Google, Microsoft Settle Legal Battle

Ending a five month drama that seemed more a soap opera than legal battle, Microsoft and Google late Thursday announced they had reached a settlement regarding Kai-Fu Lee, the famed engineer who left Microsoft to head Google's Chinese research and development center.

The legal wrangling between the rivals began on July 18 when Microsoft announced that it would pursue legal action against Google. The Redmond company argued that Lee was breaking confidentiality and non-competition agreements he signed before working for Microsoft.

A Seattle court agreed with Microsoft on July 29, preventing the hiring of Lee, but that ruling was overturned in early September. The judge said that while he will honor Microsoft's non-compete agreement, recruiting for the China location is not a violation of that.

At the same time, Google filed its own suit in California in an effort to invalidate Lee's Microsoft contract. To Google's dismay, that case was stayed until the outcome of Microsoft's suit in the Washington state court was known. A trial was scheduled for January 9, 2006.

The drama reached a crescendo when, in court filings, a former Microsoft employee accused company CEO Steve Ballmer of threatening to "kill" the search giant and throwing a chair. Although Ballmer publicly refuted the claims, he could not stop a barrage of jokes on the matter.

Terms of the settlement were not disclosed, but both companies said they were pleased to have resolved the matter.

"The parties have entered into a private agreement that resolves all issues to their mutual satisfaction," Microsoft said in a statement. "The terms of the agreement are confidential and all parties have agreed to make no other statements to the media regarding it."