Google, Microsoft square off

David Canton - for The London Free Press - October 1, 2005 Read this on Canoe

A legal battle between Microsoft and Google over a former Microsoft employee demonstrates the tension caused by the use of non-competition clauses in employment contracts.

Non-competition clauses limit the type of work an employee can perform after leaving their employer.

Businesses want to prevent former employees from using proprietary information to compete against them.

Employees don't want how or where they will earn their living to be limited.

Kai-Fu Lee was the corporate vice-president of Microsoft's Natural Interactive Services division. He was recruited by Google in July to head their new research centre in China.

Microsoft claims this move violates a non-competition clause in Lee's employment contract -- barring Lee from doing work that may compete with Microsoft for one year after leaving the company.

Microsoft alleges Lee advised Google on recruitment and business strategies for its China research centre while still employed by Microsoft.

This advice was based on research Lee had done on behalf of Microsoft, the company claims. Microsoft alleges Lee's recruitment violates the non-competition clause because of his direct knowledge of Microsoft's search technologies.

Google countered these allegations by arguing the information Lee provided them was from his work experience prior to his employment at Microsoft.

Google claims the work Lee will do for it will not be in areas that would come into conflict with the contract.

It has also countersued Microsoft, seeking to have the court invalidate the non-competition clause in Lee's Microsoft contract for being too broad.

Courts in most jurisdictions are wary of limiting a party's ability to contract freely.

On the other hand, they recognize the restraint of trade caused by non-competition clauses can be contrary to public interest.

Courts closely inspect such clauses due to the power imbalance between employer and employee.

Courts acknowledge employers have legitimate concerns about retaining trade secrets and key customers when an employee leaves. Even without a non-competition clause, courts recognize former employees have obligations not to misuse corporate information.

This includes a duty to keep their former employer's trade secrets, client lists and business strategies confidential even after employment has ended.

These concerns intensify when the departing employee is a high-level executive -- such as Lee -- in a position of trust or seniority that grants them access to the inner workings of the company.

Employers may use non-competition clauses to contractually protect themselves from competition with departing employees so long as the clauses are reasonable both for the individuals involved and the surrounding community.

Clauses drafted with time periods that are too long or restrictions that are too broad will not be upheld.

Thus, courts try to achieve a balance between competing interests when dealing with non-competition clauses.

Employers can contractually protect their business from unfair competition, employees can seek judicial intervention where clauses are too broad or restrictive, and the public will continue to have a market unrestricted by onerous clauses in employment contracts.

The court ruled in an interim proceeding that Lee can begin recruiting staff for Google's development centre in China.

The decision restricts him, however, to recruitment and government liaison activities. He cannot participate in research or work on Google's speech or search technologies. He is barred from recruiting Microsoft employees or using confidential information from Microsoft in his work at Google.

The trial will begin in a few months.