Log in

No account? Create an account

Previous Entry | Next Entry

Disclaimers: The opinions expressed in this entry are those of the author, William H. Hsu, only. The factual statements cited in this article are verifiable through the mainstream IT media. Relevant articles, both factual and editorial, are linked where feasible.

Some of you know that KFL, the former Microsoft exec who left for Google and whom MS immediately sued to keep him from starting Google Labs Asia, is my uncle (my mom's younger brother). I've been sitting on my hands somewhat regarding the controversy surrounding the case, owing to the probable perception of partiality that would color any comments I made. Recently, however, I've come across some misconceptions that I thought I would correct here. I also found some relevant articles:

  • CNet (Ed Frauenheim, 26 Aug 2005): `Buried in Microsoft's lawsuit against its former executive Kai-Fu Lee and Google is a legal doctrine that could make tech professionals shiver... 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.'

  • Slashdot (28 Aug 2005): In a discussion thread on Frauenheim's article, readers compare the ramifications of the suit to a new species of feudalism and preemptive lawsuits in Jennifer Government (the inspiration for NationStates). Arguments range from "never sign a noncompete agreement" (patient: "it hurts when I do this"; doctor: "then don't do that") to "the employer should pay if it expects blanket coverage from a noncompete". A couple of cogent points were made several times: that most IT professionals have most or all the liabilities of a noncompete (not being able to work for a competitor on a broadly-defined or undefined set of R&D topics) and few or none of the benefits (the new company being willing to pay you for a year without your being able to work on what you were hired to do). Thus the potential downside if the court compels KFL not to start is that IT professionals may find it harder and harder to move to a new company.

I have a few points to add to these.

First, as some readers pointed out, the precedent that the case would set, enabling companies to chain down employees using non-disclosure agreements (NDAs) alone, amounts to a kind of indentured servitude, which is illegal when it comes down to it.

Of course he didn't have to sign it (not unless he wanted the job back in Redmond when he came back from MSR Asia). Of course he read it. Of course in 2000 the groups he had responsibility for were somewhat different than the ones he had in 2005. Think of it as effectively thus: a company hires an exec, sends him to his ancestral country to start a lab, brings him back, and has him sign a non-compete agreement then. Five years later, the company (purportedly) divulges info on beating competitor X to its senior management, including the now-promoted exec. Exec now has privy information. Some of the hundreds of people in this exec's groups are working on the X-Killer app. Exec now has privy information and is "in charge of X"; oh, noes! Now exec goes to X. Is he automatically in violation of what he signed?

Substitute your top company in your favorite niche market for X. Sony and PlayStation, Skype and VOIP, et cetera ad infinitum et ad nauseam. Eventually, you might see that non-compete agreements are more nebulous things than those who live by them would have it, and the breadth of interpretation enters very much into it. Only a Sith deals in absolutes, as they say.

Second, a lot of people are painting a thick line between NDAs, which don't say "I won't go work for your competitor", and non-compete agreements (NCAs), which explicitly do. "You signed on the dotted line and got paid for it." The reality of the matter is that:

  • 1. In the general case, NDAs have thus far been actionable only if already violated.

  • 2. Companies generally don't go after NCAs unless an employee is poached for specific knowledge, technology, or unique skills covered by the contract.

  • 3. In this case, as Frauenheim reported from the court filings in his August 2nd article, the crux of the debate is whether what KFL would do at Google, and in founding the facility in Beijing, China, actually overlaps enough with what he did at MS to count as an impending NCA violation.

Put these three together and you can see what's going on. It's a legal dragnet for MS: first, they claim it does overlap enough; if that doesn't fly (which it actually doesn't), they have the safety net of "inevitable disclosure" with which to muddy the waters. So, something that should concern you if you are a CS researcher, or indeed an IT professional of any kind, is that companies such as MS are willing to set up legal precedents that could mean NDA == NCA, just in case the things on your personal no-fly list aren't enough to keep you out of the enemy's camp.

