

PayPal sues Google + ex-PayPal VP for Google Wallet - zengr
https://www.thepaypalblog.com/2011/05/paypal-files-lawsuit-to-protect-trade-secrets-a-reason-worth-fighting-for

======
olivercameron
After reading briefly through the lawsuit[1], it seems that Osama Bedier was
working as a senior manager at PayPal creating a product similar to Google
Wallet (referred to as a "mobile payment" point of sale). He then interviewed
and left for Google (whilst PayPal and Google were in negotiations for a
separate business deal), and PayPal claims that he used trade secrets from
PayPal to help Google create Wallet.

Stephanie Tilenius broke her contractual agreement with eBay after she
recruited Bedier (and attempted to recruit many other PayPal employees).

"Bedier was the senior PayPal executive accountable for leading negotiations
with Google on Android during this period. At the very point when the
companies were negotiating and finalizing the Android—PayPal deal, Bedier was
interviewing for job at Google without informing PayPal of this conflicting
position. Bedier’s conduct during this time amounted to breach of his
responsibilities as PayPal executive."

I'm not a lawyer, but it looks like they have pretty good reason to be upset.

1\.
[http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC...](http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC.pdf)

~~~
abraham
> ... [Bedier] not only used trade secrets from PayPal to help Google create
> Wallet, but also poached Stephanie Tilenius ...

You have that switched.

> Google hired Bedier after another former eBay executive, defendant Stephanie
> Tilenius, solicited and recruited him.

~~~
olivercameron
Thanks, updated.

------
ryanbigg
What struck me the most in that lawsuit (which I haven't yet finished reading,
but seems pretty compelling) is:

"Bedier transferred up-to-date versions of documents outlining PayPal's mobile
payment and point of sale strategies to his non-PayPal computer just days
before leaving PayPal for Google"

and

"At the time he left PayPal, Bedier admitted that he had confidential eBay
information in locations such as his non PayPal computers, non-PayPal e-mail
account, and an account on the remote computing service called 'Dropbox'"

It goes on to explain that PayPal has requested that Bedier removes the
information from his personal accounts and returns it to PayPal. Bedier has
not yet done that.

This almost displays _intent_ to share this information with outside sources.
Wow. This sounds like a massive shitstorm is brewing.

------
DevX101
Reading the suit, a lot of the evidence that Tilenius recruited Bedier was
based on the content of Facebook messages and text messages. Anyone know how
they got access to these supposedly private communication?

Case in point: "Tilenius reached out to Bedier by text message and again
attempted to change his mind. On or about December 3, 2010, Tilenius messaged
Bedier, “I still feel like I am missing something, for example what if we
increased your offer, would that change things?"

~~~
guelo
If these communications occurred from within Paypal's coporate network or
using Paypal equipment they could have been gathered using employee spying
systems that they might have in place.

~~~
esrauch
Paypal has company phones that log all your text messages?

~~~
husein10
Not sure about paypal but I'm a lawyer at at a publicly traded financial
services company and all communications on company blackberries (bbm, sms)
automatically get logged along with all emails. All of these communications
are searchable via a system we use for discovery during litigation.

The law isn't the employee's friend here...employees have no reasonable
expectation of privacy on company devices.

~~~
kmfrk
Does this apply to in-going mobile communication as well?

------
android2
PayPal, that exhalted bastion of ethical business practices, will be very
successful in this appeal to public sentiment.

~~~
brown9-2
Even jerks are sometimes right, or in this case, have legal standing.

~~~
lurker19
However, it helps to pay one's own debt to society before calling in someone
else's.

I personally had to file a fraud dispute with my credit card company after
receiving two promises over two months to reverse an unauthorized charge
PayPal put on my card at their own (not a third-party vendor's) behest.

------
jasonkester
This seems like a good illustration of the principle: "Ideas are worthless.
Execution is what matters."

Paypal had the idea first and a good 10 years worth of trying to make it work
(payments from mobile devices was, after all, their first product, even pre-
dating online payments). And in this case, they even had some of the same
_team_ working on the idea, but they just couldn't make it happen. Google
could, and did, so they'll win.

