August 26, 2005 12:29 PM PDT
Legal argument could hamper high-tech job-changers
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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.
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.
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
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