News

Microsoft, Google Both Claim Victory with Judge’s Ruling

• By Stuart J. Johnston
• September 14, 2005

Tuesday’s highly-anticipated ruling by the judge hearing Microsoft’s ongoing lawsuit against Google was a bittersweet irony with both sides declaring victory. The suit itself will grind on until trial early next year, however.

Microsoft won a partial victory in its request that the court enforce its non-compete agreement with a senior executive who debarked for Google earlier this summer. But at the same time, the judge said that the former Microsoft vice president and research center director is free to start work at the search behemoth immediately – with some restrictions.

Dr. Kai-Fu Lee had been with Microsoft since 1998, when he was hired to build and staff the Microsoft Research lab in Beijing. Lee, the U.S.-educated son of a Taiwanese lawmaker, also played the role of diplomat in many of Microsoft’s dealings with Chinese officials, according to Microsoft’s filings. He moved back to the United States in 2000 to become corporate vice president of Microsoft's Natural Interactive Services Division.

The controversy erupted in late July when Lee abruptly left Microsoft, not so coincidentally the same day that Google announced it had hired him to spearhead the Mountain View, Calif.-based search engine firm’s push into mainland China and its potentially gigantic markets. Microsoft immediately sued Lee and Google for violating the terms of the non-compete agreement he had signed when he moved to Redmond in 2000. The agreement requires that he not go to work for a direct competitor for a year after leaving the software giant’s employment.

In his ruling, King County Superior Court Judge Steven Gonzalez of Seattle appears to hand Google a victory in that it lifted part of the temporary injunction granted to Microsoft in July. To wit: Lee can go to work for Google immediately.

But at the same time the ruling backs several of the points Microsoft has argued and makes some pointed slaps at Lee in finding that Microsoft has a likely chance of prevailing at trial.

“Dr. Lee misled Microsoft about his intention to return to Microsoft following his sabbatical [in June] and he continued to have access to Microsoft’s proprietary information after he decided to leave Microsoft to join one of its competitors without informing Microsoft,” the ruling says.

“Dr. Lee began assisting Google while he was still employed at Microsoft … [and he] confused the difference between the discretion given to him to disclose Microsoft’s confidential information for the benefit of Microsoft and disclosing Microsoft’s confidential information for his own benefit or for the benefit of another,” Gonzalez’s ruling continues.

Microsoft officials say they are pleased.

“We are gratified that the court found Dr. Lee ‘misled Microsoft’ and misused confidential information, even while he was still employed by Microsoft,” the Redmond, Wash.-based company said in a statement posted on its Web site following the ruling. “Dr. Lee was hired to serve as the President of Google China's operation, and today's injunction severely restricts his ability to perform the role for which he is hired.”

All gloating aside, however, the judge affirmed Lee’s right to work for Microsoft’s most serious competitor in the race to dominate the search engine arena as the months tick off until the actual trial date. Indeed, for Microsoft, it must be especially galling to have Lee working for Google in helping its arch-competitor enter a market (China) where it has taken years for the software giant to develop what is still a tentative foothold – and that at least partly with Lee’s help.

Under Gonzalez’s ruling: “Google’s use of Dr. Lee to engage in recruiting activities relating to Google’s planned research and development facility in China pending trial, including establishing facilities, hiring engineers … interacting with public officials … and offering general, non-technical advice to Google about doing business in China, does not violate the agreement, provided Dr. Lee does not recruit from Microsoft or use any confidential information.”

A Google spokesperson calls that a clear win. “The ruling clears the way for Dr. Lee to do the work we hired him to do,” he says. “He’s going to begin recruiting and building our China R&D facility immediately.”

Microsoft paints a different picture.

“The court entered an injunction that restricts the work Dr. Lee can do for Google, preventing him from working on speech, natural language and search technologies, as well as setting the overall research and development course for Google China,” Microsoft’s statement says. Those were areas Lee had worked on for Microsoft.

Time is not on Microsoft’s side, however. “By the time the trial is complete, the year of non-competition will mostly be up,” quips Rob Enderle, principal analyst at technology analysis firm the Enderle Group.

Lee, himself, is well known and highly regarded in both business and research circles worldwide. Before being recruited into Microsoft Research, he was president of Cosmo Software, Silicon Graphics’ multimedia software business unit.

Prior to that, Lee spent six years at Apple Computer where he was vice president of that company’s interactive media group. During his tenure there, his group developed QuickTime, QuickDraw and other technologies. Previously, Lee was an assistant professor at Carnegie Mellon University, where he developed the first speaker-independent continuous speech-recognition system.

Judge Gonzalez is an interesting figure in his own right. He is best known for the role he played before becoming a state superior court judge, as the former assistant U.S. attorney who prosecuted terrorist Ahmed Ressam – the so-called “Millennium Bomber.” Ressam was caught in December 1999 trying to enter the United States at a Washington-Canada border crossing with his car trunk full of explosives. He was convicted and sentenced to 22 years in prison for planning to blow up Los Angles International Airport on the eve of the Millennium.

The fireworks may not be over yet for the Microsoft-Google grudge match though. A countersuit by Google is pending in California.

However judges in both cases eventually rule, one of the main outcomes – and an important issue throughout the technology industry – may be to provide more clarity to questions surrounding the legitimacy of non-compete agreements in the first place. Analyst Enderle says that Washington courts tend to favor non-compete agreements while California courts tend to “hate” them.