I can understand why PayPal would be upset. But really this just strikes me as
another reason why we shouldn't get too worked up about the value of ideas.

~~~
tvon
Devils advocate stance, Google couldn't make it happen until they hired the
people from PayPal who had been working on it for ten years.

------
qasar
Talent moving from company to company is not new in SV. And to be more
specific, if you've been working you're whole career in maps technology and
then move to maps division in another company, that shouldn't be shocking.
Also, I have a hard time believing this one guy was the entire lynch pin on
wallet and was the difference between Google doing it or not. A payment wallet
is not a new concept.

This is a clear sign of paypal's weakness. Rather than compete, sue. It's like
zuckerberg said: If you guys were the inventors of Facebook, you'd have
invented Facebook.

I'm not a lawyer, just an engineer so maybe i'm missing something but doesn't
seem as dramatic as some of the comments here imply

~~~
brisance
It's neither the career move nor the concept of the e-wallet that is in
dispute... refer to the Mark Papermaster hiring fiasco that involved Apple and
IBM a few years ago. The complaint is about a high-level executive acting
against the company's interests while being employed in that capacity by
stealing company information. I'm not a lawyer but I seem to recall quite a
few similar cases e.g. someone from Coca-Cola who jumped shipped to Pepsico
(or was it the other way around) and got charged with violating trade secrets
laws.

Edit: OK I got the details of the Coca-Cola/Pepsico case wrong. Apparently
some Coca-Cola employees tried to profit from selling trade secrets to
Pepsico. Article here: [http://www.allbusiness.com/crime-law-enforcement-
corrections...](http://www.allbusiness.com/crime-law-enforcement-
corrections/criminal-offenses/11497994-1.html)

------
FeelsGoodMan69
Hopefully, this means Paypal sees Google as a legitimate threat. Good. The
world could only improve if Paypal ceased to exist.

~~~
zengr
And why is that?

~~~
proexploit
People get upset about the way Paypal deals with fraud because they lose a lot
of money to it and take extra precautions. While that is reasonable, they do a
lot of things other people (and I) find to be ineffective and hurtful to
users. For example, Paypal escapes banking regulation in the US due to
loopholes. If you have your account locked for any reason they will hold your
money for 6 months without interest. No exceptions. Their customer service
sucks, it's nearly impossible to get ahold of a human and they'll require
documentation they have no legal right to in order to unlock your account
(example: complete bank statements: [http://openca.mp/blog/paypal-hates-
conferences-especially-op...](http://openca.mp/blog/paypal-hates-conferences-
especially-opencamp/)). I believe the world without Paypal would certainly be
a better place. I emphasize with their difficult issue of preventing fraud but
that doesn't make their actions ok.

Edit: In response to following comments, I amended above where it made it
sound like Paypal escaped a banking regulation to withhold your money. My
issue is that they use the 180 hold on account that haven't been locked for
good reason.

Some people may be able to get customer service. They offer different kinds of
accounts and maybe with a merchant account through Paypal or a business
account. I've personally found Paypal to be lacking when trying to get in
touch with them. I had someone attempt to scam me out of money by doing a
chargeback for an eBay product I shipped via USPS (no tracking number). When
they opened a hold on the account because the person said they didn't receive
the item, Paypal had a field where I could put the tracking number. Having no
tracking number, I tried to attach a note saying I shipped via USPS. I tried
contacting support and no one ever answered. I offered to sign something
making my personally liable if there was a lawsuit (as I had shipped the
item). After all of that, their response was to refund the money so I was out
the product and money, and close my account.

Don't act like I'm the only person who's got problems with Paypal. If you have
had only great experiences with them, more power to you, but there's many more
people who have been wrong by Paypal than other money processors:

"paypal sucks" About 65,800 results

"visa sucks" About 3,970 results

"mastercard sucks" About 1,760 results

If they had a true competitor, they'd be struggling to stay in business.

~~~
dangrossman
Holding your money for 6 months without interest IS the banking regulation.
That's a rule that comes straight from the Visa Operating Regulations which
was written by the member banks that comprised Visa and MasterCard. Those
regulations specifically say 180 days and that the funds be held in a non-
interest-bearing account. It's exactly the same policy enforced on every
merchant account underwritten by every regulated bank in the country.

PayPal has customer service by phone, and they answer on the first ring. No
automated system on the business support line either.

Your opinion on PayPal is __entirely __baseless.

