinsic value to the one-year employment bar. No one gets the money. It will remain in escrow until the one-year period ends and IBM is satisfied that Papermaster upheld his obligations. The bond will then return to Apple.