A day after Google announced the Google Wallet, an NFC ( Near Field Communication) based mobile payments system, that lets users make contact-less payments through their NFC enabled mobile phones on a compatible terminal, online payment service company PayPal sued the internet major alleging that it stole the company’s trade secrets through two former executives Osama Bedier, and Stephanie Tilenius, whom Google hired, earlier this year. Google spokesperson Aaron Zamost, in a reply to Bloomberg has said that the company has not yet received a copy of the complaint and would not be able to comment until it gets a chance to review it.

What Is Google Wallet?

Google has partnered with Citi, Master card, First Data and mobile service provider Sprint, to offer users a payment product that resides in their mobile phones in form of a mobile app. It works with NFC technology, through which users can make payments by simply tapping their mobile phones on a terminal. Currently, it works with MasterCard PayPass terminals and supports Citi Mastercard and Google Prepaid Card.

So essentially, users just feed-in and verify their credit card or bank details into their compatible phones, which then acts like a wallet and use it for offline transactions, instead of swiping cards. Google demonstrated the service at its New York office and plans to launch it commercially in the near future.

The PayPal Lawsuit

Filed in a state court in San Jose, California (Download here), the suit filed by PayPal against Google,  alleges:

– Osama Bedier, who was a senior PayPal Executive responsible for mobile, platform and new ventures, had intimate knowledge of PayPal’s capabilities, strategies, plans and market intelligence regarding mobile payments and related technologies. He joined Google on or about 24 January 2011, and was put in-charge of mobile payments. In the course of his work at Google, Bedier and Google misappropriated PayPal trade secrets by disclosing them within Google and to major retailers. Prior to Bedier’s exit PayPal undertook research and analysis of what it saw as Google’s major problems and weaknesses in the mobile payment and point of sale context, and Bedier was briefed on this analysis.

– Bedier had detailed knowledge of PayPal’s point of sale, mobile payment, and digital wallet business strategies, concepts, and proposed procedures. In addition, Bedier knew about the results of marketing research, consumer preferences, and merchant issues related to point of sale, mobile payment, and digital wallet strategies, as well as the employees executing those strategies. Further, Bedier knew about the current stage of development, anticipated deployment and the scheduled sequence for the rollout of features PayPal intends to deploy. Bedier was acquainted with top prospects among retailers and has begun to approach those same retailers on behalf of Google.

– Former eBay executive Stephanie Tilenius who joined google before Bedier, solicited and recruited him, violating her contractual obligations with eBay. Bedier has also violated contractual obligations by soliciting and recruiting other PayPal employees to work at Google.

– From 2008 to 2011, Google and PyPal were negotiating a commercial deal where PayPal was to serve as a payment option on Google’s Android Market. PayPal provided Google with an extensive education about mobile payments and Bedier was leading negotiations between the two companies. At the time when the two companies were negotiating and finalizing the Android-Paypal deal, Bedier was interviewing for a job at Google, without informing PayPal about this conflicting position.

In addition to general damages, compensatory damages and attorneys’ fees, PayPal has asked for a royalty for Google’s and Bedier’s misappropriation of the company’s trade secrets.

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A Push For Mobile Payments Is Upon Us

Nikhil adds: A push for mobile payments is upon us, and while Google Wallet is primarily about offline payments – much like Docomo in Japan – I’d be surprised if there isn’t a non-NFC mode of payment developed, aggregating payment gateways for the mobile, to be deployed across Google’s AdMob ad network. A similar initiative is being launched by AdMob competitor InMobi, and it’s time for two key changes: Firstly, taking mobile payments beyond the telecom operator integrated billing network, because in most cases, there isn’t revenue share/processing fee standardization, and the cost of telco payment for the vendor (developer) is much too high.

It’s also time, from a developer perspective, that a global plug-and-play payments system for the mobile was developed that goes beyond individual application stores; outside of the Apple ecosystem, the dependency on advertisements is much too high.