When Google recently announced it had tapped Lee to head its new R&D center in China, Microsoft sued for breach of a non-compete agreement Lee had signed in 2000 when he worked for Microsoft.

A judge late last week granted Microsoft’s request for a temporary restraining order to prohibit Lee from performing his job at Google. The order would stand until September 6, the next scheduled hearing.

Superior Court judge Steven Gonzalez ruled that leaked trade secrets could potentially hurt Microsoft’s business and the company had grounds for concern. Google saw the situation differently.

What Microsoft is doing here is trying to intimidate, said Google associate general counsel Nicole Wong. They’re trying to intimidate Dr Lee and any other employee who might want to leave Microsoft. We won’t be intimidated and we won’t let them intimidate Dr Lee.

Despite the restraining order, Wong said Google was gratified the judge recognized that all Google and Lee have to do is avoid having him do anything competitive with what he did at Microsoft. As we have said all along, we have no intention of having him do that, she said.

The judge asked Microsoft for more comprehensive details of the types of technologies that Lee worked on as a Microsoft employee, which Microsoft claims compete with what he’ll be working on at Google.

We will be looking for clarification when Microsoft complies with the judge’s order, Wong said.

A Microsoft spokesperson said Lee has key knowledge of the strategy development of Microsoft’s business presence in China, as well as the development of search technologies.

Also, as part of the agreement [with Microsoft] Kai-Fu entered into a valid and binding agreement that for a period of one year following his termination of employment with Microsoft he would not perform work that competes with Microsoft, the spokesperson said. Once that period expires he would, of course, be able to pursue whatever opportunity he wished.

Separately, Microsoft confirmed late last week that it is serious and committed about expanding its Web search presence, said chief executive Steve Ballmer during a financial analysts meeting at its Washington headquarters.

It is a Job 1 priority for our company, this transformation to [online] services and the competition that it brings with Yahoo and Google and everybody else, Ballmer said.

In court filings, Lee recalled a July 8 conversation with Ballmer in which Ballmer said that if Lee left Microsoft to join Google, Microsoft would have to do something and asked Lee not take that action personally. Ballmer said to Lee, We like you. Your contributions to Microsoft have been immense. It’s not you we’re after, it is Google, according to Lee.

What’s more, Lee claims Microsoft chairman Bill Gates said during a July 15 meeting: Kai-Fu, Steve is definitely going to sue you and Google over this. He has been looking for something just like this, someone at a VP level to go to Google. We need to do this to stop Google.

The Microsoft spokesperson said Microsoft does not have direct knowledge of these conversations, but the fact that Google is a direct competitor is one of the primary reasons we took this action.

Lee and Google argue that Lee is not a search expert and his involvement with Microsoft’s operations in China was limited.

In court filings, Google called Microsoft’s lawsuit a charade. Indeed, Microsoft executives admitted that their real intent is to scare other employees into remaining at the company.

When asked if Microsoft was facing a broader problem with retaining and attracting top talent, the Microsoft spokesperson replied no and said the company had seen a great spike in recruiting from college campuses and elsewhere and had a 90% acceptance rate on jobs offers this past year.

However, Google’s Wong said, [Google is] working on a great place for innovators to work, while Microsoft is focused on litigation and intimidation.