May 27, 2011, 9:05 AM

Experts doubt PayPal’s suit will derail Google’s mobile wallet

Allegations of stolen trade secrets not enough to slow down Google Wallet, some observers say.

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EBay Inc. and its PayPal payment service late Thursday sued Google Inc. over allegations the search engine giant stole trade secrets related to mobile payments. The suit also accuses two former eBay employees who left for Google and are involved in its payment effort of violating their responsibilities to eBay. Google yesterday launched its mobile payment service, Google Wallet.

Industry observers say the case is unlikely to delay Google Wallet because the suit is based on employment issues.

PayPal wants a court to issue an injunction to stop what it calls a “misappropriation of PayPal’s trade secrets,” but it’s unlikely to get it, says Paul Rianda, an attorney at Rianda Law, which specializes in payments. “It’s very hard to get an injunction,” Rianda says. “Courts are loathe to do something so drastic.”

PayPal also could have to prove that Google improperly acquired some PayPal information or technology, and Rianda says that can be a tough case to make. “I don’t see one person today doing something that is so revolutionary in mobile payments,” he says.

The lawsuit is unlikely to slow down Google’s initiative, says George Peabody, director of the emerging technologies advisory service at Mercator Advisory Group Inc. “It’s a lawsuit about employment,” Peabody says. “I doubt it will stop Google Wallet and Google Offers from moving forward.” Google Offers is a couponing and promotional program the company will offer merchants as part of Google Wallet.

Besides Google, the suit also names as defendants Google executives Stephanie Tilenius and Osama Bedier. Tilenius is the former senior vice president and general manager of eBay North America and global platform who last year joined Google, where she now works as vice president of commerce and payments. Bedier left his PayPal job as vice president of platform, mobile and new ventures, in January for a similar job at Google.

“Bedier and Google have misappropriated PayPal trade secrets by disclosing them within Google and to major retailers,” says the lawsuit, filed in superior court in San Jose, CA. "Bedier transferred up-to-date versions of documents outlining PayPal’s mobile payment and point-of-sale strategies to his non-PayPal computer just days before leaving PayPal for Google on Jan. 24, 2011."

The lawsuit also accuses Tilenius of violating her eBay contract by recruiting Bedier to work at Google; in turn, the suit continues, Bedier violated his eBay contract by soliciting and recruiting PayPal employees to work at Google.

"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,” a Google spokesman says.

The lawsuit says that between 2008 and 2011, “Google and PayPal were negotiating a commercial deal where PayPal would serve as a payment option for mobile app purchases on Google’s Android (a mobile phone operating system). During that time, PayPal provided Google with an extensive education in mobile payments. 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. Bedier’s conduct during this time amounted to a breach of his responsibilities as a PayPal executive.”

One analyst suggests the lawsuit could accelerate an eventual Google and PayPal collaboration. “I would have expected at some point in time that PayPal would have been part of the Google Wallet,” says Rick Oglesby, senior analyst at Aite Group LLC. As the case progresses, the two sides may still find common ground, he says, though it is very difficult to predict the course of legal disputes.

J.J. McCarthy, senior manager of Internet marketing at eBay Inc., will speak at the Internet Retailer Conference and Exhibition 2011 in a session entitled "How eBay built a top-producing affiliate program in-house—and how you can too." Also at the conference, Christopher Payne,  vice president and head of eBay North America, will give a keynote address on “The future of e-commerce.” Additionally, Zhiheng Wang, staff software engineer at Google, will speak in a session entitled "Do your web pages need a new fitness regimen?"

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