Third, a lot of people don't seem to fully grasp that like any competition, hiring away R&D people is itself a legal contest between the old and new company where the NCAs are the playing field. The new hire's job description are the pieces. The old company inflates the job description as much as it can convince the court to accept and has to demonstrate that this violates the NCA, and the new company defends against these allegations. Both sides can offer claims about what the defector will actually do. Because it's essentially trying to prove a negative, noncompetes are not gone after often; sometimes they are upheld, though, because the terms are of limited duration.

Fourth, some people who aren't reading the news (or history) carefully enough keep saying things like:

  • "He went to work for the identical department at the competitor." Um, no. This is called believing everything you read. KFL had several groups under him, speech rec being his primary area and his primary responsibility. Google's claim is that the actual responsibilities and technical knowlege of MS's search technology that KFL had were of tangential relevance to its search strategy. The bar is pretty high on what consitutes the same technology.
    Being a machine learning researcher, I'm aware of the relationship that ASR and NLP in general, have to search. Nobody's claiming they are disjoint. But "exactly the same"? Learn about the technology and judge for yourself.

  • "Oh, it'd be {hard | easy} for KFL to find another job." KFL wants to work for Google, and Google wants him. Nobody has ever denied that, to my knowledge! Much as I'd like the comments implying that Google scooped him up after he went out the door to be true, KFL did leave MS to go to Google.

  • "He's privy to MS's confidential strategy!" Repeat after me: knowing something confidential doesn't violate NDAs; disclosing it does. Similarly, one has to disclose or act on privy knowledge to violate an NCA. The reason NCAs are actually broader in some sense, and say you just can't go work for the competitor if you're going to be doing the same thing, is precisely because the presumption is that in that case, you're going to use that privy information, advertently or inadvertently. So, the court provides for a "reasonable waiting period" for the old company to revise its strategy, or (more likely and more effectively in the internet search industry) for the highly dated insider information to expire.

  • "So he takes a vacation for a year - so what?" Yes, Google's willing to pay him anyway. No, my cousins won't go hungry. So what? As I started to explain above: A year is a very long time in search. The problem is that KFL wasn't just in charge of search, he wasn't the only one in charge of search, and most important, he wasn't mainly doing search. So Google's argument is that holding him for this waiting period isn't reasonable because managerial and administrative tasks such as hiring for the new lab are going to go without KFL's leadership in the meantime.

  • "Who could possibly be worth all this legal hassle?" You'll permit me a bit of family pride: KFL is. Objectively speaking, as a CS researcher, I can tell you that his reputation and his track record are really that strong.

There you have it: my $0.03 worth.

Thanks for reading, and please feel free to post relevant links here, respond with your opinions or questions, and forward this link wherever you like.



( 45 comments — Leave a comment )
Sep. 2nd, 2005 02:54 pm (UTC)
I very much agree with your concerns. We don't have the IT professional agreement from the movie Paycheck. We can't. So prior training and experience *might* inform future actions. Well, that's part of having human employees. So sorry some companies don't think that employees should have any life that doesn't support them directly. Yes, Mr. Gates, there is life after Microsoft.
Sep. 3rd, 2005 09:26 pm (UTC)
Editorials, Microsoft's business model, and Porter's Five Forces
I am trying to get some editorials out: the NY Times, LA Times, and Chicago Tribune seem likely venues, but BusinessWeek seems to take only things from Gates himself and the like. (Thanks for suggesting Wired, Scientific American, and Mother Jones.)

I actually don't dislike Gates as a person, and I honestly do admire and respect him for his philanthropy (it may be the only reasonable thing to do given his wealth, but there are plenty of multibillionaires who are far less reasonable). I can't say the same positive things about Microsoft's other senior execs, nor the company's whole approach to this. Feudalism is just too far outmoded to even consider as a business model.

I will research things as time permits. I don't think most IT people realize the broader ramfications yet. It's not business as usual; it's actually broadening the ability of major corporations to put a fence around the pasture. IT has never had "lifers", so it makes no sense to try to force them to do it within the confines of one company for their whole lives. That some companies are starting to test the waters in this area is a very unfortunate trend. Not only is it bad for the field (consumers and professionals); it's actually bad for the companies as well, given that there is just enough anti-trust legislation to make doing so very short-sighted.

As you noted, the legislation has to be enforced and properly interpreted on behalf of the industry and the consumer.
Thanks for the critique about the five forces.

