According to a report in the Wall Street Journal, a group of 20 ex-Microsoft employees was fired from Internet startup Crossgain this week, after Microsoft complained that the employees were bound by non-compete agreements. The firing affected literally 25 percent of Crossgain's workforce: Before this event, the company had only 80 employees. And three of the fired employees were pretty high up in the food chain: The company lost its two founders and CEO in the firings. The bad blood between Microsoft and Crossgain has a lot to do with Crossgain's business plan, which included its work on Web-based software services, which is key to Microsoft's strategy as well.

Founded in February 2000 by ex-Microserfs Adam Bosworth and Rod Chavez, immediately snagged a number of other ex-Microsoft employees, who began work at the company's Redmond, Washington offices, right down the street from the software giant. Microsoft says that the employees are bound by a one-year non-compete agreement, however, and after lengthy, secretive talks, Bosworth, Chavez, and CEO Tod Nielson, who left Microsoft last June, resigned, while the remaining 17 ex-Microserfs were temporarily fired, at least until their non-competes run out.

Nielson had said previously that Crossgain's technology would be complimentary to the .NET work that Microsoft is doing. But Nielson's first-hand knowledge of Microsoft's long term plans and Crossgain's suspiciously similar plans was enough, apparently, to cause Microsoft to enforce its employment agreements.