2011 Paypal
2011 Paypal
2011 Paypal
124811)
[email protected]
2 BROOKS G. PARFITI’ (STATE BAR NO. 268538)
[email protected]
j ALEX J. FEERST (STATE BAR NO. 270537)
[email protected]
4 ORRICK, HERRINGTON & SUTCLIFFE LLP
1000 Marsh Road
) Menlo Park, California 94025
Telephone: ÷1-650-614-7400
6 Facsimile: +1-650-614-7401
/
SUPERIOR COURT OF THE STATE OF CALIFORNIA
14
COUNTY OF SANTA CLARA
15
16
PAYPAL, INC., a Delaware Case No.
17 Corporation, and
EBAY INC., a Delaware Corporation, PAYPAL, INC.’S AND EBAY INC.’S
18 COMPLAINT FOR: (i)
Plaintiffs, MISAPPROPRIATION OF TRADE
19 SECRETS; (2) THREATENED
V. MISAPPROPRIATION OF TRADE
20 SECRETS; () BREACH OF CONTRACT;
GOOGLE INC., a Delaware (4) BREACH OF CONTRACT; (5)
21 Corporation, INTENTIONAL INTERFERENCE WITH
OSAMA BEDIER, an individual, CONTRACTUAL RELATIONS; (6)
22 STEPHANIE TILENIUS, an individual, BREACH OF FIDUCIARY DUTY AND
and DOES 1 through 50, inclusive, DUTY OF LOYALTY; () AIDING AND
23 ABETTING BREACHES OF FIDUCIARY
Defendants. DUTY AND DUTY OF LOYALTY; (8)
24 INTENTIONAL INTERFERENCE WITH
PROSPECTIVE ECONOMIC
25 ADVANTAGE; (9) UNFAIR
COMPETITION UNDER CALIFORNIA
26 BUSINESS AND PROFESSIONS CODE
SECTION 17200, ET SEQ.
27
28
12 business in the County of Santa Clara, State of California. Among other endeavors, eBay
13 operates a marketplae hosting hundreds of millions of transactions per year
14 3. Defendant Google Inc. (“Google”) is a Delaware Corporation having
15 its principal place of business in the County of Santa Clara, State of California. Google
0
16 owns and operates the world’s most popular Internet search engine. Google’s primary
17 source of revenue is advertising sales, but it also competes with eBay in c-commerce
18 through its shopping services and payment processing product, Google Checkout.
19 Google also controls and funds development of the Android mobile operating system
20 used on smartphones and other mobile devices. Google owns the marketplace for
21 Android mobile applications, Android Market.
22 4. Defendant Osama Bedier worked for PayPal from December 2002
23 until January 24, 2011. At the time of Bedier’s departure from PayPal, he served as Vice
24 President of Platform, Mobile, and New Ventures. Bedier now fills a similar role at
25 Google. At all times relevant to this complaint, Bedier was, and continues to be, a
76 resident of the State of California.
27 5. Defendant Stephanie Tilcnius worked at eBay from 2001 to October
28 16, 2009. At the time of Tilenius’ departure from eBay, she served as eBay’s Senior Vice
-j)
21 9. Plaintiff PayPal has spent the past ten years building a global
22 leadership position in online and mobile payments. As a result, PayPal has substantial
23 intellectual property in these fields. Over the past year, PayPal has been developing
24 capabilities to provide large retailers with next generation “mobile payment” point of sale
25 technology and services. Recently, Google has also been exploring the market for next
26 generation mobile payment point of sale technology and services.
27 10. Defendant Osama Bedier was the senior PayPal executive
28 responsible for Mobile, Platform, and New Ventures. In this role, he was PayPal’s senior
-3-
PAYPAL, INC’S AND EBAY INC.’S COMPLAINT
I leader charged with bringing its mobile payment and point of sale technologies and
2 services to retailers. Through this work, he had an intimate knowledge of PayPal’s
3 capabilities, strategies, plans, and market intelligence regarding mobile payment and
4 related technologies — information constituting in part PayPal’s trade secrets. Bedier left
5 PayPal for Google on or about January 24, 2011, and was put in charge of Mobile
6 Payments. He is now leading Google’s efforts to bring point of sale technologies and
7 services to retailers on its behalf. In the course of his work at Google, Bedier and Google
8 have inisappropriated PayPal trade secrets by disclosing them within Google and to
9 major retailers.
