
Google Responds To PayPal Lawsuit: People Have The Right To Seek Better Jobs - ssclafani
http://techcrunch.com/2011/05/27/google-responds-paypal-lawsuit/
======
grellas
Google has issued a pretty tepid statement to what appears to be a highly
problematic situation.

In its complaint
([http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC...](http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC.pdf)),
PayPal alleges in meticulous detail how its chief negotiator over some two
years on a major deal with Google for mobile payments on Android brought the
deal between the companies to within a hair of signing and then, at the end of
the process, did a series of interviews with Google to take a position working
on its mobile-payment system. Not only was this person the chief negotiator on
that deal, he was also PayPal's senior executive in charge of this area for
his employer. On the eve of the anticipated signing (October 31, 2010) after
two years of negotiations, Google told PayPal it wanted a restructuring the
deal even while it was giving the negotiator a job offer. The negotiator
accepted the offer, notified PayPal and was confronted about how this step was
seriously problematic from a legal standpoint. He then changed his mind and
told Google no. The parties once again revved up the deal and got to a signing
stage for the second time by February, 2011. At that point, Google changed its
CEO and, with Larry Page back in that role, Google killed the deal and hired
the PayPal executive to lead its work in the mobile-payment area.

In the midst of all this, you also have a second PayPal employee who had been
hired by Google in 2009 and was under a legal restriction not to solicit
PayPal employees for a period of one year. With that restriction still in
effect (or so PayPal alleges), she was actively soliciting not only the senior
PayPal executive mentioned above but (according to the allegations of the
complaint), a series of other PayPal employees who were part of the mobile-
payments group.

It is way too early to tell what happened here, but here are a few thoughts:

1\. The complaint is incredibly detailed, with much specific evidence of
communications and events that do not look good for Google or the individuals
sued. This level of detail is _highly_ unusual for a complaint of this type
and suggests to me that this is a very serious case, well-prepared and
meticulous (and, of course, when the lead attorney is named G. Hopkins Guy
III, as he is, you just know you are in trouble).

2\. Employees owe a fiduciary duty to their employers to act in the best
interest of the company and playing both sides of the fence at the end of a
major negotiation is almost certain to raise serious issues about whether such
duties were breached. This is possibly an even more serious problem here than
is the trade secrets case.

3\. California does not recognize the "inevitable disclosure" doctrine by
which a former employee can be enjoined from taking a position on grounds that
it will be "inevitable" that he would need to disclose important trade secrets
in order to perform his duties. That said, any such case involves highly
problematic issues and it would not take much evidence for a court to look at
the whole picture and say, "what the hell is going on here." Google may be
treading on thin ice here.

4\. This sort of conduct usually evidences a cynical power play by a major
company along "might makes right" grounds. Here, though, it is hard to believe
that Google would be that cynical. Nor is PayPal a small company without
resources. This part remains puzzling.

5\. The real test will come if, as I assume, PayPal seeks to get a preliminary
injunction blocking Google from using its mobile-payment technology because it
allegedly based on a misappropriation of PayPal's trade secrets. This is where
the evidence on both sides will come out and it will be much clearer whether
Google did in fact commit wrongs as alleged. Until then, it really is hard to
tell.

~~~
mikeryan
Well stated. as always, just a question is there any potentially criminal
actions here either on the part of Google or the Paypal/Google Exec?

~~~
grellas
There is federal law that defines theft of trade secrets as a crime.

The federal Espionage Act of 1996 provides: "Whoever, with intent to convert a
trade secret, that is related to or included in a product that is produced for
. . . interstate . . . commerce, to the economic benefit of anyone other than
the owner thereof, and intending or knowing that the offense will, injure any
owner of that trade secret, knowingly . . . steals, or without authorization
appropriates, takes, carries away, or conceals, or by fraud, artifice, or
deception obtains such information . . . shall . . . be fined under this title
[i.e., up to $5 million] or imprisoned not more than 10 years, or both."

That said, it would be highly unusual for the authorities to attempt to prove
a criminal violation in this sort of case. I think the overwhelming odds are
that it will be treated as a purely civil case.

~~~
WesleyJohnson
Is there any sort of time frame attached to something like this? Perhaps
something along the lines of a non-complete agreement? If you worked for
someone like PayPal, could you never again work for a company that has a
payment service or does this only come into play if you're hired to help
-build- a payment service?

~~~
grellas
In general, every employee in California may freely work for a competitor
after leaving a job and may do so right away.

