PayPal accuses Google executives of stealing secrets for mobile payments

Internet giant Google has vowed to defend itself after online payments group PayPal said it would sue the company for allegedly using secrets stolen by two ex-PayPal executives to develop its new mobile wallet system.

Although the lawsuit has been underway for some time, it only became public just a few hours after Google launched the Wallet system on Friday.

The incident highlights the dangers involved in Silicon Valley job-hopping, which industry veterans have said becomes a problem as executives move between several different companies within years, often to firms that are competing with each other.

The PayPal lawsuit is directly aimed at Google executive Osama Bedier, who helped debut the wallet system on Friday. PayPal accuses Bedier and other ex-employees of “misappropriation of trade secrets” and “breach of fiduciary duty”.

PayPal even noted the lawsuit on its blog, saying “spending time in courtrooms is not generally our thing… we prefer to compete and innovate”.

“But sometimes the behaviours of people and competitors make legal action the only meaningful way for a company to protect one of its most valuable assets – its trade secrets.”

In the lawsuit, PayPal notes that Bedier was the executive in charge of negotiations at the company, and dealt with Google executive Andy Rubin over a payment system for Android apps. The two had signed a deal in October 2010 – but at that time Bedier had actually finished interviewing for a job at Google.

“Though Google’s leadership had directed negotiations toward the October 26 finalisation months earlier, it now baulked when presented with the very deal they had requested. The companies had a term sheet, a two phase roll-out with dates, and all other details nailed down.”

“But, in the interim, Google’s leadership had interviewed Bedier. Rather than inking the October 26 deal, Google instead at the last minute professed a shift in mindset on the entire structure of the deal.”

The lawsuit then alleges that Bedier knew all about PayPal’s mobile strategy when he moved to Google.

But even more alarming is the accusation that he kept “confidential eBay information in locations such as his non-PayPal computers, non-PayPal email account, and an account on the remote computing service called ‘DropBox’”.

PayPal then alleges he used those secrets to develop Google’s new Wallet strategy, saying Bedier knew of “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”.

Bedier is cited as hiring Tilenius, among other PayPal employees.

According to TechCrunch, Google has said in a statement it respects the practice of trade secrets, and that “we will defend ourselves against these claims”.

The lawsuit highlights the problem many Silicon Valley giants have when recruiting new talent. Many executives come from rival companies, and the potential for secrets to be divulged is quite high, especially when these companies are working on projects unbeknownst to the public.

This controversy was highlighted recently when Google set aside $US500 million for a potential settlement with the Department of Justice. While Google did not specify what this was for, rumours suggest the DoJ is investigating the use of “no-poaching” agreements among Silicon Valley companies to keep salaries low.

This problem was also highlighted in 2009 when Eric Schmidt stepped down from Apple’s board of directors, as both companies began competing against each other in the mobile space.