I0 ii. Google hired Bedier after another former eBay executive, defendant
II Stephanie Tilenius, solicited and recruited him. By doing so, Tilenius violated her
12 contractual obligations to eBay. Before and since his arrival at Google, Bedier has also
13 violated his obligations to eBay by soliciting and recruiting PayPal employees to work at
14 Google,
15 12. In addition, from 2008 to 2011, Google and PayPal were negotiating
16 a commercial deal where PayPal would serve as a payment option for mobile app
17 purchases on Google’s Android Market. During that time, PayPal provided Google with
18 an extensive education in mobile payments. Bedier was the senior PayPal executive
19 accountable for leading negotiations with Google on Android during this period. At tile
20 very point when the companies were negotiating and finalizing the Android—PayPal deal,
21 Bedier was interviewing for a job at Google — without informing PayPal of this
22 conflicting position. Bedier’s conduct during this time amounted to a breach of his
23 responsibilities as a PayPal executive.
24 /
25 //
26 //
27 //
28 /
-4-
PAYPAL, INCS AND EBAY JNC.S COMI’LAJNT
I , BACKGROUND
2 A. Mobile Payment at the Point of Sale
3
13. Internet consumers have begun a large-scale migration from
desktop and laptop computers to mobile phones. As high-powered mobile
5
‘smartphones” become ubiquitous, gwing consumers quick and secure Internet access
6
from anywhere, the distinction between “online” and “offline” activities is blurring.
7
Many consumers are always online, even as they engage in what used to be
quintessentially offline activities.
9
14. “Mobile payment” refers to the rapidly growing trend of consumer
10
payments made using smartphones and other mobile devices, either in-store, online or
11
peer-to-peer. In-store purchases are one variety of “point of sale” transactions. Industry
12
analysts project that the domestic mobile payment market will reach $200 billion to
13
$i trillion annually within the next few years.
15. A smartphone or other mobile device that stores payment
information and facilitates transactions is an implementation of a “digital wallet.” One
16
form of digital wallet technology is the “wallet in the cloud,” where a customer’s financial
17
data, payment options, and preferences are stored online in addition to or instead of the
18
mobile device itself, and is accessed on demand by whatever device or service a customer
19
seekstousc.
20
i6. Retailers and consumers alike are interested in mobile payment and
— digital wallet technologies because they provide flexibility, intriguing opportunities for
22
location-based services, targeted advertising possibilities, and myriad other services,
23
24 B. PayPal and Google in Competition
25 .
26
online payment processing company. PayPal interfaces with 57 financial networks and
. .
27
local banks across the world to facilitate global online commerce. Among
.
over 15,000
28
diverse payment systems, PayPal acts as a “universal adapter.” Regardless of the
3 i8, Around the same time in 2006, Google tried to enter the payment
4 processing market with its Google Checkout product. On its surface, Google Checkout
5 functions like PayPal. Unlike PayPal, however, Google Checkout is mostly a tool for
6 acquiring customer information for the benefit of Google’s other products and services.
7 After five years of operation, Google Checkout has had virtually no impact outside of
8 Google. Revenues from Google Checkout went unreported as not material in Google’s
9 oio Annual Report, compared to PayPal’s $3.4 billion in the same timeframe.
10 i. At over 30%, Android currently enjoys the largest and fastest
11 growing market share for the smartphone operating system market in the countiy,
12 beating out Nokia’s Symbian, Apple’s iOS, Research in Motion’s BlackBerry, and
13 Microsoft’s Windows Mobile. More people have Android-powered smartphoncs in their
14 pockets than those running on any other operating system. Google’s growing dominance
15 in mobile operating systems has led it to attempt entry into the mobile payment space.