 _But_ \- in doing so, he has no right to pilfer his former employer's trade
secrets and either use or disclose them in the new position. An employee can
use his general skills and expertise freely in any position, as these are not
tied to misuse of confidential, proprietary information. The tension lies
between your right to work freely using your skills and restrictions placed on
you to the extent you learn confidential things in your old position.

Thus, the general answer to your question is that, yes, you can work for
another company doing a payment service even if you have worked for PayPal,
but you can't use or disclose trade secrets from your former employer in your
subsequent job. Do gray areas come up in such situations? All the time.
Usually, they don't lead to lawsuits. In extreme cases, they do; in abusive
cases, they also do, though these are not justified (i.e., where a former
employer wants to chase and punish an employee just for having left
employment). In the vast majority of cases in California, nothing happens and
the former employee freely moves on - at times immediately, at other times
after some delay. (Results may vary in other states where the law may be
different and particularly where non-competes are enforced).

~~~
WesleyJohnson
Thanks for the detailed explanation. I had forgot we were talking about
California where non-competes are not really enforced (from what I've heard).
I can definitely see how there are some grey areas, but it's good to know that
generally the employee is free to move on to other employment in the same
field.

------
olivercameron
From what I have read in the lawsuit, PayPal doesn't seem to be complaining
that people have the right to seek better jobs, in fact that statement from
Google comes across extremely childish. Their argument is that Bedier used
trade secrets from PayPal to create Google Wallet, and used his knowledge of
secret and upcoming PayPal products to sell it to the retailers (comparing an
unfinished PayPal product to the finished Google Wallet).

~~~
ansy
That just doesn't sound very convincing. If PayPal had an unfinished Wallet
product before Google even started, what happened to PayPal's product? Did
PayPal shelve it and now it's taking out its frustration on Google?

EDIT: Wow, lots of down votes just for asking a question?

~~~
smokeyj
In America we believe ideas are property, and that companies can call dibs on
ideas to bully people who use this idea later. It's a really good idea, and
also why we need to censor the internet so that our property isn't stolen.

~~~
firemanx
This sounds like kind of a sarcastic comment, which it probably is, so I'll
just point out that I don't think they're using patent or copyright law here
to sue Google, but rather the domain of trade secret law, which SHOULD be
there - not just to protect large companies, but smaller ones as well.

If I come up with a really great idea, and we're bringing it to market, then
you decide you don't like me and run off to a potential competitor with larger
resources to get it to market sooner (and assuming we have non-compete or NDA
clauses in our mutual contract), I absolutely have a right to sue you and your
new employer.

This is well established and I don't know why there is such a fuss about it -
its pretty black and white issue when it comes to ethics and morals, rather
than the patent/copyright issue which most certainly has its grey areas.

~~~
pbhjpbhj
> _This is well established and I don't know why there is such a fuss about it
> - its pretty black and white issue when it comes to ethics and morals [...]_

I disagree, it's not a [necessary] natural conclusion based on logic axioms.

Aside from that consider this possible opposition: Patents are a contract of
disclosure in return for a time-limited monopoly. I can well imagine that
patents are a greater benefit to a society than industrial secrets; the
knowledge is released in to the public domain and can be built on. Thus
industrial secrets create a detriment, they hide knowledge that the society
has spent resources on discovering (creating?).

Having briefly thought on this matter I think that forcing people to use
patents to protect their IP instead of shackling inventors is probably the
greater good. In any case presenting it as a done deal that needs no
discussion is wrong IMO.

One could look at this from a Kantian perspective - if everyone hides their
industrial/technological progress is that better or worse than everyone
disclosing it?

------
pointillistic
The Native Google products are far and few between. They are the Mountain View
Raiders. Sometimes they buy a company, other times they buy the developers.
For example even Chrome was created by ex FireFox developers. It's just that
Mozilla is too weak and too dependent on Google's revenue to put up a fight.

In the payment business it's often the relationship with the merchants and
processors, understanding how they work is even more important than the code
or even the hardware. People are key in that business.

Forget about the industrial espionage, just hire a person who knows all the
trade secrets. If PayPal and Google were a country there would be dead bodies
on the streets of San Francisco.

~~~
mbrubeck
It's not just Blake Ross and Chrome - Apple's Safari/WebKit team is led by
Firefox co-creator David Hyatt. And long-time IE platform architect Chris
Wilson left Microsoft to work on web platform stuff for the Google TV team...

