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Google's Kai-Fu Lee Gets Judicial Go Ahead to Start Work Today
Wednesday, September 14 2005 @ 02:31 AM EDT

The temporary restraining order that Microsoft briefly won against Google is over. Dr. Kai-Fu Lee has been give the go ahead by the Judge to go to China and staff the research and development center for Google, starting immediately.

He will be held to his agreement and can't work on any projects, products or services he work on at Microsoft until the trial. But Microsoft's attempt to convince the judge that they had some sort of secret sauce trade secret method for hiring people ... snort ... well, I started to say it was laughed out of court, but let's instead just say that it didn't convince the judge. It probably didn't help that CEO Steve Ballmer was said to have thrown a chair and sworn to blankety blank kill Google and bury its CEO.

I have a suggestion for Microsoft. Instead of sending their executives to PR school, as I suspect they must, since they all speak alike, as far as I can tell, I think they should send them to anger management classes.

The AP article gives us some details:

... Gonzalez said recruiting and staffing a Google center in China would not violate that agreement. Although Lee cannot set budget or compensation levels or define the research that Google will do in China, Gonzalez said, he can hire people to work there.

“The importance of this is that it allows me to do my job,” Lee said. “Starting today, I’m going to walk into Google and start work.”

In an interview Tuesday night, Microsoft general counsel Brad Smith said the company was pleased with the restrictions and that it would end all litigation in the case if Google and Lee agree to abide by the judge’s order until next July, when the noncompete agreement expires.

“We can settle this lawsuit tomorrow,” Smith said. “We can get back to ... competing in the marketplace.”

Speaking of PR, here's Microsoft full statement. I hope you are not prone to uncontrollable giggles:

Microsoft issued the following statement regarding the Preliminary Injunction Order issued today by the Superior Court of the State of Washington:

We are pleased with our victory in court today. The court entered an injunction that restricts the work Dr. Lee can do for Google, preventing him from working on speech, natural language and search technologies, as well as setting the overall research and development course for Google China. Today's injunction is broader than the Temporary Restraining Order, which was granted to Microsoft in July, and imposes further restrictions on Dr. Lee's activities in China. The injunction restricts Dr. Lee to limited interviewing and site location activities.

Microsoft General Counsel Brad Smith added, "We can settle this lawsuit tomorrow if Google will agree to take today's preliminary injunction, keep every word without a single change, and enter it as a permanent injunction that will last until July 18, 2006. We can avoid a trial, forgo paying outside lawyers, and get back to competing in the marketplace. We are very pleased with today's order, and we're prepared to back up our words with concrete deeds if Google will do the same."

"Our victory"? They specifically asked the judge to block Lee from being able to hire people. That must be some PR school. I have an idea. To cut through the whipped cream, why don't you read the judge's order [PDF] for yourself. Then no one has to tell you what it means. Here's the part about the stipulation Google offered:

Since the Court issued the TRO, Google and Dr. Lee have, both in writing and in open court, offered to stipulate (the "Stipulation") that, pending trial, Dr. Lee will not engage in certain activities. Microsoft declined to join the Stipulation.

Now, after Microsoft's "victory", they are ready to drop the whole thing, if Lee will agree to extend this temporary restraining order until the agreement runs out. That tells me that after this wonderful "victory" Microsoft is worried they won't get as much at trial as they could by such a stipulation. Winners don't offer to settle. You can take that to the bank. At least, I've never seen it happen. Here's the part I see in the order that may have Microsoft worried and offering to settle:

A question remains for trial whether independent consideration exists to support the Agreement.

If there isn't independent consideration, the agreement may be found to be void. There was a case in 2004, Labriola v. The Pollard Group, which you can read about here, in which a Washington court ruled that to be effective, noncompete agreements must be supported by independent consideration. Consideration, they explain in that Preston, Gates & Ellis article, is "any act, forbearance, creation, modification or destruction of a legal relationship, or return promise given in exchange," adding:

There is consideration for a noncompete or non-solicitation agreement signed at the time the employee is first hired. In that case, the consideration is the offer of new employment. However, such an agreement entered into after an at-will employment relationship begins must be supported by new, "independent" consideration. This independent consideration may include increased wages, a promotion, a bonus, a fixed term of employment, or, in some cases, access to protected information; in any case, the consideration must involve some sort of new promise or obligation not previously required of the parties.

Yes, Preston, *Gates*, and Ellis. That would be Bill's dad.

That sentence about a question about whether there was independent consideration likely has Microsoft worried. Dr. Lee was already a Microsoft employee when he signed the agreement.

But here's the part that Google's lawyers are probably discussing among themselves with some concern:

Dr. Lee began assisting Google while he was still employed at Microsoft. Dr. Lee confused the difference between the discretion given him to disclose Microsoft's confidential information for the benefit of Microsoft and diclosing Microsoft's confidential information for his own benefit or the benefit of another.

Presumably, those two sentences foreshadow that -- if the agreement is upheld -- Dr. Lee may have to pay damages to Microsoft. So why are they offering to drop the suit? Probably because it isn't about money. They can't get what they want, he is going to set up the center, and so why risk a trial at which a serious issue of whether or not the agreement is even valid will come up?

Google is weighing their options from the opposite angle, trying to figure the odds. They didn't start by immediately offering to stipulate. That came after the temporary restraining order was issued. And the court has ruled that pending trial, Microsoft could be hurt worse than Dr. Lee if they don't get a restraining order until trial. After all, Google has indemnified him and he won't lose any salary. So pending trial and a determination of the validity and reach of the agreement, Dr. Lee is being held to the agreement, narrowly construed. But Microsoft had to put up an injunction bond in the amount of a million dollars "for payment of Google and Dr. Lee's costs and damages that may be incurred in the event they are found to be wrongfully enjoined or restrained by this Order." I mention that because AP reported that the judge ruled the agreement is valid. That is not accurate. He can't make such a ruling until the trial. What he found was that Microsoft had presented enough to convince him that they probably would prevail on that point at trial, if there is independent consideration, and that the balance of hardships analysis favored protecting them until trial. Here are all the activities that Google wanted Dr. Lee to be able to engage in, after they offered to stipulate to the rest, according to the order:

  • establishing facilities
  • hiring engineers and administrative staff
  • interacting with public officials
  • meeting with university administrators and professors
  • offering general, non-technical advice to Google about how to do business in China

Here's what the judge ruled Dr. Lee can do, despite Microsoft's motion:

However, Google's use of Dr. Lee to engage in recruiting activities relating to Google's planned research and development facility in China pending trial, including establishing facilities, hiring engineers and administrative staff, interacting with public officials regarding the facilities and recruitment, meeting with university administrators and professors regarding recruitment, and offering general, non-technical advice to Google about doing business in China, does not violate the Agreement, provided Dr. Lee does not recruit from Microsoft or use any confidential information from Microsoft.

Sound like a Microsoft victory to you? Here's a transcript of day one [PDF] of the hearing, and day two [PDF]. You learn from the transcript of day one that it was Dr. Lee who asked for live testimony at the hearing; Microsoft opposed andn presented none itself, only video excerpts, but the court granted Dr. Lee's request. And you also learn that the judge at one time was fluent in Chinese, having a background in East Asian studies. He was able, therefore, to read exhibits in Chinese. And you will learn what both Microsoft and Google are working on, such exciting projects as figuring out how to use speech to search on your mobile phone. And there is an intriguing sentence in an annual report Dr. Lee wrote, "I took the initiative to go to China ahead of Bill Gates to avoid disasters during his visit." And most important of all, you get to see John Keker, attorney for Google, on his feet. It's impressive.

There are more filings and videos here.

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