16 20. PayPal’s long experience in online payment processing has allowed
nt, point of
17 PayPal to develop a wide range of trade secrets in the areas of mobile payme
titors
18 sale, and digital wallet, which give PayPal an advantage over both existing compe
19 and new market entrants, such as Google. Thus, despite the relatively recent
’s
20 development of the use of a smartphone as a point of sale transaction device, PayPal
21 trade secrets are particularly valuable in this emerging area.
22 21. Both PayPal and Google are currently offering their mobile payment
23 and point of sale technologies to major retailers for trial use. Although PayPal’s services
y that a retailer
24 and Google’s services are not mutually exclusive, at this stage it is unlikel
25 would invest time and effort in testing both companies’ products.
26 22. Early adoption by retailers and consumers will be critical for success
from
27 in mobile payment, just as it has been in online payment. For example, apart
28
-6-
PAYPAL, INC’S AND EI3AY INC’S COMPLAINT
I Google Checkout’s limited success, CitiGroup, Yahoo, and Western Union have all
2 launched and shuttered online payment processing services since PayPal was born.
3
II.
4 TS
5 A. Bedier Knows PayPaPs Trade Secrets aiJ is Misapprop.ting
them at Googjc
6
18 payment, and digital wallet business strategies, concepts, and proposed procedures. In
19 addition, Bedier knows the results of PayPal’s marketing research, consumer
20 preferences, and merchant issues related to PayPal’s point of sale, mobile payment, and
21 digital wallet strategies, as well as the key employees executing those strategies.
22 Furthermore, Bedier knows the current stage of PayPal’s development, anticipated
23 deployment and the scheduled sequence for the rollout of features PayPal intends to
24 deploy. Bedier also knows PayPal’s top prospects among retailers and has begun to
25 approach those same retailers on behalf of Google.
26 26. Bedier transferred up-to-date versions of documents outlining
27 PayPal’s mobile payment and point of sale strategies to his non-PayPal computer just
28 days before leaving PayPal for Google on Jan 24, 2011. On information and belief, Bedier
23 29. At the time he left PayPal, Bedier admitted that he had confidential
24 eBay information in locations such as his non-PayPal computers, non-PayPal e-mail
25 account, and an account on the remote computing service called “DropBox.” Plaintiffs
26 are informed and believe and allege on that basis that this confidential eBay information
27 includes PayPal trade secrets.
28 30. PayPal has made repeated demands regarding the proper return and
-8-
PAYPAL, INC.’S AND EBAY INC’S COMPLAINT
I analysis of its trade secret information contained in Bedier’s DropBox, non-PayPal
2 computers, and non-PayPal emi1 account in order to prevent Bedier and Google from
3 continuing to have access to, and continuing to use, PayPal confidential information,
4 including PayPal trade secrets.
5 31, PayPal’s demands have been reasonable as to time, place, and
6 method, yet Bedier has refused these demands because he either intends to maintain
7 access to and use that trade secret information, or attempt to conceal his prior use of that
8 information on behalf of Google. Specifically, PayPal has set forth a protocol for a neutral
9 third-party expert to take forensic images of Bedier’s data and devices for preservation,
10 determination, and analysis of the presence of PayPal’s trade secrets and confidential
11 information therein, and Bedier has refused to accept or abide by that protocol.
1’)
I’
16 functionality that would allow third-party application (or “app”) developers to collect
17 payments for downloads on the Market. Google knew that growing Android’s market
18 share would rely heavily on fulfilling consumer demand for apps written by third-party
19 developers. So, providing a way for developers to get paid for their work was crucial to
20 the success of Android. Google needed a payment solution and opened negotiations with
21 PayPal.
22 Over a two year period, as PayPal and Google negotiated deal terms,
23 integration engineers for PayPal and Google worked together to build the software and
24 capabilities that would enable Android Market to offer PayPal as a payment option for
25 apps. Development of the integrated payment system occurred in tandem with the
26 negotiations because of Google’s claimed need to understand the complexity of the
27 integrated payment system before moving forward.
