PayPal Sues Google, Ex-Employees

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PayPal on Thursday sued Google and two ex-employees claiming that its trade secrets had been stolen and contracts had been broken.

The lawsuit was filed just as Google introduced Google Wallet, part of a mobile payment platform that competes with PayPal's current and possibly future mobile offerings.

Amanda Pires, PayPal's senior director of global communications, said in a blog post that while PayPal prefers to innovate to win customers, "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."

At issue are the actions of two former PayPal employees who left to join Google. Stephanie Tilenius was hired by Google toward the end of June 2010, when she became Google VP of commerce and payments. She left PayPal in October 2009 and PayPal claims she was bound by contract not to solicit PayPal employees until March 2011.

According to the complaint, Tilenius contacted Osama Bedier, then at PayPal, in July 2010 and tried to convince him to join Google. Bedier, after several months of wooing, which included meetings with top Google executives, opted to remain with PayPal in December 2010. But Tilenius apparently persisted and managed to convince him to resign from PayPal in January.

The lawsuit charges both Tilenius and Bedier with violating contractual obligations and theft of trade secrets, and it charges Google with interfering with PayPal's contractual relations.

Google defended the right of employees to seek better opportunities. "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," a company spokesperson said in an emailed statement. "We respect trade secrets, and will defend ourselves against these claims."

There's some irony in this position, given that Google is among several tech companies that stand accused of conspiring with each other not to try to hire each other's employees, thereby suppressing employee wages.

In a blog post following the conclusion of the Department of Justice's inquiry into the non-poaching pact last year, Google said, "... there's no evidence that our policy hindered hiring or affected wages ..."

This is not the first time Google has been accused of poaching valuable employees. In July 2005, Microsoft sued Google to enforce a noncompetition agreement against Dr. Kai-Fu Lee, a former Microsoft executive who left the company to work for Google in China. The two companies settled in December 2005 under undisclosed terms and Lee left Google in September 2009, shortly before the cyberattack that prompted Google to scale back its involvement with China.

Such lawsuits are not unusual. IBM in October 2008 sued one of its former executives, Mark Papermaster, who left the company to take a job with Apple, claiming that he had violated a non-competition agreement.

However, such hires don't always work out as planned. As with the Microsoft-Google case, IBM settled its lawsuit a few months later and Papermaster was allowed to work for Apple in April 2009. But Papermaster didn't remain with Apple for very long: He left in August 2010, following widely publicized hardware issues related to the iPhone 4's antenna.

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