Legal argument could hamper high-tech job-changers

Buried in Microsoft's lawsuit against its former executive Kai-Fu Lee and Google is a legal doctrine that could make tech professionals shiver.

The high-profile dispute largely hinges on a noncompete agreement Lee signed with Microsoft. But in court filings, the software giant has also mentioned the theory of "inevitable disclosure," which holds that in some circumstances people can't avoid sharing or relying on trade secrets from their former employer when moving to a competitor.

Thanks to this increasingly popular legal argument, techies and other employees could be in for a surprise when they try to switch companies. In states that accept the inevitable disclosure concept, employers can sue defectors even if they've signed only a confidentiality agreement--or even if they haven't signed an employment agreement at all, said Robin Meadow, an attorney with the firm Greines Martin Stein & Richland.

News.context

What's new:
Microsoft's suit against Kai-Fu Lee and Google invokes a theory that holds that in some circumstances people can't avoid sharing or relying on trade secrets from their former employer when moving to a competitor.

Bottom line:
Thanks to this increasingly popular legal argument, defectors might face a lawsuit even if they did not sign agreements not to compete or not to disclose confidential information.

"It's sort of an unwritten noncompete contract, in effect," Meadow said. "The fact that you haven't signed something doesn't mean you're safe when you move to another company."

Chief scientists and engineers at high-tech companies, as well as executives, are particularly vulnerable to the inevitable disclosure argument, according to Martin Foley, an attorney with the law firm Sonnenschein, Nath & Rosenthal. Courts making inevitable disclosure rulings tend to bar a worker from a new position for a year or less, but the concept conceivably could keep someone from taking a new job in their field forever, Foley said.

"Inevitable disclosure is ultimately, potentially, a form of indentured servitude, if it's applied in an extreme manner," Foley said.

A few years ago, Foley himself helped convince a California court of appeals to reject the inevitable disclosure doctrine. But it has been upheld in federal court. Employer suits that call on the inevitable disclosure doctrine are on the rise and now number in the hundreds each year, said Johnny Taylor, partner at the law firm McGuireWoods. It's difficult to say how many state courts have ruled in favor of at least a limited version of inevitable disclosure.

"It's become a trend," said Taylor, also chair of the Society for Human Resource Management professional group. "This theory or doctrine is taking hold."

Microsoft v. Google
The issue has gained renewed attention thanks to a bitter and at times personal legal spat between tech giants Microsoft and Google. After Google hired Lee to run its China operations last month, Microsoft filed suit in a Washington state court claiming Lee was breaking a contract by taking the new position. Coverage of the legally complex case has focused on Microsoft's claim that Lee's new job violates a one-year noncompete clause, which bars him from doing work that would compete with projects he worked on at Microsoft.

But near the end of Microsoft's initial complaint, the company accuses Lee of violating nondisclosure provisions in his contract. In doing so, the software giant calls on the inevitable disclosure theory: "Lee's conduct threatens to disclose or Lee inevitably will disclose Microsoft's trade secrets to Google and/or others for his and/or Google's financial gain in the course of working to improve Google search products that compete with Microsoft, and in the course of establishing and building Google's presence in China to compete with Microsoft's efforts in China."

Microsoft spokeswoman Stacy Drake said the company is not trying to keep Lee, who founded a Microsoft research center in China, from taking his Google post forever. "We are asking that Dr. Lee and Google honor the one-year noncompete/confidentiality agreement that Lee signed with us," Drake said in a statement.

In court documents, Google has called Microsoft's suit a "charade" that's meant to scare Microsoft employees into staying put. Google has claimed that Lee is "not a search expert" and described him as peripheral to Microsoft's business in China--though Microsoft says a document it found in the recycle bin of one of Lee's computers indicates Google anticipated a possible lawsuit in hiring Lee.

Lee has said he has not disclosed any Microsoft secrets to Google, and Google said it has told Lee not to disclose Microsoft's confidences.

A recent court filing by Lee makes the case that he does not possess key confidential information related to Microsoft's Internet search efforts: "Dr. Lee states that he has never seen and has no relevant technical knowledge of Microsoft's Internet search engine source code, nor has he ever attended a Microsoft Internet search architectural review."

