It didn’t take a crystal ball for Google to foresee there would be trouble if it hired Kai-Fu Lee away from Microsoft .
As documents filed in the Superior Court of Washington for King County reveal, Google promised to defend the former Microsoft executive if Redmond’s lawyers came after him.
According to the addendum to Lee’s employment agreement with Google, publicly released in response to legal requests from the Seattle Post Intelligencer, Google agreed to pay Lee for a year if he was prevented from coming to work.
In addition to defending the suit, Google agreed to pay Lee his full salary, bonus and benefits for 12 months, and to either vest his stock options as though he were employed or to “make him whole” for that loss.
After Google announced it had hired Lee to head a research lab in China, Microsoft immediately sued both Lee and Google, claiming breach of Microsoft’s employee confidentiality and non-compete agreements.
Google certainly anticipated the suit, said Vic Schachter, chair of the employment practices group at the law firm Fenwick & West.
“This is a very common and typical business dispute,” he said. “There’s nothing unusual, except that it’s two very glamorous companies.”
John Challenger, CEO of executive outplacement firm Challenger, Gray & Christmas, said there are always concerns when high-level executives change jobs.
“Most executives in research or sales or many other roles will sign a non-compete agreement when they’re hired,” he said. “However, the courts don’t allow a company to interfere with a person’s livelihood, so there’s a lot of case law around what you can put into those non-competes.”
Such agreements are valid tools, Challenger said, but state laws differ on their enforcement. He and Schachter agreed that California, Lee’s new place of employment, gives more weight to an individual’s right to earn a living, while Washington state, the home of Microsoft, tends to emphasize the interests of the employer that lost a key employee.
Schachter said that the vast majority of such suits never go to trial; usually the two parties reach a compromise.
The discovery phase of the trial could hinge on whether Lee was privy to Microsoft’s trade secrets — which can include strategy. “Business strategy can be trade secrets, because they’re talking about new initiatives, new prod lines, new marketing techniques,” he said. But the key is that the company that claims a trade secret has to have treated the information like one.
Microsoft has said repeatedly that it plans to compete with Google in search and advertising.
More details about Lee’s work with Microsoft and negotiations with Google were revealed this week, thanks to a motion by the Post Intelligencer to unseal documents in the case. The newspaper cited the public’s right of access to judicial proceedings, and Judge Steven Gonzalez granted the motion in part on Tuesday.
He ruled that Microsoft had to file uncensored copies of two of its exhibits under seal, for Attorneys’ Eyes Only. Those exhibits are notes about a meeting between Microsoft Chairman Bill Gates and Lee in May 2004, and a series of e-mails relating to salaries for Microsoft’s China operations, marked “MS confidential.”
Microsoft could provide redacted versions — ones with trade secrets blacked out — for public view.
The “redacted” versions released to the public contain almost no information. For example, after various headers, the first half of Exhibit 1, with the header “Client Search,” reads, “Google — Longhorn — Longhorn — Suggestion: — Longhorn — MSN — Google.” The second half is headed “General Search & Google-compete.”
While those few words would seem to imply that Lee was privy to high-level discussions about Microsoft’s competition with Google, Lee denied it in a statement to the court. He differentiated MSN’s new algorithmic search product from the old MSN search service that relied on technology from partners.
“I was never responsible for algorithmic-search-based Internet search at Microsoft, never saw that code, and never participated in a code review for that product,” the statement read.
Except for one time when he did review a search product. According to Lee’s statement, in April 2004 a small team in his group “started an unofficial desktop search project without consulting me.” After he heard about it in June, he said, he approved the project, but it was then transferred to MSN, the designated competitor to Google and other Internet search providers.
Regarding alleged conflicts posed by his opening a Chinese research lab for Google, just as he did for Microsoft, Lee pointed out that he left his post as director of Microsoft’s China research center in 2000, and that while he was there, the emphasis was on academic research.
In contrast, he said, Google’s China research center will focus on product development. However, he said hiring and staffing Google’s China outpost would take until August or September 2006.
Supporting the idea that Lee would not be breaking his non-compete agreement with his work at Google for more than a year, the statement read, “Only after the China center is constructed and staffed will Google start to develop a significant amount of technologies to be used in the United States — much of which will take many years of development.”
The accelerated court schedule calls for trial to begin on January 9, 2006; the next step is for each side to disclose their primary witnesses by September 12, 2005.
On July 28, Microsoft obtained a preliminary injunction preventing Lee from taking a job with Google or any place else where he would work on projects or products involving any kind of search, natural language processing, speech technologies, or business strategies, planning, or development for search in the Chinese market.
On September 6, Microsoft, Google and Lee will face the court to argue about whether the injunction should be made permanent until the case is decided.
The meter is ticking.
