San Francisco — It has been months since news started swirling about Google’s NFC payments project, and just last week within hours of the unveiling of Google Wallet, an application utilizing your cell phone like a credit or debit card on the Mastercard’s PayPass system, only available on the Android Smartphones using technology PayPal’s lawsuit says belongs to them, and delivered to Google by PayPal former executives.
The new offerings would empower Android users to make mobile payments from their credit cards simply by swiping their handsets over specially-designed in-store payment terminals. Besides, Google users will also receive Groupon-like coupons and local deal offers direct to their G-mail account or Android smartphone.
But Mountain View has not just embarked into m-commerce, it has prompted a costly lawsuit to boot — as the online payments firm PayPal, owned by eBay, has begun legal proceedings — PayPal alleges that Google and Osama Bedier “have misappropriated PayPal trade secrets by disclosing them within Google and to major retailers”.
The lawsuit emerged within hours after Google unveiled Google Wallet in New York on Thursday.
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According to BBC News, PayPal has filed a lawsuit alleging that Google unlawfully obtained sensitive trade secrets from Osama Bedier — a former PayPal employee who is currently Google’s vice president of payments.
PayPal further alleges Google appointed Bedier in January 2011 and developed a Google Wallet that will adopt Near-Field Communications (NFC) technology built into Android handsets, allowing users to “wave and pay” at retailers that have MasterCard’s contact-less point of sale equipment. Launch partners include Macy’s department store and the sandwich chain Subway.
But PayPal states that it drained out three years trying to formulate a deal in which it would handle payments for Android smartphones, only to see Google scamper the talks and hire PayPal lead negotiator Osama Bedier, according to court documents.
PayPal’s introductory court filing read: “By hiring Bedier, with his trade secret knowledge of PayPal’s plans and understanding of Google’s weaknesses as viewed by the industry leader, Google bought the most comprehensive and sophisticate critique of its own problems available.”
“Google placed 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.”
Bedier, at PayPal was employed as a vice president of platform, mobile, and new ventures until being appointed in January by Google. When Bedier moved from PayPal to Google early this year there was no trace of acrimony.
“I want to personally thank Osama for his friendship and leadership,” said PayPal’s chief technology officer Scott Guilfoyle as he announced the departure.
However, Bedier was enticed to Google by Stephanie Tilenius, who left her job as an eBay executive in late 2009 and had joined Google, according to the lawsuit.
But in its filing, PayPal accuses Bedier of transferring “up-to-date information of document’s detailing PayPal’s mobile payment and point-of-sale strategies to his non-PayPal computer just days before leaving”.
The Mobile Wallet App:
The specs for the mobile wallet, released yesterday (Thursday the 26th), go over the key points:
- The app is free to download and use.
- Transactions will still require a PIN, and the application will require one too.
- All payment information will be stored on a secure chip inside the phone. All credentials and card information can be disabled remotely should the phone be lost.
- Initially, the app will only be available for “high-end Citibank card users,” but Google is actively seeking other partners.
The lawsuit labeled Google, Bedier, and Telenius as offenders, accusing them of misappropriation of trade secrets, breach of contract, and unfair business practices.
The concept behind the app is by no means unique. PayPal, which is the leading payment system on the web, is devising its own smartphone payment system for retailers, to compete with Google and others. Apple is also expected to enter the fray this year. In addition, numerous other businesses have started field testing similar apps and devices, with names like O2, Orange, and Payments Council having NFC payment options on the market already.
PayPal is seeking damages and a “reasonable royalty for Google and Bedier’s misappropriation of trade secrets”. The lawsuit was filed in the California Superior Court.
Both Google Offers and Google Wallet are scheduled for trials this summer, with a general release expected to quickly follow. A spokesman for Google said its lawyers had not yet received the complaint so could not comment.