Mircosoft versus Kai-Fu Lee and Google Lawsuit

   Microsoft's lawsuit against Kai-Fu Lee and Microsoft made all the major finanical papers today.  Filed in a trial court in Seattle, Washington, Microsoft argues that Dr. Lee violated a classic "non-compete" agreement he had signed with Microsoft.  Dr. Lee's employment agreement contained a one year hiatus in which he could not work for competitors once he had left Google's employment.  These agreements were big news during the technology boom of the 90s, when tech companies most valuable resources, their employees, walk out the door every night.  Courts and some legislatures are suspicious of the agreements and limit their time and geographical scope;  lawyers butress ans supplement the agreements with a rising flood of confidential information protection provisions (duties on handing documents and on revealing all confidential valuable information).  Companies rarely sue on the agreement because they themselfs are in the hiring game and are themselves susceptable to suit.  Microsoft, for example, sued a start-up, Cross-Gain, on such agreements in the 90s.  Moreover, the lost employee will rarely come back.  The suit does hold up a competitor for a short time, but the cost is marginal (they would not have otherwise had the employee anyway).  In essence, it is only when the defection is very high level and very important that the agreements are enforced, as a way of demonstating to other high level employees that are still on the job that the agreements are important.  The agreements and their supplementing documents are in the borderline of the definition of property rights;  courts must define what belongs to an employee and what belongs to the employing company.  Clarity is critical, for the parties can contract around whatever the rules are.  Courts are concerned with uneven bargaining power on the employement agreement (young employees sign anything to get a paycheck), however, and build escape hatches into the rules.  The escape hatches muddy the rules, tempt folks to ignore the agreements, and encourage litigation.