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Tuesday, May 31, 2011

Google introduces mobile wallet, PayPal sues

Google Inc. introduced a new mobile wallet application for its Android phone May 26, 2011. The next day PayPal Inc., eBay Inc.'s payment subsidiary, sued Google for stealing trade secrets. The Google mobile payment application had rolled out in a campaign confettied with press releases, news articles and advertising.

Google Vice President of Commerce and Payments Stephanie Tilenius, a former PayPal executive and a central figure in the PayPal complaint, said, "Today, we've joined with leaders in the industry to build the next generation of mobile commerce. With Citi, MasterCard, First Data and Sprint we're building an open commerce ecosystem that, for the first time, will make it possible for you to pay with an NFC wallet and redeem consumer promotions all in one tap, while shopping offline."

Wallet in testing

The Google Wallet is being field tested and is expected to be ready for customers this summer. Google Wallet is a mobile phone application that will enable consumers to leave cash, cards and checks at home when shopping. The card allows consumers to either add cards co-branded by Citibank NA and MasterCard Worldwide to the application using First Data Corp.'s trusted manager service, or they can add cash to Google Prepaid cards with any payment card.

The Mobile Wallet's near field communication technology (NFC) allows consumers to make secure payments just by tapping the phone on any MasterCard PayPass-enabled POS terminal. Google Wallet security features include a required app-specific personal identification number and payment card identification encrypted and stored on a chip separate from the Android memory and available only through authorized programs.

The MasterCard PayPass POS network has more than 124,000 terminals in the United States and more than 311,000 terminals worldwide. Google said it is additionally working with VeriFone Inc., Hypercom Corp., Ingenico, ViVOtech Inc. and other terminal makers to create the next generation SingleTap technology that will allow consumers to simply tap a terminal to use a credit, debit or prepaid card; redeem promotions; receive coupons; and earn loyalty points.

Google indicated First Data is actively recruiting major merchants to add contactless merchant terminals.

Bones of contention

One day after Google stated its Mobile Wallet will be available to consumers soon, PayPal sued Google in Santa Clara County's California Superior Court. The complaint alleges Google hired a pair of PayPal executives to steal PayPal technology and secrets for Google's new Mobile Wallet venture.

The lawsuit claims Tilenius, who left her job as PayPal's Senior Vice President of North America and Global Products in 2009 to join Google as Vice President of Electronic Commerce, recruited Osama Bedier, PayPal's Vice President of Platform, Mobile and New Ventures, for Google. The suit alleges Bedier brought a number of PayPal employees with him to Google. Tilenius, Bedier, Google and up to 50 Google employees are named as defendants in the PayPal suit.

PayPal stated in its complaint that Google worked closely with PayPal between 2008 and 2011 to develop a mobile payment application for the Android. The suit alleges that Bedier, at Tilenius' urging, began interviewing for a job with Google at the same time he was negotiating and finalizing the Android mobile applications deal for PayPal. Just as the deal was ready to be signed, Bedier left PayPal and went to work for Google. The contract between Google and PayPal was never finalized.

"PayPal's long experience in online payment processing has allowed PayPal to develop a wide range of trade secrets in the areas of mobile payment, point of sale, and digital wallet, which give PayPal an advantage over both existing competitors and new market entrants, such as Google," PayPal stated in its complaint. "Thus, despite the relatively recent development of the use of a smart phone as a point of sale transaction device, PayPal's trade secrets are particularly valuable in this emerging area."

PayPal maintains Bedier stole documents about PayPal's mobile payment and POS strategies and lured away critical employees working on its mobile payment application. PayPal also alleges Bedier has access to privileged research and analysis of Google's mobile payments strengths and weaknesses and other trade and technology secrets encompassing areas such as market research, consumer preferences, merchant POS options, mobile payment and digital wallet strategies, and PayPal employees critical to PayPal mobile wallet development.

"Google bought the most comprehensive and sophisticated critique of its own problems available," the suit contends. "Google put Bedier in charge of its mobile payment business, virtually ensuring that Bedier would misappropriate PayPal's trade secrets concerning planning and competitive assessments in mobile payments."

PayPal also asserts Bedier is now using proprietary PayPal information when making sales calls on behalf of Google by comparing and contrasting for customers Google and PayPal mobile application products.

Google responded to the PayPal suit in a statement saying, "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." end of article

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