[FoRK] Google vs. MSFT: Non-Competes

Ian Andrew Bell FoRK fork
Wed Jul 20 08:22:41 PDT 2005


This case is the right one to set a precedent, and potentially  
(officially) invalidate Non-Competes in the Valley -- simply because  
both parties have the bucks to ride this through a long case.  If  
Google truly isn't evil, they'll fight this one for all of us..

-Ian.

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http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/ 
2005/07/20/BUGO2DQIC21.DTL&type=business

Microsoft sues over hiring
Former exec joins Google to open lab
Verne Kopytoff, Chronicle Staff Writer
Wednesday, July 20, 2005

Microsoft's rivalry with Google spilled into the courts Tuesday after  
the software giant sued Google for hiring one of its former  
executives to open a research lab in China.

The suit, filed in King County, Wash., Superior Court, accuses the  
executive, Kai-Fu Lee, of violating a non-compete agreement with  
Google's assistance.

"What we are interested in is making sure that our confidential  
information is protected and that Dr. Lee isn't in a position where  
he could compromise, even inadvertently, our confidential  
information," said Tom Burt, Microsoft's deputy general counsel.

In a statement, Google denied the accusations, saying "we have  
reviewed Microsoft's claims and they are completely without merit. We  
will defend vigorously against these meritless claims and will fully  
support Dr. Lee."

Google and Microsoft are engaged in an intense battle for users. Each  
has unveiled a series of new features in an effort to cement user  
loyalty and increase adverting revenue.

Google leads the race, which also includes Yahoo and IAC/ 
InterActiveCorp's Ask Jeeves.

Microsoft's suit highlights a common business practice in some  
states. Companies routinely require workers, particularly executives,  
to sign contracts that prohibit them from joining competitors after  
resigning.

Protecting company secrets is the goal. The fear is that employees  
will reveal important information about products and strategies to a  
rival.

In California, non-compete agreements are unenforceable, according to  
Michael McCabe, an employment law attorney in the San Francisco  
office of Reed Smith. Workers can join any firm they want, even a  
rival, he said. But as part of an employment contract, employees can  
be prohibited from sharing trade secrets and trying to steal  
customers after changing jobs, he said.

"A big battle, when you have companies in different states, is whose  
law will apply," McCabe said. "The battle then becomes is it  
appropriate to enforce, is it overbroad or really necessary to  
protect an employer?"

Google announced Lee's hire Tuesday morning as president of the  
Mountain View search engine's China operations. His job is to open a  
research and development lab in China, a nation that Internet  
companies covet because of its huge potential market.

Lee was previously a vice president for Microsoft, starting in 2000.  
Prior to that, he founded Microsoft's research lab in China and was  
involved in such technologies as multimedia and voice recognition  
software.

Microsoft argues that Lee signed a non-compete agreement when he  
became a vice president five years ago. Provisions block him from  
working on certain kinds of projects for a rival for a year after his  
resignation.

In its court filing, Microsoft said that Lee was closely involved  
with Microsoft's efforts in search, including the products the  
company is currently developing and its future business plans in  
China. Microsoft said he was given access to proprietary information  
that would give any competitor a strategic and economic advantage.

Burt said that Lee notified Microsoft that he was leaving for Google  
on Monday. He added that Lee and Google never tried to negotiate a  
deal to avoid the conflict.

Lee could work for Google, Burt said, but on projects unrelated to  
what he did at Microsoft. Or he could simply be paid to do nothing  
for a year, he said.

Burt said it is rare for Microsoft to file suit over non-compete  
agreements, preferring to cut deals beforehand. However, Microsoft  
was involved in a high profile episode in 2000 and 2001, when several  
former employees left for Crossgain, a startup that allowed business  
software to work on the Internet.

Those workers eventually left Crossgain after Microsoft pressured the  
company. They rejoined its successor company, BEA Systems, after  
their non- compete agreements had expired.

E-mail Verne Kopytoff at vkopytoff at sfchronicle.com.



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