28 By 2010, the executive in charge of the negotiations for PayPal was
-9-
PAYPAL, 1NCS AND EBAY INCS COMPLAINT
1 Osama Bedier. The executive in charge of the negotiations for Google was Andy Rubin.
2 PayPal and Google had a deal finalized and signature-ready on October 26, 2010. By that
3 time, unknown to PayPal, Bedier had just finished a series of job interviews with Google
4 senior executives, culminating with a meeting on October 21 between Bedier, Google
5 Senior Vice President Jonathan Rosenberg, and then-President of Google Larry Page.
6 3. Though Google’s leadership had directed negotiations toward the
7 October 26 finalization months earlier, it now balked when presented with the very deal
8 they had requested. The companies had a term sheet, a two phase roll-out with dates,
9 and all other details nailed down. But, in the interim, Google’s leadership had
10 interviewed Bedier, Rather than inking the October 26 deal, Google instead at the last
ii minute professed a shift in mindset on the entire structure of the deal.
12 36. On October 28, 2010, in his capacity as an officer at PavPal, Bedier
13 spoke to Andy Rubin about Google’s strategic shift regarding the deal, and where this left
14 Googic and PayPal going forward. On October 31, Google offered Bedier a job. On
15 information and belief, on November 2, Bedier sought another meeting with Rubin, this
how
16 time to talk not about what PayPal could do with Google going forward, but rather
Less
17 Bedier could help Google compete against PayPal, if he accepted Google’s job offer.
18 than a week earlier, Bedier had been the lead representative for PayPal at its annual
re
19 “Innovate” developer’s conference, expressing PayPal’s strategic vision to softwa
20 developers.
21 37. Bedier informed eBay and PayPal of his job offer from Google on or
2010. Bedier said he was considering multiple job offers and
that one
22 about November 1,
his
23 involved work in mobile payment at Google. Plaintiffs informed Bedier that given
cloud
24 knowledge of PayPal’s mobile payment, point of sale, and digital wallet in the
’s mobile
25 strategies as well as his knowledge of PayPal’s detailed assessment of Google
of
26 payment and point of sale strategies and weaknesses, that Bedier would as a matter
.
27 course misappropriate PayPal’s trade secrets if he were to take that position at Google
28 38. In addition, Plaintiffs informed Bedier that there would be a
- 10 -
ii belief, Android chief Andy Rubin signed the agreement with approval from the Google
12 Board and then-CEO Eric Schmidt. However, Google stalled on communicating this to
13 PayPal. Larry Page took over as CEO on April 4. Three days later, Google scuttled the
14 deal for good. It was no longer interested in partnering with PayPal, but instead decided
helm.
15 to build a competing product with PayPal’s former employees and executives at the
C
16 41. Following Bedier’s arrival at Google, Bedier and Google began
secrets.
17 actively recruiting other key PayPal employees with knowledge of PayPal’s trade
engineer and
18 On April 7, 2011, they successfully recruited Usman Abbasi, a director-level
Bedier
19 key player in PayPal’s mobile payment operations, to work for Google. Google and
ed
20 recruited, both successfully and unsuccessfully, other key PayPal employees involv
that
21 with PayPal’s mobile and point of sale strategies. Google had abandoned the plans
g
22 had developed over more than two and a half years of collaboration with and learnin
.