Google declined comment for this story. (Google representatives have instituted a policy of not talking with CNET News.com reporters until July 2006 in response to privacy issues raised by a previous story.)

A Washington judge has temporarily barred Lee from performing work at Google that competes with what he did at Microsoft.

Even if Microsoft's argument about Lee breaking the noncompete clause fails in court, the company could prevail with its claims about

[Dachi]

I have an answer to this problem.

Kai-Fu cannot be in both places at once and Microsoft is not happy about him defecting to Google but I have a perfect solution. Google can instead hire me for $500,000. If my employer does not like the idea I will have enough left over to give them $460,000 to not care.

[Dachi]

I have an answer to this problem.

Kai-Fu cannot be in both places at once and Microsoft is not happy about him defecting to Google but I have a perfect solution. Google can instead hire me for $500,000. If my employer does not like the idea I will have enough left over to give them $460,000 to not care.

[R. U. Sirius]

I agree

It's time to end the musical chairs shuffle. Companies should do what baseball does: sign people to a guaranteed contract (at least for managerial and science positions), with options for renewal.

You're crazy

I reserve the right to work for whomever I choose. I will fight to the end, any attempt to allow employers to dictate where I can earna living.

My job has been outsourced to India TWICE in four years - where was employer loyalty THEN ???

The only way I will have any loyalty to an employer, is if they have a proven loyalty to me - give me TENURE !!!

After all

"Microsoft's suit against Kai-Fu Lee and Google invokes a theory that holds that in some circumstances people can't avoid sharing or relying on trade secrets from their former employer when moving to a competitor.".

This implies that the fight over the non-compete contract, is actually suggesting that Dr. Lee will break his confidentiality agreement - a whole different thing.

On the grounds that he would eventually disclose some non-public information - Then this issue should apply to ALL trades that gain any non-public information - lawyers, accountants, security guards - even priests (in the confessional). Once they know something about someone, they shouldn't be allowed to work with another client - try telling a lawyer, that he can only have 1 client, and then not work for a year after ending the association with that client - good luck !

[R. U. Sirius]

I agree

It's time to end the musical chairs shuffle. Companies should do what baseball does: sign people to a guaranteed contract (at least for managerial and science positions), with options for renewal.

You're crazy

I reserve the right to work for whomever I choose. I will fight to the end, any attempt to allow employers to dictate where I can earna living.

My job has been outsourced to India TWICE in four years - where was employer loyalty THEN ???

The only way I will have any loyalty to an employer, is if they have a proven loyalty to me - give me TENURE !!!

After all

"Microsoft's suit against Kai-Fu Lee and Google invokes a theory that holds that in some circumstances people can't avoid sharing or relying on trade secrets from their former employer when moving to a competitor.".

This implies that the fight over the non-compete contract, is actually suggesting that Dr. Lee will break his confidentiality agreement - a whole different thing.

On the grounds that he would eventually disclose some non-public information - Then this issue should apply to ALL trades that gain any non-public information - lawyers, accountants, security guards - even priests (in the confessional). Once they know something about someone, they shouldn't be allowed to work with another client - try telling a lawyer, that he can only have 1 client, and then not work for a year after ending the association with that client - good luck !

[M C]

This opinion should be a blog post.

Or are editorials "news"?

[M C]

This opinion should be a blog post.

Or are editorials "news"?

[Bill Dautrive]

Insane

The way corporations want things to go is to never allow employees to leave, and be able to enforce it legally.

What is Lee supposed to do? Suffer at MS or stop working in his chosen profession. Corporations are getting too much power, and need to be curtialied against these kinds of abuses.

That a court could even entertain this lawsuit shows that our courts are equally insane and out of touch.

[hadaso]

Welcome back slavery!!!

Slavery is back!
I always thought the crazy hours my friends in the "industry" work (staying till midnight just because something urgent came up...) was a sort of modern slavery...
But now I see that an employer can almost OWN an employee, preventing the employee from working for anyone else...

