EBay, PayPal Sue Google, Claims Mobile Wallet Uses Stolen Trade Secrets

The proverbial battle over mobile payments has turned into a legal one.

EBay Inc. and its PayPal subsidiary are suing Google Inc. and two former PayPal employees, accusing them of stealing trade secrets for the search engine giant's new mobile wallet service.

The lawsuit reinforces the high stakes that companies are placing on mobile payments, which could generate new revenue for banks, card networks, advertisers and wireless carriers.

EBay's suit, filed Thursday in the Superior Court of California in Santa Clara County, claims Osama Bedier, who left PayPal as vice president of platform, mobile and new ventures in January to join Google, had "intimate knowledge" about PayPal's mobile payment plans.

"Bedier knew that PayPal viewed Google as one of the competitors in the emergence of mobile payment at retail stores," the suit said. "Prior to Bedier's departure, PayPal undertook research and analysis of what it saw as Google's major problems and weaknesses in the mobile payment and point of sale context. At PayPal, Bedier was briefed on this analysis."

"In the course of his work at Google, Bedier and Google have misappropriated PayPal trade secrets by disclosing them within Google to major retailers," the suit said.

It also said that Stephanie Tilenius, Google's vice president of commerce, violated her contractual obligations with eBay by recruiting Bedier to work for Google.

Tilenius also tried to recruit other PayPal employees "via Facebook messages, in person and by providing Google recruiters with names and personal contact information of key PayPal employees," the suit said.

Tilenius worked at eBay from 2001 to 2009. She worked as a consultant to eBay, of San Jose, Calif., until March 2010.

Google and PayPal also were negotiating a deal under which PayPal would serve as a payment option for purchases made in Google's Android Market between 2008 and 2011, according to the suit. Bedier was leading those negotiations at the same time he was interviewing for a job at Google, it said.

On Friday, Google said: "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. We respect trade secrets, and will defend ourselves against these claims."

Google on Thursday unveiled a service that will let consumers load payment cards into a mobile application that can be used at contactless payment terminals. Google is initially partnering with Citigroup Inc., MasterCard Inc., Sprint Nextel Corp., First Data Corp. and several retailers on the Google Wallet service. Google plans to make money by running a coupon system called Google Offers that will connect to the wallet service.

The lawsuit seeks preliminary and permanent injunctions against the alleged misappropriation of PayPal's trade secrets, compensatory damages and other measures.

A spokesman for Citi, which is allowing its MasterCard PayPass cards to be loaded into Google Wallet, on Friday declined to comment on the suit.

PayPal said it is working on its own service that would enable merchants to accept mobile payments from consumers at the point of sale.

"Both PayPal and Google are currently offering their mobile payment and point of sale technologies to major retailers for trial use," PayPal said in its suit. "Although PayPal's services and Google's services are not mutually exclusive, at this stage it is unlikely that a retailer would invest time and effort in testing both companies' products."

In a company blog post, PayPal's director of global communications, Amanda Pires, said PayPal prefers "to compete and innovate" but "sometimes the behaviors 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."

A PayPal spokesman on Tuesday said that the company plans to test a mobile payments system for brick-and-mortar merchants late this year.