21 July 2005 Microsoft has upped the ante in its battle for supremacy in the search engine market by launching a legal fight against market leader Google, alleging unfair business practices.

Microsoft believes that Google’s decision to appoint Kai-Fu Lee, the former corporate vice president of Microsoft’s natural interactive services division, breaches a ‘no compete’ clause in Lee’s contract.

It says Google was aware of the clause, but encouraged Lee to ignore it,

“We are asking the court to require Dr Lee and Google to honour the confidentiality and non-competition agreements he signed when he began working for Microsoft,” the company said in a statement.

Microsoft is concerned that Lee had access to its trade secrets relating to its search technology and its business strategy for China.

But it has also been desperate to establish itself in new markets beyond its current Windows and Office strongholds. Microsoft CEO Steve Ballmer recently told a gathering of partners that it intended to overtake both Yahoo and Google in the search engine market in coming years.

Microsoft is eyeing the search engine market with just cause. Since its floatation, Google has seen its share price take off, and its grip on the online advertising market has strengthened. Microsoft executives would dearly like to take a big portion of those revenues for itself.

Clearly, the defection of a senior executive involved with its search technology is an embarrassment to Microsoft. But in initiating the legal action it has served notice that the fight for dominance is likely to be a bruising one.

Google said Microsoft’s claims are without merit. “We will defend the company vigorously against these empty claims and will fully support Dr Lee,” it said in a statement.