23 from PayPal, and instead sought to hire away employees who knew PayPal trade secrets
24 42. Despite Bedier’s assurances and protests to the contrary, the point of
25 his departure to Google has been to lead Google’s efforts in mobile payment and
’s
26 particularly mobile payment at the point of sale. Bedier is willfully usurping PayPal
Google’s
27 trade secrets in these areas as well as its digital wallet in the cloud strategies for
re
28 and his own gain. Both Bedier’s departure itself and Bedier’s actions after his departu
* II -
11 committed to not solicit any eBay or PayPal employees for a period of one year after her
12 employment with eBay. Tilenius also agreed not to disclose to others eBay’s confidential
13 information regarding the skills and compensation of employees of eBay or its
14 subsidiaries. Tilenius reaffirmed these commitments in an October 16, 2009 Separation
also
15 Agreement under which eBay paid her a substantial amount of severance pay. She
16 signed a Consulting Agreement with eBay on October 16, 2009 that obligated her to not
lting
17 solicit eBay or PayPal employees for one year following its termination, The Consu
Tilenius
18 Agreement expired on March 3, 2010. As a result of her agreements with eBay,
19 was obligated not to solicit eBay employees until at least March 2, 2011.
20 45. At the end of June 2010, Google reorganized some of its business
a new
21 units. One result of this reorganization was installing Tilenius as the head of
a campaign to
22 Commerce & Payments group. Almost immediately, Tilenius embarked on
23 hire Bedier away from PayPal. On or around July 15, 2010, Tilenius initiated contact with
:
24 Osama Bedier through a message on the social networking site Facebook, writing
25 How are you? Hope the wife and kids are well.. .hard to
believe you have 4 kids, they all must be so big now. I heard
26 from a little birdie that you might be open to bigger and
better challenges, I have a HUGE opportunity for you, would
27 love to chat if you are interested.
28 46. Tilenius continued her efforts to recruit Bedier over at least the next
- 12 -
14 during this interview process with Google, Bedier did not use his best efforts to work on
15 behalf of PayPal. Instead, he breached his fiduciary duty and duty of loyalty and
ffs’
16 rescheduled, canceled, and/or delayed his duties at PayPal, causing damage to Plainti
17 business.
19 resigned from PayPal, Bedier began a campaign of soliciting and recruiting PayPal
20 employees to join him at Google in breach of his EPI with eBay, which he signed
17 year after the date of termination of my employment by the Company I will not induce
18 any employee of the Company to leave the employ of the Company.” As defined by the
19 EPI, “Company” includes PayPaL
20 83. The EPI between Tilenius and eBay also contained a provision
21 requiring her, during her employment with eBay and thereafter, to hold in strictest
22 confidence and not disclose, use, lecture upon or publish any of eBay’s Proprietary
23 Information. Proprietary Information is defined as (a) trade secrets, inventions, mask
24 works, ideas, processes, formulas, source and object codes, data, programs, other works
25 of authorship, know-how, improvements, discoveries, developments, designs, and
26 techniques; (b) information regarding plans for research, development, new products,
27 marketing and selling, business plans, budgets and unpublished financial statements,
28 licenses, prices and costs, suppliers and customers; and (c) information regarding the
- 20 -
10 Agreement with eBay. This agreement was an exhibit to the Separation Agreement and
11 expressly incorporated the Separation Agreement. In the Consulting Agreement,
tor or
12 Tilen ins agreed in part “not to solicit, or induce any employee, independent contrac
13 other personnel to terminate or breach an employment, contractual, or other
icit obligations
14 relationship with [eBay] and its subsidiaries.” Tilenius’ employee nonsol
for a period of one
15 under the Consulting Agreement ran “{d]uring this Agreement, and
tion Agreement, the
16 year immediately following its termination.” According to the Separa
also be terminated by
17 Consulting Agreement would expire on March 3, 2010, and could
18 either party on seven days’ written notice.
the
19 86. Tilenius also agreed in her Consulting Agreement that, during
and its
20 term of the Consulting Agreement and thereafter, Tilenius would hold eBay’s
would not use or disclose
21 subsidiaries’ Confidential Information in strict confidence and
similarly to
22 the Confidential Information. Confidential Information is defined
to trade secrets,
23 Proprietary Information in the EPI and includes but is not limited
the skills and compensation
24 inventions, ideas, business plans, and information regarding
25 of employees of eBay or its subsidiaries.
but
26 87. eBay performed its obligations under the contracts, including
and
27 not limited to paying Tilenius a salary, a substantial sum of severance pay,
28 consulting pay.
