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."

Retailers Offer Apps With a Catalog Feel

Mia Sara, 43, a Manhattan transplant in Los Angeles, misses window shopping in New York, but has found a replacement — shopping on her iPad.

It’s a reasonable facsimile of doing a little window shopping and maybe you stop in somewhere and get something that piques your fancy,” she said, like the blue silk Phillip Lim blouse she recently bought on the Net-a-Porter.com iPad app.

Shopping on the iPad is more convenient than using her laptop in bed, Ms. Sara said, and easier than scrolling through tiny images on her phone while waiting in the car for her children.

“It’s greatly enhanced my kind of depressing soccer mom life,” she said.

Shopping, as old-timers may remember, was once fun.

Then Google came along, and afternoons spent wandering past store windows, or flipping through catalogs, were often condensed into two-minute searches for “jeans 32 waist dark wash -bootcut -stretch city fit”

Now, though, retailers like Net-a-Porter think they have found a way to give online shopping more of the feel of an outing at the mall or an hour with a catalog — by creating apps that resemble magazines for tablet computers. Just as magazine publishers are producing iPad apps that mimic print in a way they never could on ordinary Web sites, retailers are making iPad catalogs, with big, stylized photographs that users can flip through on the couch or in bed. And also like magazine publishers, they are adding rich features like video, sound and 3-D views.

Though most retailers started with the iPad, some are starting to build versions for other tablets. EBay, for instance, is building Android tablet apps and a new version of its Web site designed for tablets. Others, like Blue Nile, the online diamond retailer, are taking a different approach, constructing tablet versions of their Web sites instead of apps on the theory that most traffic still comes through Web searches.

The idea is to offer “shop-ertainment,” said Siva Kumar, chief executive of TheFind, a shopping search engine that last week introduced Catalogue, a tablet app that pulls together interactive catalogs from about 30 retailers including Crate & Barrel and Sephora.

Traditional retailers like Sears and Ralph Lauren, along with e-commerce focused companies like Amazon, Gilt, QVC, HSN and eBay have all introduced tablet apps.

Many retailers say they see a lucrative future in tablet shopping because even though tablets made up only about 4.4 percent of all computers shipped in 2010, according to Morgan Stanley, they are expected to make up about 20 percent within two years. And iPad owners, who tend to be affluent given the $499 price tag for the device, already prefer not only browsing but also buying from a retailer’s app rather than the Web site in some cases.

At Net-a-Porter, for example, about 15 percent of shoppers buy from the iPad app, while eBay says the average purchase amount through its iPad app is higher than through either its Web site or through mobile phones. Meanwhile, Blue Nile executives say they expect iPad shopping to outpace Web shopping at some point.

Retailers also see the tablet as a more appealing backdrop for presenting their goods. On a computer, anyone can put up a Web site and compete with an established retailer. But on a tablet, big retailers have the deep pockets and development skills to set up eye-catching features and also add the ability to drop an item in a cart with a quick drag of a finger.

It is also easier than on a phone, say, to swipe to the next image or zoom in on a hemline. And the image and video quality are often better than on either phones or computers.

At the same time, tablets allow retailers to fix what many think went wrong for them online, when search engines made shopping all about the price, rather than about the store. In the new apps, retailers edit their merchandise, focusing on just a few top items. This is meant to appeal to shoppers who might be overwhelmed by the pages of search results they see on a computer. Because it is about presentation and selection rather than price, it gets the stores out of the low-price game that many are forced to play online, and back into being fashion arbiters.

“The iPad app is really our magazine app,” said Alison Loehnis, vice president of sales and marketing for Net-a-Porter. Its app was introduced last summer, and has been downloaded 120,000 times.

“Our site was founded on the desire to create a fashion magazine that you can shop from, and this whole notion of literally being able to move things around on the page and slide things into a shopping basket and touch things with your fingers the way you would do in a magazine is really a dream come true,” Ms. Loehnis said.EBay, which had an iPad app ready to go the day that Apple introduced the tablet, also set it up for leisure time.

“We speculated, along with some input from Apple, that people would use the iPad like a book or a magazine, so the idea was a comfy chair, the couch, the bed, where a laptop doesn’t work very well,” said Steve Yankovich, vice president of eBay Mobile.

At Gilt, a flash-sale site, the iPad app “truly is sort of an entertainment source during the member’s downtime” said the company’s chief product officer, Stefan Pepe.

Gilt’s sales start at a specific time, and it has a limited amount of merchandise, and so its Web site and iPhone app are geared toward quick shopping. Although Gilt members shop flash sales on the iPad app, they can also use it to look at clothes as they would in a fashion magazine — a different experience. Shoppers can zoom in on the images closely enough to see the stitching on a shoulder seam or the lace fringe on the bottom of a skirt, for instance, and can drag items to their shopping carts without leaving the page.

Amazon’s tablet app, Windowshop, is also heavily visual, showing rows of images with tiny bits of text beneath them, and that seems to draw customers in, said Sam Hall, director of mobile for Amazon.com.

“The thing that customers have commented on is there’s this area of serendipity,” Mr. Hall said. “Windowshop looks so different from other shopping experiences, and we show you so many images at once, that you find yourself five minutes later looking at something that you had no intention of looking at originally.”

In TheFind’s Catalogue, a shopper can see the typical catalog-style shots, like of a living room filled with Crate & Barrel furniture, or can view individual photographs and descriptions of each item in the shot, like the pillows or lamps.

Mr. Kumar of TheFind said the app was a reaction, in part, to the overwhelming shopping options available online.

“If I said, let’s show you every possible shoe on the planet, you’d be exhausted,” Mr. Kumar said. “A lot of these retailers use the catalog to tell people what they have: it’s things they’ve curated and picked.”

Retailers have also noticed that consumers use tablets as a way to relax. And that’s good for them. As Mr. Yankovich of eBay said, most transactions on the company’s iPad app take place from 5 to 11 p.m.

“People are decompressing after work, maybe had a few cocktails,” he said. “That’s beautiful, we like that, it’s good for shopping.”