Microsoft Says Lee Was Google’s Mole

Microsoft has charged that former executive Kai-Fu Lee began helping Google with its China business strategy while still taking Microsoft’s money, according to court documents made public on Tuesday in the dispute of Google’s hiring of Lee.

In a motion for a preliminary injunction against Lee’s going to work as head of Google’s new China research lab, Microsoft accused Lee of passing along a confidential document outlining Microsoft’s own China strategy.

“Shortly after offering his services to Google, and while still in Microsoft’s employ, Dr. Lee sent a document he prepared for Steve Ballmer entitled ‘Making it in China’ to Google, after removing the ‘Microsoft Confidential’ label from the document and making other changes,” the motion alleged.

“Also while still on Microsoft’s payroll, he advised Google on its business in China, including where it should locate its offices, who it should hire, how it should strategize for the market, and advising that Google should look to Microsoft as a source of talented employees.”

In an e-mail, Google associate general counsel Nicole Wong said, “The information Microsoft says is confidential had been presented publicly repeatedly long before Kai-Fu contacted Google. It wasn’t confidential, period.”

Microsoft handed Lee his copy of a suit alleging he had violated his non-compete agreement when Lee gave notice, according to an earlier statement by Lee. Microsoft is suing Lee and Google in Superior Court of the State of Washington.

It won a temporary restraining order against Lee’s going to work at Google; arguments today aim at making the restraining order last through the trial.

Google countersued Microsoft in California State court, then moved the trial to U.S. District Court for the Northern District of California.

In defense of the Washington State suit and in its countersuit, Google alleges that Lee’s activities for Google will be different from the work he did at Microsoft, where his last position was head of the Natural User Interaction Division.

But Microsoft countered that, in an e-mail from Lee to Google CEO Eric Schmidt revealed during the discovery process, Lee described his activities at Microsoft as “working on areas very related to Google.”

Later, in an e-mail to Microsoft Chairman Bill Gates, Lee wrote that he spent 10 percent to 15 percent of his time on Microsoft’s activities in China and bragged that he had written several documents that became the cornerstone of Microsoft’s China strategy.

Google stated that Lee hadn’t recruited for Microsoft in China for the past five years, and that the “Making it in China” paper contained general, public information.

“The version … that Dr. Lee gave Google contains general and publicly available ideas about how a multinational company should do business in China,” Google’s court documents said. “This paper was originally written by Dr. Lee … as part of his effort to prevent Microsoft from continuing to act counterproductively in China.”

In fact, Google said, Lee had distributed multiple versions of the paper since 2003; only one section contained “Microsoft Confidential” information.

According to Microsoft’s court papers, Google offered Lee a compensation package worth more than $10 million, including a $2.5 million signing bonus and another $1.5 million after one year. Microsoft paid Lee a paltry-by-comparison $1 million in 2004.

Microsoft will spend today and tomorrow presenting evidence in support of its request to the Washington court to bar Lee from going to work at Google .

The Washington State trial is scheduled for Jan. 9 2006.

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