Sep. 2nd, 2005 03:58 pm (UTC)
So where can I get this new "X-Killer" app? Sounds pretty sweet...
Sep. 3rd, 2005 09:28 pm (UTC)
Microsoft's Start, a rival to Google
Haven't you heard of Start.com?

There's a beta here.

Re: Microsoft's Start, a rival to Google - gondhir - Sep. 3rd, 2005 10:00 pm (UTC) - Expand
X-Killer - banazir - Sep. 4th, 2005 03:37 pm (UTC) - Expand
Re: X-Killer - gondhir - Sep. 4th, 2005 07:32 pm (UTC) - Expand
Windows Mobile 5.0 - banazir - Sep. 5th, 2005 08:59 am (UTC) - Expand
Re: Microsoft's Start, a rival to Google - altamira16 - Sep. 4th, 2005 11:57 am (UTC) - Expand
Millersville, MD - banazir - Sep. 4th, 2005 08:59 pm (UTC) - Expand
Re: Millersville, MD - altamira16 - Sep. 4th, 2005 09:13 pm (UTC) - Expand
Sep. 2nd, 2005 04:02 pm (UTC)
Interestingly, an implication that I see from this "inevitable disclosure" is that once a company feels that they've got their hooks deep enough into an employee that he/she can never leave, then they never have to ever pay him more money. They have no incentive to try to keep him because he/she CAN'T LEAVE

Sep. 3rd, 2005 09:50 pm (UTC)
Employee rights
Hypothetically speaking, an individual inability to leave would not instantaneously and totally deprive an employee of bargaining rights. There would be the remedy of the courts, and collective bargaining would still be effective even if a particular employee was a "lifer".

Otherwise, wouldn't union membership be useless once an employee was part of a disenfranchised group, such as those past mandatory retirement age?

Re: Employee rights - gondhir - Sep. 3rd, 2005 10:02 pm (UTC) - Expand
Unionization of IT Professionals - banazir - Sep. 4th, 2005 03:36 pm (UTC) - Expand
Sep. 2nd, 2005 05:33 pm (UTC)
Very interesting.

I have to admit, I usually skip your posts, because I don't have time to read them in-depth, and it's impossible to skim them. But I stopped to have a closer look at this one.

Forgive me for translating (I'm a bit slow on the corporate legalese being thrown around - one more reason why I'll never make management) but what seems to have happened is that a man left one company for another whose business is in the same generic area, and the old company is trying to stop him from working at the new company under a 'noncompete' agreement.

A noncompete agreement is essentially a clause by which a company can say that once an employee has profferred their skills and knowledge in a specific area, the employee cannot go and work for a similarly based company using the experience, knowledge, and skills he may have gained from the old company.

Is this approximately what's happening?
Sep. 3rd, 2005 09:53 pm (UTC)
Essentially, yes
Hi, thanks for reading.
Your summary seems about right.

I would say "the experience, knowledge, and skills he may have gained at, or contracted to, the old company". Some of the claimed skills in noncompete agreements are just "things you can't take to the competitor" and there's no claim that they are things the ex-employee developed at the old company.

BTW, I'm curious as to your opinions on the matter.

Re: Essentially, yes - seldearslj - Sep. 3rd, 2005 10:09 pm (UTC) - Expand
(Deleted comment)
"The same thing" - banazir - Sep. 5th, 2005 12:02 am (UTC) - Expand
(Deleted comment)
Mmm... - gondhir - Sep. 5th, 2005 01:00 am (UTC) - Expand
(Deleted comment)
(Deleted comment)
(Deleted comment)
(Deleted comment)
Concerning "rich people" - banazir - Sep. 6th, 2005 02:33 am (UTC) - Expand
Re: Essentially, yes - seldearslj - Sep. 5th, 2005 06:39 am (UTC) - Expand
Not all years are created equal - banazir - Sep. 5th, 2005 09:06 am (UTC) - Expand
NCAs and the CodeWarrior - banazir - Sep. 5th, 2005 08:55 am (UTC) - Expand
Sep. 3rd, 2005 08:42 pm (UTC)
I hope everything works out well for your uncle. It must be a bit strange to find yourself in the middle of a potentially precendent-setting legal battle.

