A U.S. judge ordered a tentative stay in Web search company Google Inc.’s lawsuit against Microsoft Corp., dealing a blow to Google’s fight over the hiring of a former Microsoft official.
But Judge Ronald Whyte of the U.S. District Court for Northern California in San Jose declined to say what his final ruling would be in the suit by Google, which is seeking to override the jurisdiction of a Washington state court in a related case.
The Washington state case, brought by Microsoft, accuses Google and manager Kai-Fu Lee of violating a non-compete agreement that Lee had signed with Microsoft.
During a hearing on the Google suit, Judge Whyte called the matter a tough case. "It is one of those where I read one brief, and I say, ‘Yep, they’re right.’ And I read the other and I say, ‘Yep, they’re right."
The stay order by the federal court, if maintained by Judge Whyte, would set the stage for the Washington state case to go to trial on January 9, 2006, according to attorneys working for Microsoft.
In questioning lawyers representing both sides, Whyte appeared to support Microsoft’s position that the case in Washington could proceed. There is no reason the Washington court cannot consider in its analysis the California public policy interest, Whyte said.
Arguing on behalf of Microsoft, Michael Bettinger, an attorney with Preston Gates Ellis LLP, supported the judge’s line of reasoning, saying the Washington state court could give due consideration to California’s public policy of upholding its century-old policy discouraging non-compete deals.
But according to Karl Quackenbush, lead attorney for Microsoft, it appears a tentative order granting Microsoft’s motion to stay the case in California and allow Microsoft’s case against Google in Washington State to proceed will be made final.
We are very pleased and encouraged by the tentative order granting Microsoft’s motion, Quackenbush said in an interview following the San Jose hearing. If entered as a final order, which we hope and expect it will be, the Washington case will continue on its expedited schedule.
However, Google litigation counsel Michael Kwun said that the judge appeared interested in hearing arguments from both sides about the implications of staying the case or granting Google’s request to declare the noncompete clause unenforceable under California law.
We were pleased that the court seemed to be interested in the issues, he said. It seemed to me that Judge Whyte was not sure which way to go. We trust he will pay close attention to the arguments we raised and we look forward to his ruling.
But Steven Taylor, an attorney with Taylor & Co., arguing on behalf of Google, countered: The only court in which these California rights … can be enforced is this court.
Robin Meadow, a partner in Los Angeles law firm Greines, Martin, Stein & Richland LLP, said it makes sense that Judge Whyte would allow the case in Washington to go on, since there already have been proceedings in that case and the decision in Washington could supersede any decision in California anyway.
Meadow has said previously that if Microsoft wins its case in Washington, it can be applied as reason to throw out Google’s suit in California because a Washington state judgment is binding in California, but the reverse is not true until an appeals process takes place. Only after that process will a California judgment be binding in another state, but a judgment in a Washington court can be binding in California as soon as it is handed down.
At this point, it appears Microsoft will get its expedited trial in its home state, a move that seems to favor the software company, Meadow said. Certainly it looks like Microsoft has the upper hand at this point, he said.
Judge Gonzalez has granted a temporary restraining order requested by Microsoft that banned Lee from performing his duties at Google, but later filed a ruling that allowed Lee to work at Google in a limited capacity. The judge also granted Microsoft’s request for an expedited trial in Washington.
Microsoft offered to settle the suits with Google after Washington court issued the preliminary injunction. Though Google has not responded to the offer, which asks the company to limit Lee’s duties until the noncompete agreement expires in July.
Predictably, both companies expressed optimism about the final ruling Judge Whyte will hand down. The judge did not specify when he would enter his final order.