That would be truly nefarious (which fits in perfectly with Google's M.O.). Do you know of any precedent for companies operating in this way? I guess the NSA probably operates on similar principles?
Why is this nefarious? Nothing is forcing these allegedly top employees from staying at Google. They get to work on something cool and get paid presumably a disgusting amount of money, and Google gets to maybe have a groundbreaking technology at the end of it, and their competitors don't get the allegedly top guys. If those employees would feel more fulfilled working somewhere else, and many do end up leaving, they can.
What the OP described is removing talented people from the labor pool and directing them towards efforts which have no expected application in the market. I'm not suggesting it's the individuals who choose this arrangement who are losing out, it's society at large.