(BCM43 is right that none of us at Mozilla have any reason to complain about
ex-Mozillians and others helping to increase competition on the web.)

~~~
paulbaumgart
FYI, it's the other Firefox guy, Ben Goodger, who now leads the Chrome team at
Google[1]. Blake Ross is apparently doing things unrelated to browser
development, at Facebook[2].

1\. <http://en.wikipedia.org/wiki/Ben_Goodger>

2\. <http://en.wikipedia.org/wiki/Blake_Ross>

------
ChuckMcM
I found Google's response humorous in light of the fairly draconian (and
according to my attorney unenforcable) employment agreement they ask you to
sign when you go to work there. But that is all part of the 'game' here.

If you read this as Paypal negotiating to get some return out of the two years
they paid their employees to negotiate a deal (which didn't close) it makes
more sense. Lets say for the sake of argument that they pay them 200K/yr
($300K if you include benefits) and that they each vested 50K shares of Ebay
stock, so maybe a $15/share gain on the stock over 2 years. That is $600K +
$1.5M of 'cost' for the two execs ($2.1M) so settle out of court for $6M pay
2M to the lawyers and net $4M for the 'effort'.

Really sounds more like positioning to be paid off rather than a serious
complaint.

------
nkassis
I guess it's to the point that what is in your head is no longer yours. Never
had to deal with those kinds of issues personally but if someone told me I
couldn't get another job somewhere else for a few years to keep what's in my
head safe I'd be baffled.

~~~
cydonian_monk
I'm still baffled that I agreed to exactly those terms when I hired on where
I'm at now (3 years non-compete, including all competitors, vendors, and
customers (which is essentially everyone)). But the job prospects were weak,
especially for someone with no legit programming experience and a hardware-
focused degree (and no hardware firms were interested). It's our stance that
since we "train" folks from nothing, if it's in your head we probably put it
there.

Don't know that we've ever enforced such an agreement, but it is in ink just
in case it's needed.

~~~
SystemOut
Disclaimer: This assumes you're in the US...if not I have no idea how it might
apply in other countries.

Depending on where you live it might not even be enforceable. Even large
companies will put employee agreements in front of you that they KNOW aren't
enforceable in a particular state but will do it since they know that most
people don't know any better.

I had a particular instance when a company I was working for got acquired by a
Texas based company and they sent us the employee agreement they use in Texas
to us in California. There were no less than 4 completely unenforceable
clauses in that contract. And this was a public company doing this.

If you live in Texas, though, you're screwed.

~~~
cydonian_monk
I not only live in Texas, but we did exactly what you describe to a small
group in MountainView. We're private, though, so it (presumably) wasn't your
group. I'm fairly certain none of them are still around, if they even came
along after the acquisition.

I figure when it comes time for me to move on it'll have to be to a "safe
harbour" state that views such agreements as unenforecable.

~~~
mrtron
It would be relative to where you signed the agreement wouldn't it?

~~~
cydonian_monk
Yeah, you're probably right. Or maybe where I was a resident of when signed,
or where we were headquartered when signed, or something along those lines.
Depends on the wording of the agreement, which I don't have on hand.

I'm not overly concerned about it regardless, as should I leave it wouldn't be
to a direct competitor (or likely anyone that could possibly benefit from my
industry-specific knowledge) - it'd be somewhere completely out of our
industry. And if they want to make an issue over someone as small as me, then
I'll just find a new line of work for a few years. There's no way they could
claim a "training investment" or "trade secret protection" if I was a
programmer and left to become a carpenter or a roughneck or somesuch.

~~~
jgmmo
No, the law goes according to the headquarters of the purchasing public
company. If they are headquartered in Cali, and you're in Colorado then your
contract is according to Cali law. Also, Non-competes are non-enforceable in
Cali - just FYI. However this is different from the trade secret situation.

------
click170
In order for something to be a trade secret, don't you have to protect
whatever 'it' is?

Maybe I'm missing some key aspect to PayPal but what part of their tech/system
is unique to PayPal, such that they can claim it is trade secret? I mean, if
they aren't doing anything innovative and are just using existing technology
in obvious ways (online payment processor), what could the trade secret
possibly be? Something related to how they scale?

~~~
wmf
Paypal's whole anti-fraud system is trade secret. Also, their mobile payment
system hasn't even launched yet, so there's no way for us to know what's in
there.

------
itswindy
"People Have The Right To Seek Better Jobs"

Seeking to hire a bank employee...as long as he/she empties a few bank safe
boxes and brings them to me. Pay depends on the loot...

------
senthilnayagam
As a entrepreneur do you want your ideas, intellectual property and key
employees stolen?

No.

If google sitting on a cash pile can't build or innovate, let them perish,
what they have done is stealing