Is Microsoft seeking to not have your uncle work for a whole year?
Sep. 3rd, 2005 10:01 pm (UTC)

Strange is an understatement: I've never actually been sued, but as you know, I've been through inquisitions by lawyers ("friendlies" and "non-friendlies") , and any kind of audit can be nerve-wracking.

MS is seeking to have my uncle barred from joining Google for up to one year, and as I understand it, they have a list of specific things they are seeking to have him barred from working on during that period even if he does go. A couple of those things are actually things he was working on at MS; some are not, and some are not even close, according to Google.

Sep. 3rd, 2005 10:21 pm (UTC)
Re: Precedent-setting
It's reasonable for one company to request that their former employee not work on the exact same things at the new, rival company; however, it's unreasonable to add things that he did not work on for the old company.

For instance, I'm not sure how hiring new people to work on Google searching, or whatever they plan on doing in China, is going to reveal all the deep trade secrets of Microsoft's. It'll be interesting to see how this all unfolds.

Again, good luck to your family. (^_^)
KFL's MS and Google duties - banazir - Sep. 3rd, 2005 10:44 pm (UTC) - Expand
Sep. 4th, 2005 01:19 am (UTC)
Out of curiosity, are there any others in your family that do CS-type stuff? In my family, I'm the only one, except for my aunt, who has done a wee bit of bioinformatics (she's a genetics prof by trade).
Sep. 4th, 2005 03:30 pm (UTC)
The Lee Family and Hsu Family
Just him and me, really, but here's the breakdown:

Lee Family

Grandfather: originally a politician (elected representative of Sichuan province in China), later a professor of political history
Grandmother: physical education teacher
Eldest aunt: banking, son in MIS, daughter in MIS (she's a bit of a techie)
Elder uncle: biochemist, son in medicine
Second aunt: banking & HR (IIRC), sons in finance, medicine, film & TV
My mom (nee Kai-Rue Lee): med tech (hematologist), son in CS
Fourth aunt: office administration (admin assistant at banks and docs' offices), daughter with MBA, son in chemical engineering
Fifth aunt: social worker, daughter in business management, daughter in HS with aspirations to her mom's occupation the last I heard
Younger uncle: major CS R&D head, daughter in junior high, daughter in elementary

Hsu Family

Grandfather: civil service (an executive secretary of the Nationalist Party in Taiwan)
Grandmother: homemaker, became a pretty good watercolor artist at age 70
Dad (Kuei-Yen Hsu): PhD in chemical engineering, son in CS
Younger uncle: PhD in physics, daughter in finance (I think; she's a fundraising director of some kind), daughter with MS in biology

Re: The Lee Family and Hsu Family - prolog - Sep. 4th, 2005 04:27 pm (UTC) - Expand
Science and Humanities - banazir - Sep. 5th, 2005 08:30 am (UTC) - Expand
Re: Science and Humanities - prolog - Sep. 5th, 2005 07:54 pm (UTC) - Expand
(Deleted comment)
Sep. 4th, 2005 08:37 pm (UTC)
Possessiveness of properties, intellectual and otherwise
I see your point, though to be honest, I don't think possession of new technologies is any different from possession of any other property, intellectual or otherwise. Money is at stake; "them that has, gets"; and the team with the deepest pockets has the upper hand. The only difference is that when it comes to "explaining old things", laws such as copyrights and patents are specifically crafted to time out, so the only thing that applies is (say) your being allowed to cite new sources on caricature, including your own. Academia, generally speaking, has no stake in not letting you do so, any more than K-State would try to keep me from using my own code or that produced by my students if I went to another uni.

As for deep pockets: in this case, both teams have hired a large retinue of good attorneys, and the exec in question has a good defense.

Please do feel free to repost the above discussion wherever you like, BTW. Thanks for commenting!

( 45 comments — Leave a comment )

Latest Month

December 2008

KSU Genetic and Evolutionary Computation (GEC) Lab



Science, Technology, Engineering, Math (STEM) Communities

Fresh Pages


Powered by LiveJournal.com
Designed by Naoto Kishi