PayPal sues Google over trade secrets

Two of Silicon Valley's leading Internet companies are heading to court. Late Thursday, PayPal charged in a lawsuit that two former employees since hired by Google had misappropriated trade secrets related to its mobile- payment business.

The lawsuit claims that one of the former PayPal execs, Osama Bedier, misappropriated PayPal's confidential information, and that the other former official, Stephanie Tilenius, violated contractual obligations by recruiting Bedier.

"Bedier and Google have misappropriated PayPal trade secrets by disclosing them within Google and to major retailers," according to PayPal's lawsuit.

Coincidence or not, Google earlier yesterday introduced its own plans to allow consumers to buy products with their mobile phones. Tilenius and Bedier were among the Google employees who helped unveil the "mobile wallet" ervice on Thursday.

PayPal claims that it negotiated for more than two and a half years with Google in hopes of reaching an accord governing how to deal with payments for Android smartphones. It says that Google ended the talks and then hired Bedier, who had been PayPal's lead negotiator.

"By hiring Bedier, with his trade secret knowledge of PayPal's plans and understanding of Google's weaknesses as viewed by the industry leader, Google bought the most comprehensive and sophisticated critique of its own problems available," according to PayPal's filing. "Google put Bedier in charge of its mobile payment business, virtually ensuring that Bedier would misappropriate PayPal's trade secrets concerning planning and competitive assessments in mobile payment."

PayPal alleges that Bedier copied PayPal strategy documents to his personal computer "just days before leaving PayPal for Google on Jan 24, 2011."

Beyond the specific allegations contained in the lawsuit, the broader context here is key. The mobile payments business, which is growing rapidly, is estimated to reach more than $600 billion market within the next three years. PayPal, a subsidiary of eBay, offers technology that allows payments and money transfers to be made through the Internet. Google now looking to grab a piece of that business.

"Spending time in courtrooms is generally not our thing," PayPal said on its corporate blog. "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."