~~~
CamperBob
Except PayPal is not a bank (in the US), and your account with them is not a
merchant account. Consequently the 180-day hold rule does not apply.

I don't agree with proexploit's assertion that we'd be better off without
PayPal, but I also wouldn't carry signs and chant slogans in the streets if
the US government forced them to be better stewards of their customers' hard-
earned money.

~~~
dangrossman
To be fair, PayPal does offer real merchant accounts underwritten by real
banks. PayPal Website Payments Pro accounts are underwritten by one of these
banks: JP Morgan Chase, HSBC, Wells Fargo and National Westminster Bank.

The point of my comment was that proexploit makes it sound like the 180 day
hold follows from PayPal not being a regulated bank, where the reality is that
regulated banks have the same 180 day hold.

I fear I may sound fishy standing up for PayPal considering its unpopularity
(despite so many on HN using it without problems), but I don't like to see the
perpetuation of untruths. The people that write these complaints must have
never read a merchant account agreement. The list of banks that underwrite the
Payments Pro accounts are on the PayPal website under the Legal Agreements
link. I do read every contract I agree to.

~~~
proexploit
You're absolutely right that my initial comment made the 180 day hold sound
different than it is. To be fair, I'm not talking about PayPal Website
Payments Pro accounts at all but basic personal or business Paypal accounts.
It sounds like you've had a pleasant experience as you've been using a
different product. Speaking of baseless opinions: "despite so many on HN using
it without problems". I'd love to see a source for that. The fact is, even if
80% of people using Paypal have a great experience, too high of a percentage
is being screwed over.

~~~
dangrossman
If 20% of PayPal users were having a negative experience, you'd see a _lot_
more complaints than you do. That'd be around 46 million people.

Even if only 1% of PayPal's users were dissatisfied you'd have much more
activity than a couple dozen forum posts a month spread across the web and an
outdated PayPalSucks site. That'd be over 2 million people with a reason to
vehemently complain. The level of chatter you hear makes it much more likely
that significantly less than 1% of their user base has serious problems with
the service.

No, I'm not using a different product than you. I've been using the plain-jane
standard PayPal payment links and subscriptions since 2000. I'm not immune to
their risk department either; someone called me just this month to express
concern at my account's refund rate after I cancelled some suspicious looking
orders.

I'm sure my account has enough notes on it that I'm a single mis-step away
from being frozen myself through no fault of my own. But that's nothing less
than I'd expect from any of my payment providers. This is business, I
understand why their policies are what they are, and I'm prepared for the
chance that they may choose to stop doing business with me at some point in
time. A little bit of basic knowledge about the financial industry they
operate in and you'd run your risk department the same way.

For a good read, get a copy of the book "Founders at Work: Stories of
Startups' Early Days". One of the stories is that of the founding and early
growth of PayPal. The only reason they are here today, where their great many
competitors during the dot-com boom aren't, is that they figured out how to
manage fraud risk. They were hemmorhaging tens of millions of dollars a month
to fraud losses, but they held on long enough to build the risk management
systems you need to provide payment processing to the masses.

~~~
proexploit
Other companies have to manage fraud too and do it without upsetting so many
people. The exact number doesn't matter, it's a lot higher than other
financial services companies. The fact that they had to lock down against
fraud to keep their business from failing doesn't excuse their business
practices and customer service. There's multiple open loopholes for scammers
that do not treat honest people well. We could debate this forever but we're
going to have different opinions as we don't have a lot of exact statistics
and perfect knowledge of their company policies / fraud prevention measures. I
will continue to recommend people do everything they can do stay away from
Paypal and you will continue using it. That's ok because we don't have to
agree and although I feel differently, I recognize your right to your opinion.

~~~
woobar
It is hard to compare PayPal to other companies. Their business is 100% online
payments (higher risks then B&M transactions) with a huge share of
international transactions (even higher risks).

------
andrewcooke
What's with the "Does" in the lawsuit? They are mentioned on the front page,
but not anywhere else.

I realise "Doe" is "John Doe" - a pseudonym for an unknown person. But I can't
see why they are included in the suit (all 50 of them).

