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PayPal sues Google over ‘trade secrets’

As Google launches its NFC mobile payments service, PayPal claims it was its idea.

Court case

After a split in Google and PayPal's partnership to develop mobile point-of-purchase applications, PayPal has decided to sue Google for breaching the use of their trade secrets.

PayPal has launched a lawsuit against Google, claiming it brought one of their senior executives, Osama Bedier, over to the company to steal the work he had been doing for the past ten years on expanding online payment options to mobile applications.

PayPal dominates the industry

The growing US mobile payment industry, which is projected to reach $200 billion to $1 trillion within the next few years, and PayPal's knowledgeable success in online payments, prompted Google to partner with them on this project.

PayPal has dominated the online payment industry and built a $3.4 billion industry from 2006 until 2010. The company works with 57 financial networks and over 15,000 banks worldwide.

In the same timeframe, Google came out with their version of PayPal called Google Checkout. Unlike PayPal's extreme success, Google Checkout is virtually unknown outside the Google world.

From 2008 until April of 2011, PayPal provided education on mobile payments to Google and its employees.

Bedier

During the consolidated project, Bedier had been interviewing for job positions at Google while still holding his position at PayPal, where he was the executive of negotiations for the project. PayPal claims to have been unaware of the interviews that were being conducted at that time.

According to lawsuit documents, Bedier was offered a job on 31 October 2010. Bedier made no immediate reactions to the job offer but instead met with Andy Rubin, Google's executive in charge of negotiations for the project, to discuss how he could help Google compete with PayPal if he were to accept the position.

In December of 2010, Bedier admitted to having interviewed for a position at Google, but he promised PayPal he was committed to staying. PayPal warned Bedier that if he took the job at Google, "he would misappropriate PayPal's trade secrets" and there would be a "manifest conflict of interest" if he were to join their mobile department, according to lawsuit documents.

A turn of events

After the turn of the new year, Google announced Larry Page would take the position as CEO from Eric Schmidt, beginning 4 April 2011. Four days after this announcement, Bedier left PayPal for Google.

In late February, a finalised agreement for the partnership between Google and PayPal on the digital wallet project was signed by the CEO at the time, Eric Schmidt. Once Larry Page took over as CEO on 4 April, Google decided they were going to break free from PayPal to start their own version of the project as a competitor.

Leaking trade secrets?

The lawsuit filed by PayPal claims before Bedier leftl, research was conducted pinpointing Google's major weaknesses in their attempt to break into the mobile payment market - the analysis of which was shared with Bedier. Evidence has also shown that days before Bedier left for Google, he downloaded updates on PayPal strategies, which PayPal claims is suspicious if he had intentions to leave the company.

Bedier may now have taken this knowledge to Google and PayPal believes he was comparing the two projects with prospective retailers, as it is not likely that any retailer would choose to test both products, according to lawsuit papers.

Bedier has also been accused of soliciting PayPal employees to work for Google the way he had been recruited to work for Google by Stephanie Tilenius, a former eBay executive.

PayPal files suit

Amanda Pires, senior director of PayPal, wrote in her blog that appearing in court is not generally the way PayPal likes to handle complications, but they feel this time it's appropriate.

"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," she wrote.

"We treat PayPal's secrets' seriously, and take it personally when someone else doesn't. So we made a decision today. We filed a lawsuit against Google and two former colleagues who now work there, Osama Bedier and Stephanie Tilenius."

UPDATE IT PRO asked Google for a response to the case but a spokesperson merely told us: "We have not yet received a copy of the complaint and won't be able to comment until we've had a chance to review it."

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