Microsoft sues over Google hire

update Opening a new chapter in its rivalry with Google, Microsoft on Tuesday sued the search giant and a former Microsoft executive who has been tapped by Google to run its China operations.

The suit was filed in a Washington state court against Google and Kai-Fu Lee, who until Monday was the corporate vice president of Microsoft's Interactive Services Division.

Google said earlier Tuesday that Lee was joining the company and would head up a new research effort in China.

"Accepting such a position with a direct Microsoft competitor like Google violates the narrow non-competition promise Lee made when he was hired as an executive," Microsoft said in its lawsuit, which was seen by CNET News.com. "Google is fully aware of Lee's promises to Microsoft, but has chosen to ignore them, and has encouraged Lee to violate them."

In the suit, Microsoft seeks monetary damages as well as an injunction upholding the noncompete clause and other provisions of Lee's contract, including terms barring him from sharing Microsoft trade secrets.

Google has emerged as a top rival for Microsoft, and several notable employees have left the software giant for Google in recent months. The company is seen as an aggressive rival to Microsoft in areas such as desktop search and e-mail. In addition, its services work well with any operating system.

Google issued a press release on Lee's hiring and announced plans to open a China research and development center this quarter.

"Under the leadership of Dr. Lee, with his proven track record of innovation and his passion for technology and research, the Google China R&D center will enable us to develop more innovative products and technologies for millions of users in China and around the world," Alan Eustace, Google engineering vice president, said in a statement.

Lee, an expert in speech recognition technology, founded Microsoft's China research lab in the late 1990s and worked at Silicon Graphics Inc. and Apple Computer before joining Microsoft.

A Google representative was not immediately available to comment on Microsoft's legal actions.

Google's public touting that it had hired Lee is in and of itself unique. The company rarely announces new hires, with CEO Eric Schmidt's hiring being a notable exception.

Though workers leave tech companies for rivals all the time, it's not uncommon for a dispute to end up in court, particularly when an executive has a contract with a noncompete clause. Microsoft has turned to legal channels before to pursue former employees who it felt were unfairly competing against the company.

Notably, the company sued when former executive Tod Nielsen and a number of ex-Microsoft employees went to work for Crossgain, a start-up that was focused on allowing business applications to run over the Web.

Crossgain eventually disassociated itself from a number of Microsoft workers that were still bound to noncompete agreements. Among the other ex-Microsofties who were forced to step down, at least temporarily, were Nielsen and Adam Bosworth, a founder of Crossgain.

Crossgain was swallowed up by BEA Systems in 2001, with both Nielsen and Bosworth joining the software maker. The two left BEA last year, and Bosworth joined Google. 

A Microsoft lawyer said in an interview that Lee's move to join Google was a "particularly egregious" violation of the noncompete agreement that he had signed when he joined Microsoft.

"He has access to sensitive information, to trade secrets about our search technology and business plans and our China business strategies," Deputy General Counsel Tom Burt told CNET News.com. "He has accepted a position in direct competition with Microsoft in those areas."

Lee had been working most recently at Microsoft's Redmond, Wash., headquarters, focusing on new search technologies. According to the lawsuit, for a time Lee had been the person "responsible for overall development of the MSN Internet search application." He also served as a member of a company advisory board that focused on China-related strategies, a post that, according to the suit, gave him access to the company's business strategy and planned expansion targets.

In the suit, Microsoft said that on July 5, Lee informed his department head, Eric Rudder, that he did not plan to return to Microsoft from a sabbatical and that he had talked with Google about heading up that company's China efforts.

Burt said that Microsoft was formally notified of Lee's plans Monday and that the company served him with legal papers later that day.

"There was no effort by Dr. Lee or Google to try and work out any kind of agreement," Burt said. "The combination of those factors meant that we really had no choice but to file this suit to protect our confidential information."

CNET News.com's Stefanie Olsen contributed to this report.

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