PayPal Sues Google and Two Execs Over Trade Secrets and Contract Breaches

PayPal has just filed suit against Google and two of its former executives, claiming that the company and employees misappropriated trade secrets and violated contracts involving recruiting agreements.

The lawsuit was filed today in Santa Clara’s Superior Court after Google’s mobile payment announcement this morning. However, the timing appears coincidental; the lawsuit was already in the works.

The two executives named in the lawsuit are Osama Bedier and Stephanie Tilenius, who directly oversee Google’s new payments initiative.

Bedier is now Google’s VP of payments and Tilenius is VP of commerce.

Together, they unveiled in New York an extensive mobile wallet and mobile offers strategy that will allow Android users to pay for purchases at the register using their phone.

Google said it had not yet received a copy of the document and therefore could not comment.

Bloomberg also reported news of the lawsuit.

PayPal, which is on track to become bigger than its parent company eBay over the next few years, is quickly expanding as it sees opportunities in mobile and other alternative payment options. It plans to have in-store trials by the end of this year.

According to an eBay blog post, Tilenius left eBay in late 2009 after being at the company for nine years. While at eBay, she worked on various projects, including leading the eBay Marketplace’s turnaround and building PayPal’s merchant services to a $1 billion-plus business.

Bedier left PayPal more recently. In January, he announced he was resigning to join Google after being at the company for eight years. When he left, he was PayPal’s VP of platform, mobile and new ventures.

Bedier’s departure was considered a big blow to PayPal.

While Google’s plans were still under wraps at the time, it was known that both companies were racing to build next-generation payment platforms with a strong mobile component.

In the suit, PayPal said Bedier was a senior executive in charge of its mobile point of sales technologies, and had intimate knowledge of “PayPal’s capabilities, strategies, plans and market intelligence regarding mobile payment and related technologies.”

It was Tilenius who recruited him, and in doing so, PayPal says, she violated her contract.

Additionally, PayPal said that from 2008 to 2011, it was negotiating a commercial deal with Google to serve as a payment option for mobile purchases on the Android Market. Bedier was leading the negotiations during this period, while also interviewing for a job at Google, PayPal claims.

Exactly how PayPal plans to come to market is unknown, but it has been aggressively building payment solutions to enable digital purchases on the phone.

In 2010, PayPal said that its mobile revenues totaled $750 million and that it was forecasting for the segment to grow tenfold over the next three years. If it can get just one percent of retail sales, PayPal estimates that it will be able to double the size of its business.

As part of Google’s announcement today, it named numerous partners, including MasterCard and dozens of retailers, including Subway, Macy’s, The Container Store and many others.