Courtroom showdown for Microsoft and Google

Microsoft lawyers claim Kai-Fu Lee can't be trusted with corporate secrets, while Google says Redmond is off-base.

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
5 min read
SEATTLE--Attorneys for Microsoft and Google faced off before a state court judge here Tuesday, arguing whether former Microsoft executive Kai-Fu Lee should be allowed to start work for the search company before a trial determines whether he violated a noncompete contract.

Microsoft is asking King County Superior Court Judge Steven Gonzalez to issue a preliminary injunction that would block Lee from working for Google before the trial, which is slated for January. The judge already issued a temporary restraining order in July. Google argues that if Lee is kept off the job until the trial, he will miss the important autumn recruiting season in China, which often determines where Chinese college students will work after they graduate.

"This is a case about whether Dr. Lee should be required to live up to his promise," Microsoft's lawyer, Jeffrey Johnson, said in opening arguments of the two-day hearing. Johnson is a lawyer with Preston Gates & Ellis, a Seattle firm.

Johnson claimed that Lee's conduct both before he left Microsoft and before the temporary restraining order was issued showed that he will not live up to the terms of a one-year noncompete agreement if allowed to work with Google.

The attorney cited a May 7 e-mail that Microsoft says Lee sent to Google CEO Eric Schmidt and co-founders Sergey Brin and Larry Page in which Lee said he was a "corporate VP at Microsoft working on areas very related to Google."

"He was saying, 'Look what I did at Microsoft--and look what I can do for you,'" Johnson said.

Johnson added that Lee's efforts to help Google began while he was a vice president at Microsoft and still on the company's payroll. That included helping Google with recruitment and advising the search giant on job candidates, and forwarding to Google executives a Microsoft paper that discussed Redmond's China strategy.

"He did all of this while he was still a Microsoft employee," Johnson said. Johnson said that after Lee left Microsoft and before a restraining order was imposed, Lee attended a meeting with Schmidt and other top executives about Google's own plans for China.

Microsoft lawyers do not plan to introduce witnesses at the hearing, while Google has called Lee to the stand and plans to call Alan Eustace, vice president of engineering at Google.

Google has brought in high-powered legal counsel to fight Microsoft. John Keker, a partner with San Francisco law firm Keker & Van Nest, was a defense attorney for Frank Quattrone in the investment banker's high-profile trial and was the chief prosecutor in the federal government's 1989 prosecution of Oliver North following the Iran-Contra scandal.

Microsoft has exaggerated who Dr. Lee is. They have exaggerated what he has done. They have exaggerated what he plans to do at Google."
--John Keker, partner, Keker & Van Nest

In his opening argument, Keker argued that if Lee were allowed to join Google before the trial he would only work on setting up a China office and would do nothing on speech and search technologies, ostensibly two areas of biggest concern to Microsoft. He said that in his most recent role at Microsoft, Lee was in a different part of the software giant's organization than either MSN, a direct competitor to Google, or research efforts in China.

"Microsoft has exaggerated who Dr. Lee is. They have exaggerated what he has done. They have exaggerated what he plans to do at Google," Keker said.

Keker also argued that the document that Lee sent to Google was stripped of all confidential information. He added that Washington state law typically doesn't favor noncompete contracts and that Lee's agreement with Microsoft should be narrowly interpreted.

"He is a very special person" with a unique appeal in recruiting Chinese students, Keker said of Lee. "Those qualities are his and not Microsoft's."

Microsoft introduced several videotaped depositions. Microsoft Chairman Bill Gates and CEO Steve Ballmer said Lee had responsibilities that stretched well beyond his main duties as speech researcher at the company.

Ballmer said Lee was "the godfather" of the company's China research efforts, while Gates said Lee was one of the top two Microsoft executives when it came to designing Microsoft's China strategy.

Kai-Fu Lee
Source: Microsoft
Kai-Fu Lee

"He'd certainly be one of the top two influential people in what we did," Gates said. At another point, Gates characterized Lee as the "most prolific" and "most energetic" advocate that Microsoft needed to change its China strategy, authoring several 20- to 30-page memos. At one point, sipping from a Diet Coke, Gates also said that Lee helped with government relations, even helping draft a letter to a top Chinese official.

Johnson, the Microsoft lawyer, noted that Microsoft has had a fair amount of success in China, but that success came after early stumbles. "I feel like we have some 'secret sauce' in terms of how we do business in China," Ballmer said in his deposition.

Google, however, argues that it has been years since Lee was responsible for hiring and staffing Microsoft's Chinese operations.

Lee briefly took the witness stand before a lunch break. His personal attorney, Brad Keller of Byrnes & Keller in Seattle, noted that Lee had worked for Apple Computer and Silicon Graphics before going to work for Microsoft, and that he avoided disclosing any confidential material from those companies to Microsoft.

Lee also testified that while at Apple he helped set up an academic research center and a research and development facility in China. Keller asked Lee whether Microsoft had concerns about a conflict before opening Microsoft's China facility. "No," Lee responded.

In afternoon testimony, Lee described frustration with the pace and methods by which Microsoft was going about business in China. He complained about an overly complicated organizational structure with multiple, independent, sometimes-competing research units.

Lee said Microsoft was trying to make money first and build relationships with the Chinese government second, when things needed to be done the other way around.

Lee recounted one incident in which Gates yelled at him, "'First, we were f'ed by the Chinese people, and now the Chinese government has f'ed us.'" Lee said he believed Gates' outburst was a statement "that my work had been in vain."

A Microsoft representative said that Gates "adamantly denies" making such a statement and said it was "another attempt to deflect attention from the real issues in the case."