I think that when companies allow employees access to trade secrets they are taking a risk. They risk having to rely on the worker's integrity in keeping the secret. If they are not confident in the worker's integrity they should not allow access to the trade secret in the first place. A risk is a risk. An individual should be free to leave an employer, and an individual should be free to work in her profession/field of expertise. It's the corporations that are using the individuals' knowledge and not vice versa. Corporations have no knowledge. They have no brains. They hire brains, but they should not be allowed to own them. If they have a problem with an employee working for a competitor they should spend money to avoid the problem.

Anyway, if a former employer uses a court to prevent a former employee from working, and the court rules that the employee cannot work for a competitor, the court should also make the former employer pay the former employee for not working!

[cyberblatt]

Example of the USA Democracy the rest of the world does not want !

USA dares to call themselves democratic?
Is there a dictionary at all in that banana republic?
Give me a break!
You better re-write your laws or or be deleted!
Make a choice as long you can. You can not terrorize the rest of the World... it will turn against you very soon!
You are not hated because you are rich, but because you are crooks = your laws and specially your foreign policy!
It just sucks!
Your country is more hated than the nazis, because you are worst.
Just in case you do not have a mirror. This is how the rest of the World sees you.
Have a nicer day. Respect the others too, before it gets to late! That is my advise 4 U.
Before you get NUKED! My prediction is 98% good at all times!
Regards
Hungarian Freedom fighter from Canada

[hadaso]

Welcome back slavery!!!

Slavery is back!
I always thought the crazy hours my friends in the "industry" work (staying till midnight just because something urgent came up...) was a sort of modern slavery...
But now I see that an employer can almost OWN an employee, preventing the employee from working for anyone else...

I think that when companies allow employees access to trade secrets they are taking a risk. They risk having to rely on the worker's integrity in keeping the secret. If they are not confident in the worker's integrity they should not allow access to the trade secret in the first place. A risk is a risk. An individual should be free to leave an employer, and an individual should be free to work in her profession/field of expertise. It's the corporations that are using the individuals' knowledge and not vice versa. Corporations have no knowledge. They have no brains. They hire brains, but they should not be allowed to own them. If they have a problem with an employee working for a competitor they should spend money to avoid the problem.

Anyway, if a former employer uses a court to prevent a former employee from working, and the court rules that the employee cannot work for a competitor, the court should also make the former employer pay the former employee for not working!

[cyberblatt]

Example of the USA Democracy the rest of the world does not want !

USA dares to call themselves democratic?
Is there a dictionary at all in that banana republic?
Give me a break!
You better re-write your laws or or be deleted!
Make a choice as long you can. You can not terrorize the rest of the World... it will turn against you very soon!
You are not hated because you are rich, but because you are crooks = your laws and specially your foreign policy!
It just sucks!
Your country is more hated than the nazis, because you are worst.
Just in case you do not have a mirror. This is how the rest of the World sees you.
Have a nicer day. Respect the others too, before it gets to late! That is my advise 4 U.
Before you get NUKED! My prediction is 98% good at all times!
Regards
Hungarian Freedom fighter from Canada

[heystoopid]

Oh, well

Modern buisiness ethics of employment, or lack there of, treat all workers, like slaves(ie long long hours, low pay unsafe working conditions et al,steal, divert or subvert pension entitlements et al). And if they want to leave for better pay and conditions, terminate that right, under the banner trade secrets. For even shonkier work conditions and very bad management attitude to workers Electronic Arts, in which all but the very senior management are treated as slaves! Oh well, welcome to the new world order, in which senior management now have the unshakeable belief, that all workers should bow down before them, and worship them as gods!

[heystoopid]

Oh, well

Modern buisiness ethics of employment, or lack there of, treat all workers, like slaves(ie long long hours, low pay unsafe working conditions et al,steal, divert or subvert pension entitlements et al). And if they want to leave for better pay and conditions, terminate that right, under the banner trade secrets. For even shonkier work conditions and very bad management attitude to workers Electronic Arts, in which all but the very senior management are treated as slaves! Oh well, welcome to the new world order, in which senior management now have the unshakeable belief, that all workers should bow down before them, and worship them as gods!

[Joe Votour]

Simple solution to the problem

There is a simple solution (in general, not necessarily this specific case) to the problem, but employers would likely balk at it.

