Google and Microsoft have settled their fierce legal battle over Google's hiring of a Microsoft vice president to head its China operations.

In a case filed in July, Microsoft alleged that Dr Lee Kai-Fu's employment at Google violated a non-competition agreement he signed while at Microsoft. The courtroom proceedings have kept IT aficionados gripped this year, providing details on the inner workings of the two technology giants.

Among the most controversial revelations was the report that, after learning that another Microsoft employee had defected to join Google, Steve Ballmer, the chief executive, picked up his chair and hurled it across his office. He then said of the Google chief executive, Eric Schmidt: "I’m going to f****** bury that guy, I have done it before, and I will do it again ... I’m going to f****** kill Google."

A full hearing on Microsoft's case had been set for January.

However, in a joint statement from the companies today, David Drummond, Google's general counsel, said: "Microsoft, Dr Lee and Google have reached an agreement that settles their pending litigation." No further details were released over the terms of the settlement.

In September, Judge Steven Gonzalez, of King County Superior Court, Washington State, found that Dr Lee misled Microsoft and had taken advantage of confidential Microsoft information when first working at Google. Following the ruling, Dr Lee was to be restricted to hiring employees and setting up a research lab in China.

"Dr Lee is going to be the highest-paid HR manager ever," Tom Burt, Microsoft’s vice president and deputy general counsel, said, referring to the $10 million in earnings the Chinese academic is guaranteed in his first four years at Google.

Google, at that stage, said it was "thrilled" with the ruling, adding that it saw "big things" in Dr Lee's future. The company argued that neither it nor Dr Lee had done anything wrong under the law in the state of California, where Google has its headquarters.

"I am pleased with the terms of the settlement agreement," Dr Lee said.

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