PayPal Accuses Google of Poaching To Build Its Mobile-Payments Team

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Google Inc. captured headlines Thursday for its splashy new mobile-payments-and-deals services dubbed Google Wallet and Google Offers. But on that very day, PayPal Inc. and parent company eBay Inc. sued Google and two former eBay and PayPal executives who are now spearheading Google’s mobile efforts on claims of misappropriation of trade secrets and violation of their confidentiality agreements with their former employer.

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The first eBay/PayPal executive to go to Google, Stephanie Tilenius, aggressively pursued Osama Bedier, PayPal’s reluctant mobile-payments man, long before her separation agreement permitted her to do so, according to the suit. And Bedier discussed potential employment with Google while simultaneously negotiating a major business deal for PayPal with Google, the suit alleges.

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The lawsuit, filed in Superior Court of California, Santa Clara County, seeks preliminary and permanent injunctions to stop the alleged misappropriation of PayPal’s trade secrets as well as unspecified damages, including punitive damages, and royalties.

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In a statement, a spokesperson for Mountain View, Calif.-based Google said Friday morning that, “We respect trade secrets, and will defend ourselves against these claims.” The statement also says “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.”

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In its suit, San Jose, Calif.-based PayPal describes itself as the online and mobile payments leader, and says that Google’s online-payment system, Google Checkout, “has had virtually no impact outside of Google.”

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The suit centers around the actions of Tilenius, now Google’s vice president of commerce and payments, and Bedier, who came over to Google only in April, months after being approached by Tilenius, and who is now vice president of payments. Both appeared Thursday at a Google event in New York City announcing the new Google mobile services.

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Tilenius worked at eBay from 2001 until October 2009 in various positions, including vice president of merchant services at PayPal from 2004 to 2008. She became a consultant to eBay after leaving the company under an agreement that barred her from recruiting eBay/PayPal employees for a year after its expiration, which happened March 3, 2010. Google hired her in February of last year.

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Google put Tilenius in charge of its new Commerce and Payments group last June. “Almost immediately, Tilenius embarked on a campaign to hire Bedier away from PayPal,” the suit says. Her first move was a July 15, 2010 message to him through Facebook saying she had “a HUGE opportunity for you, would love to chat if you are interested.” Under her separation agreement, she shouldn’t have recruited anyone at her former company until March of this year, the suit says.

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At the time, PayPal was well into two-and-a-half years of negotiations with Google on a major deal that would enable Google to use PayPal to pay third-party software developers working on Android Market applications that would run on Google’s Android mobile-phone operating system. Bedier, who joined PayPal in late 2002, was leading the PayPal side in the Google talks, and PayPal said the deal was ready for signatures on Oct. 26, 2010.

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By then, however, Bedier, helped along by Tilenius, had just finished job interviews with Google’s top brass. Google offered Bedier a job on Oct. 31, according to the suit. The next day he informed his employer “he was considering multiple job offers and that one involved work in mobile payment at Google.” In reply, the company told him he would “as a matter of course misappropriate PayPal’s trade secrets if he were to take that position at Google” and that “there would be a manifest conflict of interest if he were to head mobile payment at Google directly after being a key player on behalf of PayPal in negotiations with Google over the Android Market deal.”

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Bedier allegedly “flip-flopped” and in early December said that, “he was committed to staying at PayPal.” But Tilenius then “renewed and redoubled her efforts to recruit Bedier,” the suit says. In one message she reportedly asked, “What if we increased your offer, would that change things?” Bedier finally resigned from PayPal to join Google on Jan. 24 of this year. His 2002 employment agreement with PayPal barred him from passing PayPal’s secrets to others.

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The negotiations over Android, meanwhile, had bogged down, with Google this April scuttling them for good. “It [Google] was no longer interested in partnering with PayPal, but instead decided to build a competing product with PayPal’s former employees and executives at the helm,” the suit says.

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The suit also accuses Bedier of copying PayPal trade secrets to non-PayPal computers and to a data-storage back-up service, and of recruiting some other PayPal employees to come over to Google in violation of his obligations to eBay. In addition, the suit names as defendants up to 50 “Does,” or other currently unidentified individuals who eBay/Pay claim may have legal culpability. Specific allegations against those people might be lodged in an amended complaint.