PayPal Sues Google Wallet Executives over Trade Secrets

Google executives are being sued by PayPal for taking trade secrets from their former company and using them to build the new Android-based Google Wallet mobile payment service.

eBay's (NASDAQ:EBAY) PayPal payment service has sued Google (NASDAQ:GOOG), accusing the search engine of poaching trade secrets it then used to hone its mobile payment service.

The suit, filed in Santa Clara County Superior Court just hours after Google unveiled its Google Wallet service, alleges that two key executives who created the Wallet service used company secrets about mobile payments to fashion Google's own service.

Unveiled at a press event in New York, Google Wallet lets consumers pay for products by tapping their Android-based smartphones against a special sale terminal.

Named in the suit are Osama Bedier, vice president of payments, and Stephanie Tilenius, vice president of commerce for the company. Both held similar positions at PayPal before joining Google.

Google hired Tilenius in February 2010. Tilenius is named in the suit because she broke a non-compete agreement with PayPal by persuading Bedier to join Google in January of this year, after which the search engine accelerated its mobile payment plans.

However, it is Bedier who faces the more unsavory charges.

PayPal alleges that Google in 2010 had been working on brokering a deal to have the payment provider enable payments on Android phones. Instead, it turned around and hired Bedier, who had been negotiating the deal for PayPal.

The payment provider further alleges Bedier kept records of all of PayPal's future plans for mobile payments on a non-PayPal computer, and used that info to build Google Wallet after joining the company.

Bedier used the PayPal's trade secrets for mobile payments to pitch many of the same major retailers with whom PayPal was seeking to partner for its own mobile payment service. Google Wallet partners include Macy's, American Eagle, RadioShack and a dozen other major companies.

"Bedier's comparisons incorporate PayPal trade secrets, including PayPal's schedule for deployment, anticipated features, and back-end approach to mobile payment, point of sale, and the benefits of a wallet in the cloud," according to the lawsuit.

The suit also alleges that Bedier recruited some of his former colleagues from PayPal to join Google.

"We spend a lot of time and energy creating the things that make PayPal unique and a preferred way to pay for almost 100 million people around the world," said Amanda Pires, senior director for PayPal global communications, in a brief note about the suit. "We treat PayPal's 'secrets' seriously, and take it personally when someone else doesn't."

Google, meanwhile, said the company had not yet received a copy of the complaint and would not be able to comment until it has had a chance to review it.

PayPal makes a compelling argument in its lawsuit. Google may find itself paying the company a healthy settlement fee to extricate itself from the legal matter.