-21-
PAYPAL, INC ‘S AND EHAY INC.’S COMPLAINT
1 88. While Tilenius’ obligations were in full force and effect. Tilenius
2 breached the contracts by soliciting and inducing Osama Bedier to resign from PayPal
3 and using and disclosing eBay’s and PayPal’s Confidential Information and Proprietary
4 Information.
5 89. As a result of Tilenius’ breach, Bedier did in fact resign from PayPal,
6 causing damages to Plaintiffs in an amount to be determined at trial.
7 EQU1ThCASE OFA ION
8 (Breach of Contract against Bedier)
9 90. Plaintiffs hereby allege and incorporate by reference paragraphs i
10 through 42, and paragraphs 53 through 57, inclusive, of this complaint, as though fully
11 setforthherein.
12 91 Bcdiei executed eBa3’s EPT on No ember 13, 2002, agrccmg that
13 ‘for a period of my employment by the Company and for one (i) year after the date of
14 termination of my employment by the Company I will not induce any employee of the
15 Company to leave the employ of the Company.” As a result of this agreement with eBay,
0
at
16 Bedier was and is obligated to refrain from soliciting eBay or PayPal employees until
17 least January 24, 2012.
18 92. The EPI between Bedier and eBay also contained a provision
strictest
19 requiring Bedier, during his employment with PayPal and thereafter, to hold in
etary
20 confidence and not disclose, use, lecture upon or publish any of PayPal’s Propri
21 Information, including but not limited to PayPal’s trade secrets.
22 93. The EPI between Bedier and eBay also contained a provision
at the
23 requiring Bedier to return eBay’s and PayPal’s documents together with any copies
24 termination of his employment,
25 .
eBay performed its obligations under the contract, including but not
26 limited to paying Bedier for his services while he was employed at PayPal.
27 .
While this obligation was in full force and effect, Bedier breached
28 the contract by soliciting PayPal employees to resign from PayPal.
-“ -
7 through 9, paragraphs 12 through 22, paragraph 36, paragraphs 53 through 57, and
8 paragraphs 107 through 112, inclusive, of this complaint, as though fully set forth herein.
9 114. Tilenius and Google knew that Bedier owed Plaintiffs a fiduciary
I0 duty and a duty of loyalty as an executive at PayPal.
11 115. ‘rilenius and Googic knew that Bedier would breach those duties if
12 he recruited other PayPal employees to work at Google while Bedier was still a PayPal
13 employee.
14 ii6. Tilenius and Google further knew that Bedier would breach those
15 duties if he used Plaintiffs’ time and resources to plan a move to Google.
16 117. Plaintiffs are informed and believe and on that basis allege that
17 Tilenius and Google gave substantial assistance or encouragement to Bedier to recruit
18 other PayPal employees to work at Google while he was still at PayPal, and to use
19 Plaintiffs’ time and resources to plan his move to Google.
20 118. On information and belief, Beclier did in fact breach those duties by
21 recruiting other PayPal employees causing damage to Plaintiffs in an amount to be
22 determined at trial.
23 119. Plaintiffs arc informed and believe and on that basis allege that
24 Bedier further breached his duties by using Plaintiffs’ time and resources to plan his
25 move to Google.
26 120. On information and belief, Google’s and Tilenius’ acts that
27 constitute aiding and abetting were carried out willfully, fraudulently, maliciously and
28 with a wanton disregard of Plaintiffs’ rights, thereby entitling Plaintiffs to punitive
-25-
PAYPAL, INC.’S AND EBAY INC.’S COMPLAINT
I damages to be proven at trial.
2 fflGHTH cA$QEArION
3 (Intentional Interference with Prospective Economic Advantage against
4 Google and Tilenius)
121, Plaintiffs hereby allege and incorporate by reference paragraphs i