PayPal Inc. is suing Google and two of its executives -- accusing them of stealing trade secrets and poaching employees -- in a move that ups the stakes as the two companies vie for a piece of the fast-growing mobile payments market.
The suit, filed in a Santa Clara County federal court, came hours after Google unveiled a new service, called Google Wallet, that will allow consumers to pay by simply tapping their smart phones at the checkout counter.
PayPal and its parent company, Ebay Inc., accuse two former employees, Osama Bedier and Stephanie Tilenius, of swiping valuable intellectual property related to mobile payment technology when they left to go to work for Google.
Bedier was formerly PayPal's vice president of platform, mobile and new ventures before Google hired him earlier this year as its new vice president of mobile payments. Tilenius, now Google's vice president of commerce, headed various sections of EBay until 2009.
Bedier, the suit alleges, "misappropriated PayPal trade secrets by disclosing them within Google and to major retailers" during the course of his efforts spearheading Google's push to turn smart phones into credit cards.
According to the complaint, Tilenius recruited Bedier over to Google even though her contract banned her from poaching PayPal and EBay executives for a year following her departure. She initiated contact with a Facebook message, the suit alleged.
"How are you? Hope the wife and kids are will ... hard to believe you have 4 kids, they all must be so big now," she allegedly wrote to Bedier, according the papers filed in connection with the suit. "I heard from a little birdie that you might be open to bigger and better challenges, I have a HUGE opportunity for you, would love to chat if you are interested."
Bedier in turn violated his contract, the suit alleges, by recruiting PayPal executives and leaking proprietary mobile payments research to Google. In a ill-timed turn, Bedier just a few months before leaving was also heading negotiations for PayPal to be integrated as a payment option for Google's Android market.
"Bedier knew or had reason to know that his knowledge of PayPal's trade secrets was acquired under a circumstance giving rise to a duty to maintain the secrecy of those trade secrets or limit their use," the complaint said, but he decided to disclose that information "in an attempt to gain a competitive advantage for Google" over PayPal.
Google, in a Friday statement, said it planned to fight back and disputed the allegations of stealing trade secrets. California law, the company said, protects workers' rights to "use their knowledge and expertise to seek better employment opportunities."
The mobile payments market is kicking up competition among tech companies as phone makers, wireless carriers, banks and payment processors are pushing to turn smart phones into digital wallets that take the place of credit cards and cash. Both PayPal and Google have been trying to break into this potentially hugely lucrative field. Last month, PayPal acquired mobile payment start-up Fig Card; Google will release its Wallet service, which will be an app on Android phones, this summer.
Near-field communication, the radio technology that lets phones communicate with credit card terminals through the air, is being incorporated into more and more smart phones, including Google's Nexus S model and several Nokia handsets.
Google, MasterCard offer "Google Wallet" to allow consumers to pay with smart phones
Jack Dorsey's mobile payments company Square unveils new checkout features
PayPal acquires mobile payment start-up Fig Card
-- Shan Li
Upper photo: EBay and PayPal signage at company headquarters in San Jose. Credit: Tony Avelar / Bloomberg
Lower photo: An attendee takes a photo of the Google Wallet application screen during a news conference unveiling the mobile payment system in New York on Thursday. Credit: Shannon Stapleton / Reuters