PayPal and eBay Sue Google Over Mobile Payment System Trade Secrets

May 26, 2011

PayPal Inc. and eBay Inc. have brought a suit in California state court which charges that Google Inc.’s Android mobile payment system is based on trade secrets stolen by two key PayPal executives who now work for Google (PayPal Inc. v. Google Inc., Cal. Super. Ct., No. 11-cv-201863, filed 5/26/11).

In the complaint, PayPal, which was acquired by eBay for 1.5 billion in 2002, cites industry projections that “the domestic mobile payment market will reach $200 billion to $1 trillion annually within the next few years.” PayPal further notes that it has spent the past 10 years building a global leadership position in online and mobile payments and “has substantial intellectual property in these fields.”

The complaint alleges that co-defendant Osama Bedier was PayPal’s senior leader in charge of mobile payment and point of sale technologies and services to retailers, “had an intimate knowledge of PayPal’s capabilities, strategies, plans, and market intelligence,” and was installed as head of mobile payments at Google in January 2011 after leaving PayPal. “In the course of his work at Google, Bedier and Google have misappropriated PayPal trade secrets by disclosing them within Google and to major retailers,” the complaint states.

Google hired Bedier after co-defendant Stephanie Tilenius, who was vice president of PayPal Merchant Services from January 2004 to January 2008, “solicited and recruited him” upon joining Google, the complaint continues. Tilenius became Google’s first Vice President of Electronic Commerce in February of 2010. The complaint further notes that from 2008 to 2011 Google and PayPal were negotiating a deal whereby PayPal would serve as a payment option for mobile app purchases on Google’s Android market, and that “Bedier was the senior PayPal executive accountable for leading negotiations with Google on Android during this period. 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.”

Among other things, the suit asks for preliminary and permanent injunctive relief, general damages, punitive damages, restitution and/or disgorgement, a reasonable royalty, and attorneys’ fees.