updated 9/14/2005 12:49:20 PM ET 2005-09-14T16:49:20

Hours after a state judge ruled that a former Microsoft Corp. executive may begin doing limited work for rival Google Inc., a top Microsoft lawyer said the software giant was prepared to settle its lawsuit if the restrictions on Kai-Fu Lee remain in effect until next summer.

Microsoft general counsel Brad Smith said Tuesday night the company was pleased with the restrictions and would end all litigation if Google and Lee agree to abide by the judge’s order until next July, when Lee’s noncompete agreement expires.

“We can settle this lawsuit tomorrow,” Smith said. “We can get back to ... competing in the marketplace.”

Lee still cannot work on products, services or projects he worked on at Microsoft, including computer search technology, pending a trial set for January. Superior Court Judge Steven Gonzalez said Tuesday that the noncompete agreement Lee signed with Microsoft is valid.

But Gonzalez said recruiting and staffing a Google center in China would not violate that agreement. Although Lee cannot set budget or compensation levels or define the research that Google will do in China, Gonzalez said, he can hire people to work there.

The case has exposed animosity between two high-tech titans and both Google and Lee reacted cautiously to Microsoft’s overture.

Google spokesman Steve Langdon said the company had not heard from Microsoft, “only reporters.” He added: “But if they have something they have to discuss we’d be happy to learn more about what they’re offering.”

Brad Keller, Lee’s lawyer, said he had seen no formal settlement offer and would not discuss the terms Microsoft proposed.

“Dr. Lee and Google went to court seeking permission for Dr. Lee to go and establish a research and development facility in China. They prevailed,” Keller said. “If Microsoft wants to settle the case, it should make a settlement proposal. Until then, Dr. Lee’s going to China.”

By the time the January trial rolls around, the noncompete restriction will only be in effect for another six months.

Lee, who worked at Microsoft since 2000 and oversaw development of its MSN Internet search technology, including desktop search software rivaling Google’s, left in July to lead Google’s expansion into China. (MSNBC content is distributed by MSN. MSNBC itself is a Microsoft - NBC joint venture.)

Microsoft sued Lee and Google, contending that Lee’s job at Google would violate the terms of the noncompete agreement that prohibits him from doing similar work for a rival for one year.

Microsoft also accused Lee of using insider information to get his job at Mountain View, Calif.-based Google.

Google has responded with its own lawsuit against Microsoft in U.S. District Court in San Jose, Calif.

The case has illuminated the bitterness between Microsoft and Google, which is emerging as a formidable competitor to the Redmond, Wash.-based company. Testimony suggested that Microsoft executives responded with profanities when they learned of employees defecting to Google.

Google said it hired Lee to create an engineering office in China. But Lee is also an expert in computer recognition of language — an important field for search engines such as Google.

In a hearing last week, Microsoft asked Gonzalez to restrict the work Lee could do until the January trial. Google had agreed to keep Lee from working on search technology or language recognition, but Microsoft said the promise wasn’t good enough. Microsoft sought a judge’s order and a ban on recruiting as well.

Google wants Lee to help pick a site for the China facility and begin using his connections there to recruit students and software engineers. In China, companies recruit students in the fall to begin work the following summer. Had Lee been barred from recruiting this fall, he would have missed the recruiting season and would have had to wait until next fall, Google said.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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