PayPal, EBay Sue Google for Trade Secret Theft

PayPal yesterday filed a lawsuit against Google and two former PayPal employees who now work at Google. PayPal alleges that Google and former PayPal employees Osama Bedier “misappropriated PayPal trade secrets by disclosing them within Google and to major retailers” and Stephanie Tilenius violated a contractual obligations to eBay by soliciting and recruiting Bedier to Google.

At issue is mobile transactions via digital wallet technologies – such as Google Wallet, which launched yesterday. PayPal is also working on its own point-of-sale system.

PayPal alleges Bedier, who joined Google Jan. 24, has refused to return confidential eBay information on his own computers, mail, and a Dropbox account. Bedier was leading and finalizing negotiations between Google and PayPal to create a mobile payment option for Android.

Tilenius, hired by Google in February 2010, allegedly guided Bedier through Google’s hiring process, which included interviews with Larry Page and then-CEO Eric Schmidt.

PaidContent provided some legal background:

California has strong legal protections for workers that choose to move from one company to a competitor. State courts have generally refused to enforce the kind of “non-compete” agreements that are common in many other states. However, California also has strong trade secret laws, which include tough penalties. So sometimes trade secret laws are used as a weapon to attempt to control the movement of key employees.

“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,” Aaron Zamost, a Google spokesman, said ina statement. “We respect trade secrets, and will defend ourselves against these claims.”