If you think that I have important information, and you want a non-compete clause, then pay me for the duration of the non-compete clause. There could be provisions in place for terminating the contact, in which case, I'd be free to work for whomever I want, but otherwise, as an incentive not to take a job at a competitor, I'm getting getting paid.

An example to clarify: If my employer doesn't want me to work for a competitor for one year, then they should pay me one year's salary, and I won't work for a competitor for one year. I think that's fair.

-- Joe

[Gleeplewinky]

Not that crazy...

In fact, my previous employer did just that. My
employee agreement gave the company veto rights
on my accepting a new position with a company for
a duration of two years. If they invoked that
clause in the agreement, they were to pay me my
current salary and benefits for the duration
(even if I accepted a job elsewhere, so long as
it was acceptable).

The rationale being that they were interested in
protecting their IP more than conservation of
funds. If they tried to prevent you from taking a
job in your chosen profession without any
compensation, even if with a prior agreement,
that they would risk that a court (or worse, a
jury) would invalidate the agreement outright and
likely risk high legal fees and possibly a
finding that the restriction on disclosure might
be thrown out as well.

If you think about it, for the majority of
scientific staff and even all but the highest
echelons of management, this clearly the way to
go. Why? The legal costs and bad press alone
would far surpass the cost of simply paying the
person to bide their time.

[Joe Votour]

Simple solution to the problem

There is a simple solution (in general, not necessarily this specific case) to the problem, but employers would likely balk at it.

If you think that I have important information, and you want a non-compete clause, then pay me for the duration of the non-compete clause. There could be provisions in place for terminating the contact, in which case, I'd be free to work for whomever I want, but otherwise, as an incentive not to take a job at a competitor, I'm getting getting paid.

An example to clarify: If my employer doesn't want me to work for a competitor for one year, then they should pay me one year's salary, and I won't work for a competitor for one year. I think that's fair.

-- Joe

[Gleeplewinky]

Not that crazy...

In fact, my previous employer did just that. My
employee agreement gave the company veto rights
on my accepting a new position with a company for
a duration of two years. If they invoked that
clause in the agreement, they were to pay me my
current salary and benefits for the duration
(even if I accepted a job elsewhere, so long as
it was acceptable).

The rationale being that they were interested in
protecting their IP more than conservation of
funds. If they tried to prevent you from taking a
job in your chosen profession without any
compensation, even if with a prior agreement,
that they would risk that a court (or worse, a
jury) would invalidate the agreement outright and
likely risk high legal fees and possibly a
finding that the restriction on disclosure might
be thrown out as well.

If you think about it, for the majority of
scientific staff and even all but the highest
echelons of management, this clearly the way to
go. Why? The legal costs and bad press alone
would far surpass the cost of simply paying the
person to bide their time.

[Betty Roper]

Slavery? Oh my god.

Is there anyone of color on these forums? Equating Lee, with a (no doubt) 6 figure income and perks up the wazoo to slaves is abominable.

He agreed, IN WRITING, to a package with his former employer. He's being held to account. This is not slavery, kids. Not even close.

[volterwd]

Stop and think

Everything trickles down... one day you cant go from MS to Google... the next you cant go from University to University... then you cant go from MCdonalds to Burger King heaven forbig they find out the secret sauce.

[volterwd]

And one more thing

Why the heck do you think Blacks and slaves go hand in hand... there were slaves of every colour pick up a book

[Had_to_be_said]

Yes... It IS slavery.

First, YOUR ignorance is shocking. Many races, YES, including all manner of European-Caucasians have been enslaved throughout history.

Second, the definition of a "slave" is someone who is "chattel", ...unable to determine their own disposition, or, to truly own property.

Further, it is the "ruler/owner/royalty" who determines what "a slave" may possess, what "a slave" may undertake, and where "a slave" can live or work.

Often, such "slave-owners" bought, sold, and traded, "...the people in their charge", for their-own [the owners], "...benefit".

"Serfs" were slaves. "Peons" were slaves. And, now "corporate employees" are being told that this, "status", is very much what they must accept.

