May 28, 2011

Paypal Sues Google Over New Mobile Payment Service

Google Inc.'s plan to displace credit cards with a smartphone-based payment system has led to legal challenges with online payment service provider PayPal, which claims Google stole its ideas by hiring away two key executives.

Paypal, owned by eBay, filed the suit just hours after Mountain View, CA-based Google unveiled its new "Google Wallet" payment service in New York.

The lawsuit described a story of betrayal and espionage, alleging that Google tapped into Paypal's expertise for its new mobile payments project "“ claims that Google rejected on Friday.

PayPal said it had spent three years trying to negotiate a deal with Google to handle payments for Android smartphones, only to see the discussions fall apart followed by Google's hiring of PayPal lead negotiator Osama Bedier.

"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," a Google spokesman told the AFP news agency.

"We respect trade secrets, and will defend ourselves against these claims."

Until joining Google in January, Bedier worked at Paypal as a vice president of platform, mobile, and new ventures.

He played a key role at Google's official unveiling of Google Wallet on Thursday.  

"(Bedier) had an intimate knowledge of PayPal's capabilities, strategies, plans, and market intelligence regarding mobile payment and related technologies," Paypal's lawsuit read.

"He is now leading Google's efforts to bring point of sale technologies and services to retailers on its behalf."

Google's new payment service will initially work with the Nexus S 4G smartphone from Sprint, and will ultimately work with other phones equipped with near field communication (NFC) technology.

The technology uses short-range, high frequency wireless to enable the encrypted exchange of information between devices at short distances.

A phone with an NFC lets a user who has entered his or her credit card number "tap-and-pay" for purchases at a checkout register equipped with the PayPass system from CitiMasterCard.

Mobile payments are already being tested or used in several countries, but Google Wallet will be among the first to bring NFC technology to U.S. retailers.

Users of "Google Wallet" can also use Google Prepaid cards to pay for purchases and participate in Google Offers, the company's online discount coupon program.

Google said it has incorporated a number of security systems into Google Wallet, and that the payment system can be disabled with a phone call.

Google said the new service would be accepted at more than 124,000 U.S. merchants, and more than 311,000 worldwide, at its initial launch.

The service is being field tested, and is expected to be available later this year.

Stephanie Tilenius, Google's vice president for commerce and payments, called Google Wallet the "next generation of mobile commerce."

The PayPal lawsuit claims that Tilenius helped Google hire Bedier, and named both executives, along with Google, as defendants in a civil case alleging misappropriation of trade secrets.


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