Internet search engine Google Inc has settled a legal dispute with Microsoft Corp over its hiring of former Microsoft vice-president Kai-Fu Lee to run a research facility in China.

Terms of the settlement are confidential, the companies said in separate statements on Thursday. Washington-based Microsoft had previously won a court ruling barring Lee from working on projects at Google.

The settlement ends a bitter five-month dispute between Google and Microsoft, that ratcheted up tensions between the companies as they compete for a bigger share of the Internet search market. Google this week signed an advertising agreement with Time Warner Inc's AOL, edging out Microsoft, which tried for almost a year to sell its own search technology to AOL.

Microsoft spokesman Jack Evans said the company was pleased with the settlement over Lee. Google vice-president David Drummond also voiced his approval.

The agreement settled a case in which Google claimed Microsoft Chief Executive Officer Steve Ballmer used profane language to criticize Google and Lee, underlining the personal nature of the companies' battle for a global audience using their Internet search engines.

Google, the world's most-used Internet search engine, hired Lee in July to open a research centre in Beijing, as president of the company's Chinese operations. Microsoft, the world's largest software maker, sued, arguing that Lee was a Washington resident when he signed the non-compete agreement and is governed by the law of that state.

Microsoft won a restraining order from state court Judge Steven Gonzalez barring Lee from working on technical research at Google before a January 9 trial.

Google filed a counter-suit in a federal court in San Jose, California, attempting to release Lee from the terms of the non-compete agreement he signed with Microsoft. In the California case, US District Judge Ronald Whyte granted Microsoft's request in October to delay Google's lawsuit.

"It does demonstrate that non-competes are enforceable in some states," said Rob Enderle, president of the Enderle Group research firm in San Jose, California. "Transfers of critical employees between competitors come with a certain amount of risk."

Lee was born in Taiwan and reared in Tennessee. He is a former assistant professor of computer science at Carnegie Mellon University in Pittsburgh and a five-year employee of Microsoft.

Microsoft Chairman Bill Gates testified in September that Lee was "one of the top two" people influencing the company's strategy in China.

Microsoft needs more revenue from China to revive global sales growth, which the company has said dipped to a record 8 per cent low in the year ending June 30.

Source: China Daily