In fact, I recently heard a business-pundit on the radio actually bemoaning the fact that usually an employer could NOT treat their employees "...as slaves". His position was that this was causing an "undue hardship" upon businesses. And, that, until this situation was reversed, "society, in general" was going to pay the price of "...too much personal-freedom".

So, YES, we ARE talking about "...slavery".

[Betty Roper]

Slavery? Oh my god.

Is there anyone of color on these forums? Equating Lee, with a (no doubt) 6 figure income and perks up the wazoo to slaves is abominable.

He agreed, IN WRITING, to a package with his former employer. He's being held to account. This is not slavery, kids. Not even close.

[volterwd]

Stop and think

Everything trickles down... one day you cant go from MS to Google... the next you cant go from University to University... then you cant go from MCdonalds to Burger King heaven forbig they find out the secret sauce.

[volterwd]

And one more thing

Why the heck do you think Blacks and slaves go hand in hand... there were slaves of every colour pick up a book

[Had_to_be_said]

Yes... It IS slavery.

First, YOUR ignorance is shocking. Many races, YES, including all manner of European-Caucasians have been enslaved throughout history.

Second, the definition of a "slave" is someone who is "chattel", ...unable to determine their own disposition, or, to truly own property.

Further, it is the "ruler/owner/royalty" who determines what "a slave" may possess, what "a slave" may undertake, and where "a slave" can live or work.

Often, such "slave-owners" bought, sold, and traded, "...the people in their charge", for their-own [the owners], "...benefit".

"Serfs" were slaves. "Peons" were slaves. And, now "corporate employees" are being told that this, "status", is very much what they must accept.

In fact, I recently heard a business-pundit on the radio actually bemoaning the fact that usually an employer could NOT treat their employees "...as slaves". His position was that this was causing an "undue hardship" upon businesses. And, that, until this situation was reversed, "society, in general" was going to pay the price of "...too much personal-freedom".

So, YES, we ARE talking about "...slavery".

cough cough... pass the cough drops..

yah.. I need some more cough drops.. just leave
them on the floor on the way the mens locker room
at my health club... you know what? people are
starting to take me seriously now. I look forward
to having a deep sencere non-verbal conversation
with all of you..

cough cough... pass the cough drops..

yah.. I need some more cough drops.. just leave
them on the floor on the way the mens locker room
at my health club... you know what? people are
starting to take me seriously now. I look forward
to having a deep sencere non-verbal conversation
with all of you..

[Sentinel]

Rights

I am apalled at this story. The fact that companies can bar you from completely exercising your profession is incredible. I can't believe how low the courts have sunk. A person studies hard for years at a university to earn a degree, spends thousands of dollars on their education, and some company can tell them that all their efforts are worthless. Is not a constitutional right to be able to work, to pursure happiness? Their is only one word to describe this: SLAVERY.

I can't believe the US is still talking about democracy in Iraq and the rights of the people. The US people no longer have any rights, they just haven't realized yet. Perhaps in a few years there will be a new revolution, the people rising against the abusive courts and politicians...

[Sentinel]

Rights

I am apalled at this story. The fact that companies can bar you from completely exercising your profession is incredible. I can't believe how low the courts have sunk. A person studies hard for years at a university to earn a degree, spends thousands of dollars on their education, and some company can tell them that all their efforts are worthless. Is not a constitutional right to be able to work, to pursure happiness? Their is only one word to describe this: SLAVERY.

I can't believe the US is still talking about democracy in Iraq and the rights of the people. The US people no longer have any rights, they just haven't realized yet. Perhaps in a few years there will be a new revolution, the people rising against the abusive courts and politicians...

[bp2004]

Humorous since MSFT has done this many times

For example, remember Anders Hejlsberg? He was lead architect of Turbo/Borland Pascal, then Delphi. Microsoft then aggressively recruited him away, sending limos to pick him up at lunch, offers of being paid far more than he was at Borland (far more than $500,000 than guy in this article.)

So now he's one of the lead people on Microsoft Visual Studio.NET

I agree with earlier poster however, if companies want to retain someone so badly, then have them sign a long term guaranteed contract that both parties agree too, otherwise person should be free to leave.

