PayPal Says Google Wallet Steals Trade Secrets

A lawsuit filed by PayPal alleges two Google executives who formerly worked at PayPal used trade secrets to create Google Wallet. Google pledged to fight PayPal's suit. The Google executives, Osama Bedier and Stephanie Tilenius, are also accused of luring away PayPal employees. An analyst said Google Wallet will probably get more lawsuits.
While Google  was outlining Google Wallet for mobile payments, PayPal was readying a lawsuit against the search giant. eBay-owned PayPal filed suit against Google and two executives for allegedly stealing trade secrets that helped Google develop Google Wallet and push for a piece of the multibillion-dollar mobile-payments pie.
PayPal sued Google in the Superior Court of the State of California in Santa Clara County. The suit names Google and former PayPal employees and now Google execs Osama Bedier and Stephanie Tilenius.
Bedier previously was vice president of PayPal's mobile platform and came aboard as Google's vice president of payments in January 2011. Tilenius served in various executive roles at PayPal and eBay, including vice president of PayPal Merchant services, from 2001 to 2009, when she joined Google as vice president of commerce.
"Silicon Valley was built on the ability of individuals to use their knowledge and expertise to seek better employment opportunities, an idea recognized by both California law and public policy," Google said in a published statement. "We respect trade secrets, and will defend ourselves against these claims."
PayPal's Beef
The PayPal complaint argues that Bedier had intimate knowledge of PayPal's capabilities, strategies, plans and marketintelligence  regarding mobile payments and related technologies -- information constituting in part PayPal's trade secrets. "In the course of his work at Google, Bedier and Google have misappropriated PayPal trade secrets by disclosing them within Google to major retailers," the complaint alleges.
PayPal also asserts that Tilenius solicited and recruited Bedier to Google. By doing so, PayPal argues, Tilenius violated her contractual obligations to eBay. PayPal said Bedier also violated his obligations to eBay by soliciting and recruiting PayPal employees to jump ship to Google.
"In addition, from 2008 to 2011, Google and PayPal were negotiating a commercial deal where PayPal would serve  as a payment option for mobile-app purchases on Google's Android Market. During that time, PayPal provided Google with an extensive education in mobile payments," PayPal said in the complaint.
"Bedier was the senior PayPal executive accountable for leading negotiations with Google on Android during this period," it added. "At the very point when the companies were negotiating and finalizing the Android PayPal deal, Bedier was interviewing for a job at Google -- without informing PayPal of this conflicting position. Bedier's conduct during this time amounted to a breach of his responsibilities as a PayPal executive."
Wrongdoing?

The movement of executives and other workers from company to company is hardly big news in Silicon Valley, said Charles King, principal analyst at Pund IT , but if Tilenius sent Bedier an alleged Facebook note before she left PayPal, he's not sure how that could violate an order enforceable after she left PayPal for Google.

"The note could suggest that Tilenius was acting for Google prior to actually joining the company. But the reality of the workplace is people who are working for companies are actively talking about working for other companies before they leave. A lot of that has to do with the dates of when these events occurred and whether or not the no-solicitation order was enforced at the time that she sent this Facebook note."

The bottom line: Talk of electronic wallets and portable payments has been around for the better part of a decade. No company has made a truly viable business  based on the concept so far, but PayPal has made its moves and is clearly intent on protecting its intellectual property.

"As Google expands its area of interest and expertise beyond online advertising to enable electronic purchases of one sort or another, it's going to be touching live wires with any number of competitors with a major footprint in this area," King said. "It would be hardly surprising if future suits related to different kinds of electronic payments were filed against Google."

Google's top five standoffs--from Apple to Yahoo

When PayPal filed its lawsuit against Google yesterday for poaching a key executive for its mobile-payment business, it got us thinking about the growing list of enemies Google has made over the years.

Sometimes Google takes heat for doing the right thing, as it did in China. After wrestling with censorship, the company chose to shut down its Google.cn site and redirected users to the uncensored Chinese-language Google.com.hk domain in Hong Kong.

But Google has also managed to alienate regulators, both in the United States and abroad. And as the company pushes into new markets, it's found a passel of new rivals with which to do battle.

So here, then, are the top five confrontations (not scientifically selected) in which Google has managed to mire itself:

Apple: While Google's then-CEO Eric Schmidt sat on the board at Apple, Google developed its Android mobile phone operating system. It may not have seemed like a conflict of interest to Schmidt for the three years he served as a director. But the Federal Trade Commission raised some questions, even after Schmidt resigned. And Apple? It's CEO, Steve Jobs, felt betrayed enough that he reportedly railed on Google at an internal meeting, saying, "We did not enter the search business. They entered the phone business. Make no mistake, they want to kill the iPhone."

Yahoo deal: In 2008, Google was forced to back down from plans to create a search advertising partnership with Yahoo. The defeat, a rare one in Google's brief history, came as the company overreached, according to regulators and advertisers. The deal would have further strengthened Google's already massive lead in search advertising. It misjudged the opposition the deal engendered.

Street View: Shortly after launching Street View in 2007, Google caught flack from governments and privacy advocates for displaying photographs that included people's faces and car license plates. It creeped out users, showing people walking into adult bookstores and inadvertently flashing their underwear at Google's cameras. The company even acknowledged Google collecting e-mails, passwords, and URLs from Wi-Fi networks while the company was snapping images for its Street View service. The company continues to address the fallout from privacy concerns sparked by Street View.

Google Books: The company boldly sought to digitize every book ever written, making the world's literature available to anyone interested in any title. Quickly, the ambitious effort took heat for attempting to profit from books without the permission of copyright owners. When Google reached a settlement with the Authors Guild and the Association of American Publishers, another batch of opponents stepped forward, complaining that Google would amass too much control as the only organization in the world with a license to scan and display books that have gone out of print but were still protected by copyright laws. In March, Google lost a round in that fight when a New York federal judge rejected the settlement.

Rogue online pharmacies: Earlier this month, Google disclosed a $500 million charge in its first quarter to cover the potential cost of resolving an investigation by the Department of Justice, reportedly for accepting ads from rogue online pharmacies in violation of federal law. The eye-popping amount suggests to some legal scholars that Google knew it was taking business from companies that broke the law. Google took steps to curtail advertising by illicit pharmacies in February 2010 and even won praise from the Obama administration in December for making efforts to block those ads. Now the company just needs to resolve the lingering dispute with the Justice Department.

What Google confrontations would you add to the list?