July 28, 2005 4:00 AM PDT

Poachers encroach on tech-talent turf

The ongoing legal spat over Google's hiring of a Microsoft executive is a reminder that "poaching" of top employees is alive and well.

But it's risky business in an era of employment agreements with noncompete clauses and other restrictions, experts said.

Tim Farrelly, president of San Francisco-based recruiting firm Coit Staffing, said that compared with the late 1990s, the practice has decreased, with companies becoming more selective. "They're not just taking anybody anymore," he said. "You really have to come to the table with a solid skill-set."

The issue of recruiting employees from under a competitor's nose--and the legal ramifications of doing so--resurfaced last week with the tussle involving software giant Microsoft, its former executive Kai-Fu Lee, and search king Google.

The strings
of attachment

Employment agreements can have a variety of post-termination restrictions. In an essay earlier this year in HR Magazine, attorney Jonathan Segal cited five types:

• Restrictive covenants: These prohibit the employee from competing with the employer for a specified period in a particular geographic area.

•  Nonsolicitation of customers: These bar the employee, for a set period, from soliciting business from the prior employer's customers or potential customers.

• Nonsolicitation of employees: These prohibit an employee, for a set period, from soliciting certain individuals to leave their current employer and work with the employee.

•  Confidentiality: These bar an employee, after termination, from using or disclosing confidential information created or acquired in the course of employment.

•  Inventions: These specify that writings, products or other inventions created in the course of employment are the property of the prior employer; they also bar the employee's use of such inventions, for personal benefit or for the benefit of any other employer.

Source: HR magazine.

Google announced it had hired Lee to lead a new research and development center in China and serve as president of its Chinese operations. The same day, Microsoft sued both Google and Lee, who was a vice president at Microsoft and played a key role in its operations in China.

The suit, filed in a Washington state court, claims Lee is breaking a noncompete agreement in taking his new job, and it accuses Google of encouraging Lee to violate promises made to Microsoft.

"Lee entered into a valid and binding agreement with Microsoft in which he promised that he would not, for a period of one year following termination of his employment with Microsoft, compete with Microsoft in certain, defined ways..." the suit states.

Google and Lee fought back this week. "This lawsuit is a charade," They said in court documents filed prior to a Wednesday hearing in Seattle. "Indeed, Microsoft executives admitted to Lee that their real intent is to scare other Microsoft employees into remaining at the company."

In another filing made before Wednesday's hearing, Lee claims that in a July 15 meeting, Microsoft Chairman Bill Gates told him, "Kai-Fu, (CEO) Steve (Ballmer) is definitely going to sue you and Google over this. He has been looking for something just like this, someone at a VP level to go to Google. We need to do this to stop Google."

Last Thursday, Google asked a California court to declare Microsoft's noncompete provision invalid.

Google appears to be taking advantage of a California rule that frowns on noncompete contract clauses, and a war over courtroom jurisdiction could loom. Google representatives did not return requests for comment.

Long, sordid history
This talent tiff among tech-world powerhouses has many precedents. This is not, for example, the first time Microsoft has turned to legal channels to pursue former employees it felt were unfairly competing.

Several years ago, the company sued when former executive Tod Nielsen and a number of ex-Microsoft employees went to work for Crossgain, a start-up focused on allowing business applications to run over the Web.

Crossgain eventually disassociated itself from a number of Microsoft workers that were still bound to noncompete agreements. Among the other ex-Microsofties who were forced to step down, at least temporarily, were Nielsen and Adam Bosworth, a founder of Crossgain who eventually joined Google.

And Microsoft has been on the other side of things. In 1997, Borland International sued the software giant, claiming it had hired 34 Borland employees over three years in an attempt to put Borland out of business.

Earlier that year, database software company Informix tried to obtain a restraining order against Oracle after 11 of its software engineers left for

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