~~~
brown9-2
Because PayPal is seeking to also sue people whose names they do not yet know:

 _6\. eBay and PayPal (collectively “Plaintiffs”) are ignorant of the true
names and capacities, whether individual, corporate or otherwise, of
defendants named herein as Does 1 through 50 and Plaintiffs sue said
defendants by their fictitious names. Plaintiffs will seek leave to amend this
complaint to assert allegations against the Doe defendants when their true
involvement in these matters and capacities are ascertained._

In other words, PayPal employees that PayPal alleges that the former employees
recruited to Google.

~~~
phirephly
As I understand it, this is very standard lawsuit boiler plate, such that if
they later realize there is another party involved, they can just tell the
court, "so-and-so is Doe 1," allowing them to very rapidly fold in new parties
without refiling the suit.

------
aclark
Why is everyone a Delaware corporation? That makes me feel like my company
should be a Delaware corporation. ;-)

~~~
mikeklaas
Why corporations choose Delaware [PDF]:

<http://corp.delaware.gov/whycorporations_web.pdf>

~~~
r00fus
Corporations choose Delaware because the lawyers who incorporate them (usually
contracted from big firms) choose Delaware.

------
Sparragus
How can this be trade secrets? Japan has been doing this for years! [1] This
is not new technology.

1\. <http://en.wikipedia.org/wiki/Osaifu-Keitai>

------
methodin
This seems like a desperate move. I'm not aware of the timelines but it seems
ridiculous that Paypal just sat around knowing their "secrets" were taken to
Google and hoped the person(s) that took them would remove all traces and not
divulge them to Google. Would make me believe that Paypal was incapable of
actually delivering a quality product and Google seemed like a more viable
candidate for actually getting the idea implemented. Lawsuits like these are
increasingly only a mechanism for the lazy or inept to feel validated. I guess
this is why we're told ideas are pretty much worthless.

------
Tichy
What could be secret about a mobile wallet? The technology involved can hardly
be secret? The idea itself isn't original, either.

------
forkrulassail
We've had M-Pesa in South Africa for ages.

Mobile was the next obvious step.

------
erikpukinskis
I'm sure this makes it at least a little harder to hire talent. I wonder how
much. I know I'd never work for a company that thought it owned me, and was
entitled to control who I could recruit to work with me after I left. I wonder
how many other people feel the same way.

~~~
bmj
Reading the complaint, it's not just that a PayPal employee went to work at
Google. According to the complaint, Bedier (one of the defendants) was
negotiating a payment deal between Google and PayPal _while interviewing with
Google_. And soon after Bedier left, Google apparently scuttled the entire
deal. And there's the matter of Bedier putting PayPal strategy documents on
his personal machine days before leaving PayPal for Google.

Of course, we're only hearing one side of the story at this point, but at
least from PayPal's perspective, this isn't just about losing a couple of
executives to Google.

~~~
zs11
Osama Bedier was a big deal at PayPal. He ran the whole mobile and point-of-
sale organization. Everyone know who he was, and everyone was shocked when he
left for Google.

This could get ugly.

------
ck2
I am not sure how but I hope Google beats the heck out of PayPal.

Remember Yahoo Wallet?

------
ignifero
Makes one think that we are moving from a world of corporations to a world
where only people matter, and everyone works as a contractor directly with a
VC.

------
derwiki
That article was entirely unhelpful. What are Osama and Stephanie's
backgrounds, and why do they deserve to be sued?

~~~
olivercameron
Read the lawsuit, it says everything you need to know:
[http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC...](http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC.pdf)

