May 27th, 2011

PayPal sues after Google announce wallet app

PayPal and its parent company eBay are suing Google and two of its employees for misappropriating trade secrets and violating terms of employment, after Google unveiled their NFC-based (Near Field Communication) Google Wallet app and supporting stakeholders and processes.

Google Wallet, which was announced on Thursday, is currently being “field-tested”. Initially it will be available only in the US, although, if successful, could be rolled out globally.

At launch, the app will support both the Citi MasterCard and a Google Prepaid card. Besides Citi and MasterCard, First Data (payment processing) and Sprint were also revealed as partners.

Google Offers was also announced at the event, which appears to be a Groupon-style consumer discount scheme linked to Google Wallet.

The main focus of PayPal’s legal action, which they publicised, is a Google exec Osama Bedier, who was VP of platform, mobile and new ventures at PayPal before he was recruited to a similar role at Google in January  2011.

The main points of PayPal’s argument are:

1. Google allegedly approached Bedier to work for Google last year via Facebook. PayPal claims that this violated a contract between an ex-PayPal, now Google, employee and PayPal, and that this occurred whilst negotiations between Google and PayPal to work with each other were ongoing.

2. PayPal alleges that Bedier used his email and DropBox to keep key PayPal strategic documents before he left.

3. PayPal also allege that since Bedier joined Google  he has both made use of PayPal trade secrets in sales calls to retailers and tried to recruit other PayPal employees in breach of his contract.

PayPal wants the court to prevent further misappropriation of its secrets and award compensatory and punitive damages.

This action appears to illustrate both the determination of Google to go it alone, rather than work with PayPal and the importance that Google places on the potential of the mobile wallet market.

Some mobile devices such as the Nexus S already have the NFC technology required for mobile wallet functionality and speculation has increased that other Android-based device manufacturers and Apple are planning to introduce NFC-based devices in the near future.

Video of the Google event available here: Google announce Google Wallet and Google Offers

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