Microsoft loses bid to block Kai-Fu Lee from working

In a setback for Microsoft , a defector and high-ranking Google executive will be able to help the company set up a research and development facility in China in the coming months while a case over his hiring comes to trial in January 2006, a judge decided on Tuesday.

Kai-Fu Lee will be able to employ "his general knowledge, personal attributes, general reputation and skills" to set up and staff the Google center, wrote Judge Steven Gonzalez of Superior Court of Washington State in King County in his 13-page preliminary injunction.

"Provided Dr. Lee does not recruit from Microsoft or use any confidential information from Microsoft," he can engage in activities such as establishing facilities, hiring engineers and administrators and interacting with public officials, according to the ruling.

Lee will also be able to meet with university administrators and professors and offer "general, non-technical advice to Google about how to do business in China," Gonzalez wrote, in a decision that follows two days of hearings last week in which Microsoft and Google argued their points.

"Microsoft has not sufficiently shown that it has a clear legal or equitable right to enjoin Dr. Lee, pending trial, from establishing and staffing a Google Development Facility in China," Judge Gonzalez wrote.

With this decision, the preliminary injunction thus fails to include a provision that barred Lee from doing work for Google in China, which was included in a temporary restraining order Judge Gonzalez had issued in July.

That temporary restraining order was issued shortly after Microsoft sued Google and Lee over his hiring, alleging breach of a noncompete and nondisclosure agreement Lee signed in 2000 when he became a Microsoft vice president.

Before joining Google, Lee was corporate vice president of Microsoft's Natural Interactive Services Division. He had also been involved in Microsoft's China operations.

In Tuesday's decision, Judge Gonzalez kept other parts of the temporary restraining order in the preliminary injunction, however, such as barring Lee from activities including work on computer search technologies, such as Internet search engines and desktop search, and on natural language processing or speech technologies, areas in which Lee was involved while he worked at Microsoft. Lee is also barred from participating in setting the budget or compensation levels and defining the research and development to be undertaken at the China facility, Gonzalez ruled.

However, Google in court filings had stated it has no interest in Lee being involved in those areas, and that Google wants him to be involved in the setup of the China research and development center.

Microsoft wanted the full effects of the temporary order extended in the form of the preliminary injunction at least until the case comes to trial in January, but Google managed to win permission from the judge for the type of work it is most interested in having Lee perform.

"We're thrilled, and he's excited to get right to work on several big things, including recruiting, building our Chinese R&D center, and related government relations," wrote Nicole Wong, associate general counsel at Google, in a posting to the company's official Web log. "There are some restrictions, but the ruling basically allows Dr. Lee to do what we've wanted him to be able to do."

Microsoft also put a positive spin on Tuesday's ruling, saying in an e-mail statement that the company is pleased with the decision. "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," the statement reads.

Google argued in last week's hearings that the work Lee would be doing doesn't violate the noncompete and confidentiality agreement. Google said Lee would be in charge of opening a product development center in China and staffing it with non-Microsoft personnel, and that he wouldn't work on technical areas, such as search, natural language and speech technology.

On July 19, 2005, Google announced it had hired Lee to be president of its nascent China operations and to open a research and development center there. The center is set to open in the third quarter.

That same day, Microsoft issued its own press release on the matter, announcing it had filed the lawsuit. The noncompete and confidentiality agreement at the center of this litigation forbids Lee for a year after leaving Microsoft from accepting employment or engaging in activities that compete with products, services or projects that he either worked on or gained confidential or proprietary knowledge of while employed by the company, according to Microsoft's motion for preliminary injunction, dated Aug. 22.

Microsoft alleges that Lee has direct knowledge of its trade secrets related to search technologies and of its China business strategies. "He has accepted a position focused on the same set of technologies and strategies for a direct competitor in egregious violation of his explicit contractual obligations," Microsoft said in its July press release.

Google has argued in court filings that Microsoft's actions stem not from a desire to protect confidential information, but out of a desire to delay Google's entry into China, and "make an example of Dr. Lee for other Microsoft employees who might have the audacity to 'defect' from Microsoft."

Google and Lee countersued Microsoft in July, seeking "judicial relief from an overreaching and unlawful non-compete provision drafted by defendant Microsoft," according to that complaint.

Judge Gonzalez also stated in Tuesday's ruling that Lee "misled" Microsoft about his intention to return to the company following a sabbatical and that he continued having access to propietary Microsoft information after deciding to work for Google without informing Microsoft.

The judge also chided Lee for "assisting Google" while he was still a Microsoft employee. "Dr. Lee 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 the benefit of another," the judge wrote.

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