Google retaliates to Microsoft's non-compete suit

Counter-suing Microsoft Corp. over a prized research engineer, Google Inc. on Thursday demonstrated its readiness to take on the world's largest software maker in a legal battle amidst the tensions that began soon after Google hired Kai Fu-Lee a Microsoft employee to open its new research and development office in China.

Redmond-based Microsoft, earlier sued Google and Lee in Washington state court, on the non-compete provision signed by Lee in 2000, which they believed did not permit his joining Google.

Google’s plaintiff in the California Superior Court in Santa Clara County, sought to override Microsoft's non-compete provision in order to retain Lee, contending that Microsoft’s clause violated the California laws that gave workers the right to change jobs. Google charged that the provision signed by Kai-Fu Lee while he worked for Microsoft was "overreaching and unlawful".

Nicole Wong, Google's legal counsel, said in an interview that while Microsoft's restriction amounted to "clearly an illegal restraint of trade", Google on the other hand was trying to create an environment for innovators unlike Microsoft which is “focused on litigation and intimidation”.

On the other side Stacy Drake McCredy, spokeswoman for Microsoft believed that Google's complaint was a desperate act and likely to be rejected as it was “attempting to manufacture California residency” for Dr. Lee in an effort to “evade Washington law and renege on the agreement”. Google is arguing the need for California laws to apply to Lee’s hiring as its headquarters and a large part of its 4,200 work force are in the state, where Lee is also registered to vote, pays his taxes and plans to buy a home.

Since its inception in 1998, Google grew quickly to be powerful and popular, making Microsoft increasingly determined to snatch a share in the lucrative search engine market, by unveiling its internally developed search engine last year. Lee’s hiring by Google was particularly a sore point for Microsoft as Lee had been working on Microsoft's own search products as a vice president in the software company's interactive services division, besides facilitating the development of Microsoft’s China strategy.

While Google's initial announcement of Lee's hiring, made it sound as if the engineer was to be based in China, overseeing its new research office there and Lee had expressed at that time, that he looked forward to “returning to China to begin this exciting endeavor". Lee, worked in the Silicon Valley with Silicon Graphics Inc. and Apple Computer Inc., prior to joining Microsoft in Washington, where he signed the non-compete agreement.

Joining Microsoft in 1998, Lee was responsible for establishing Microsoft’s R&D center in Beijing, later moving to Redmond, Microsoft's headquarters as vice president responsible for developing speech recognition and other interactive technologies.

Until this standoff over Lee, Google had always publicly played down its rivalry with Microsoft, maintaining a stance that increased competition in the search engine industry would be good for everyone, fueling more innovation. The state of California, where Google has its headquarters, has a policy against non-compete provisions in contracts that seek to restrain employees from choosing where they want to work in California.

With 39 percent of Google's $1.38 billion in second-quarter sales coming from outside the United States, it has been investing considerable resources in developing overseas research centers. Lee, the most senior executive that Google snagged from Microsoft, may have been recruited either because he led a group working to improve Web searches or because of his past exposure in setting up Microsoft’s China R&D Center. But whichever be the reason, it is going to be a legal battle of which state law applies in the compete but “non-compete” world of technology.

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