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Originally published August 3, 2005 at 12:00 AM | Page modified August 3, 2005 at 9:09 AM

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Google expected fight over hiring of Microsoft exec, documents show

Google anticipated there could be a fight with Microsoft when it lured away a top executive from the Redmond company last month, according...

Seattle Times technology reporter

Google anticipated there could be a fight with Microsoft when it lured away a top executive from the Redmond company last month, according to court documents unsealed at two newspapers' request yesterday.

When it hired Kai-Fu Lee, Google agreed to pay his full salary and let his stock options vest even if he couldn't work for up to 12 months because of a noncompete agreement he signed at Microsoft.

The details were revealed in a special Google employment contract for Lee that could help Microsoft in its lawsuit to block him from working at the search giant for a year.

Microsoft filed the suit July 19, the day after Google hired Lee to launch its new research center in China. Microsoft cited the terms of the noncompete agreement he signed in 2000.

Spats over noncompete agreements are common in the industry, but the fight over Lee reveals the increasingly hostile competition between the technology giants.

After years of quietly competing for online advertising, Web traffic and software talent, both sides have gone on the offensive.

Google stepped up its hiring of Microsoft employees in November by opening an office in Kirkland.

Then last week, Microsoft Chief Executive Steve Ballmer told analysts the company will become "number one" in search, declaring that "We're not going to let anything stand in our way."

Google argued in King County Superior Court last week that Lee had little to do with search at Microsoft and wouldn't directly compete with his former employer.

Google declined to comment on the employment agreement, but spokesman Steve Langdon said the company is still on track to open the China lab this fall.

Google also countersued July 21 in San Jose, Calif., arguing that California law prohibits Microsoft from restraining where employees work.

Microsoft spokeswoman Stacy Drake said the employment agreement "underscores the fact that Google was aware that Dr. Lee had a noncompete agreement with us and had the expectation that by hiring him, he could be breaking that agreement."

Last week, Microsoft persuaded a judge to temporarily block Lee from his new job.

The company is also asking the judge to extend the restraining order until after the case goes to trial in January. That extension request will be heard Sept. 6.

Microsoft submitted the employment agreement and two e-mails to King County Superior Court Judge Steven Gonzalez but asked that they be sealed.

The Seattle Post-Intelligencer and The Seattle Times objected and filed a motion asking to let the public see the material.

Gonzalez yesterday acknowledged it's important for the public to have access to court records, but he agreed with Microsoft that the company could be harmed if the material were released in full. He unsealed copies of the documents after blacking out most of the information in the e-mails.

The e-mails suggest Lee was privy to information about Microsoft's strategies for competing with Google in search and China recruiting.

One of the two e-mails contains notes from a meeting that Lee and Microsoft Chairman Bill Gates had May 18, 2004, to discuss the company's search business and ways to compete with Google.

Topics included Google, the MSN group housing Microsoft's search business and the upcoming version of Windows that was code-named Longhorn.

The third document is an e-mail string discussing a new salary structure for Microsoft employees in China. Most of the material is blacked out, but the initial mail discusses Google.

Lee, 43, helped Microsoft establish its Beijing research lab in 1998 and is known mostly for his work on speech-recognition software.

In 2000 he came to Redmond to lead a group working on speech recognition and other technologies that make it easier and more natural for people to interact with computers.

One application of this technology is in Web searching, where Microsoft hopes to beat Google with a search engine that gives users more intuitive answers.

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

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