Its supposed to be a free country? Correct?

[bp2004]

Humorous since MSFT has done this many times

For example, remember Anders Hejlsberg? He was lead architect of Turbo/Borland Pascal, then Delphi. Microsoft then aggressively recruited him away, sending limos to pick him up at lunch, offers of being paid far more than he was at Borland (far more than $500,000 than guy in this article.)

So now he's one of the lead people on Microsoft Visual Studio.NET

I agree with earlier poster however, if companies want to retain someone so badly, then have them sign a long term guaranteed contract that both parties agree too, otherwise person should be free to leave.

Its supposed to be a free country? Correct?

[bp2004]

"At Will" Employment

I had to comment one more time, on a different line of reasoning.

I live in a state (Michigan) where employment is "at will" (not the only state either). What does this mean? Well for all practical purposes it means my employer can fire me at any time for any reason, barring a few circumstances where legal protections apply (race, religion, disability etc)

Earlier this year a Michigan employer fired employees who smoked. Granted he gave them time to quit and if they refused they were termed. The reasoning was the company would be able to lower health insurance costs with no smokers.

Now you must understand, if I know my employer can fire me at any time for any reason and I accept that, why the hell should I be prevented from leaving my job on my own terms and time of my choosing?

[bp2004]

"At Will" Employment

I had to comment one more time, on a different line of reasoning.

I live in a state (Michigan) where employment is "at will" (not the only state either). What does this mean? Well for all practical purposes it means my employer can fire me at any time for any reason, barring a few circumstances where legal protections apply (race, religion, disability etc)

Earlier this year a Michigan employer fired employees who smoked. Granted he gave them time to quit and if they refused they were termed. The reasoning was the company would be able to lower health insurance costs with no smokers.

Now you must understand, if I know my employer can fire me at any time for any reason and I accept that, why the hell should I be prevented from leaving my job on my own terms and time of my choosing?

[alx359]

the 2 sides of the coin

It's clear legalese could be used to chain employees at the mercy of corporations. Also clear however, subversive hiring and unloyal employees could harm very hard corporate assets.

Another problem is, the globalization of workforce and the fierce competition with the slimming down of profits in many industries are reinforcing the predator nature of any corporation when fighting to survive. In such form of capitalism, most corporations alienate from a social-aware mission for the benefit of their constituents and society in general, but enforce their nature as a scheme to suck up by an elite the added-value created by the rest.

Regretfully, all these are simply reflections of a too self-absorbed and greed-driven society. A solution? Well, IMO, subversive hiring is the most predatory component in this picture and companies using this approach should be kept accountable and pay the extra price of making waters turbier.

Probably a good deal for all here is, the non-compete agreement sounds not too bad to me, but the price of jumping to another boat should be paid by all interested parties in some fair degree. The employee should get paid, but a comparatively less beneficial wage, while embracing some community-friendly activity during this time. If fighting employers, they shall pay both the costs of the career change (one because wants to keep the employee out of business and the other because finds a benefit hiring them by all means).

[alx359]

the 2 sides of the coin

It's clear legalese could be used to chain employees at the mercy of corporations. Also clear however, subversive hiring and unloyal employees could harm very hard corporate assets.

Another problem is, the globalization of workforce and the fierce competition with the slimming down of profits in many industries are reinforcing the predator nature of any corporation when fighting to survive. In such form of capitalism, most corporations alienate from a social-aware mission for the benefit of their constituents and society in general, but enforce their nature as a scheme to suck up by an elite the added-value created by the rest.

Regretfully, all these are simply reflections of a too self-absorbed and greed-driven society. A solution? Well, IMO, subversive hiring is the most predatory component in this picture and companies using this approach should be kept accountable and pay the extra price of making waters turbier.

Probably a good deal for all here is, the non-compete agreement sounds not too bad to me, but the price of jumping to another boat should be paid by all interested parties in some fair degree. The employee should get paid, but a comparatively less beneficial wage, while embracing some community-friendly activity during this time. If fighting employers, they shall pay both the costs of the career change (one because wants to keep the employee out of business and the other because finds a benefit hiring them by all means).