After reading briefly through the lawsuit[1], it seems that Osama Bedier was working as a senior manager at PayPal creating a product similar to Google Wallet (referred to as a "mobile payment" point of sale). He then interviewed and left for Google (whilst PayPal and Google were in negotiations for a separate business deal), and PayPal claims that he used trade secrets from PayPal to help Google create Wallet.
Stephanie Tilenius broke her contractual agreement with eBay after she recruited Bedier (and attempted to recruit many other PayPal employees).
"Bedier was the senior PayPal executive accountable for leading negotiations with Google on Android during this period. At the very point when the companies were negotiating and finalizing the Android—PayPal deal, Bedier was interviewing for job at Google without informing PayPal of this conflicting position. Bedier’s conduct during this time amounted to breach of his responsibilities as PayPal executive."
I'm not a lawyer, but it looks like they have pretty good reason to be upset.
What struck me the most in that lawsuit (which I haven't yet finished reading, but seems pretty compelling) is:
"Bedier transferred up-to-date versions of documents outlining PayPal's mobile payment and point of sale strategies to his non-PayPal computer just days before leaving PayPal for Google"
and
"At the time he left PayPal, Bedier admitted that he had confidential eBay information in locations such as his non PayPal computers, non-PayPal e-mail account, and an account on the remote computing service called 'Dropbox'"
It goes on to explain that PayPal has requested that Bedier removes the information from his personal accounts and returns it to PayPal. Bedier has not yet done that.
This almost displays intent to share this information with outside sources. Wow. This sounds like a massive shitstorm is brewing.
Reading the suit, a lot of the evidence that Tilenius recruited Bedier was based on the content of Facebook messages and text messages. Anyone know how they got access to these supposedly private communication?
Case in point:
"Tilenius reached out to Bedier by text message and again attempted to change his mind. On or about December 3, 2010,
Tilenius messaged Bedier, “I still feel like I am missing something, for example what if we increased your offer, would that change things?"
If these communications occurred from within Paypal's coporate network or using Paypal equipment they could have been gathered using employee spying systems that they might have in place.
Not sure about paypal but I'm a lawyer at at a publicly traded financial services company and all communications on company blackberries (bbm, sms) automatically get logged along with all emails. All of these communications are searchable via a system we use for discovery during litigation.
The law isn't the employee's friend here...employees have no reasonable expectation of privacy on company devices.
IIRC, BlackBerry phones can be managed remotely. A nice use case for this feature is to shut down and wipe a stolen/lost phone with confidential information on it. I also believe that data (call log, text messages) can be retrieved remotely. I'm going out on a limb here in saying this, so I'll go look for something to cite.
EDIT: BlackBerry Enterprise Service is what I was thinking of. There's a least one tool that you can use with BES, Retain by GWAVA, that will track and store your employee's text message.
However, it helps to pay one's own debt to society before calling in someone else's.
I personally had to file a fraud dispute with my credit card company after receiving two promises over two months to reverse an unauthorized charge PayPal put on my card at their own (not a third-party vendor's) behest.
I've yet to read a story where PayPal did something unethical, despite the monthly PayPal stories on HN. All of them have involved practices (freezing accounts, almost always with very clear cause, holding funds for 180 days, etc.) that are well within their terms of service AND identical to the policies of every merchant account provider in the US.
This seems like a good illustration of the principle: "Ideas are worthless. Execution is what matters."
Paypal had the idea first and a good 10 years worth of trying to make it work (payments from mobile devices was, after all, their first product, even pre-dating online payments). And in this case, they even had some of the same team working on the idea, but they just couldn't make it happen. Google could, and did, so they'll win.
I can understand why PayPal would be upset. But really this just strikes me as another reason why we shouldn't get too worked up about the value of ideas.
Talent moving from company to company is not new in SV. And to be more specific, if you've been working you're whole career in maps technology and then move to maps division in another company, that shouldn't be shocking. Also, I have a hard time believing this one guy was the entire lynch pin on wallet and was the difference between Google doing it or not. A payment wallet is not a new concept.
This is a clear sign of paypal's weakness. Rather than compete, sue. It's like zuckerberg said: If you guys were the inventors of Facebook, you'd have invented Facebook.
I'm not a lawyer, just an engineer so maybe i'm missing something but doesn't seem as dramatic as some of the comments here imply
It's neither the career move nor the concept of the e-wallet that is in dispute... refer to the Mark Papermaster hiring fiasco that involved Apple and IBM a few years ago. The complaint is about a high-level executive acting against the company's interests while being employed in that capacity by stealing company information. I'm not a lawyer but I seem to recall quite a few similar cases e.g. someone from Coca-Cola who jumped shipped to Pepsico (or was it the other way around) and got charged with violating trade secrets laws.
I have a hard time believing this one guy was the entire lynch pin on wallet and was the difference between Google doing it or not
Perhaps not, but as the filing alleges, he was the person in charge of negotiating a deal with Google for Paypal to provide these Wallet-like services at the same exact time he was interviewing at Google for a job. That sounds like the definition of conflict of interest to me.
As an aside, I wonder what the interview process is like for someone Google is hoping to poach like this? Wonder if he had to interview with Andy Rubin a few days after/before appearing on the other side of the negotiating table from him?
You have to look at the lawsuit separately from whatever feelings you have towards either company. I'm not a huge fan of Paypal but it seems as if they have a good case against Google. I wouldn't want a employee giving trade secrets to a competitor, especially if that competitor was Google.
But here's the thing: where are the trade secrets? Displaying a picture of a credit card on a phone's screen while you send that card's info to the NFC card reader is not exactly hard to come up with on your own.
With all due respect, there's an awful lot more to it than that. There are also the many, many relationships that need to be set up to get a mobile wallet going. This is certainly part of what irritates PayPal.
People get upset about the way Paypal deals with fraud because they lose a lot of money to it and take extra precautions. While that is reasonable, they do a lot of things other people (and I) find to be ineffective and hurtful to users. For example, Paypal escapes banking regulation in the US due to loopholes. If you have your account locked for any reason they will hold your money for 6 months without interest. No exceptions. Their customer service sucks, it's nearly impossible to get ahold of a human and they'll require documentation they have no legal right to in order to unlock your account (example: complete bank statements: http://openca.mp/blog/paypal-hates-conferences-especially-op...). I believe the world without Paypal would certainly be a better place. I emphasize with their difficult issue of preventing fraud but that doesn't make their actions ok.
Edit: In response to following comments, I amended above where it made it sound like Paypal escaped a banking regulation to withhold your money. My issue is that they use the 180 hold on account that haven't been locked for good reason.
Some people may be able to get customer service. They offer different kinds of accounts and maybe with a merchant account through Paypal or a business account. I've personally found Paypal to be lacking when trying to get in touch with them. I had someone attempt to scam me out of money by doing a chargeback for an eBay product I shipped via USPS (no tracking number). When they opened a hold on the account because the person said they didn't receive the item, Paypal had a field where I could put the tracking number. Having no tracking number, I tried to attach a note saying I shipped via USPS. I tried contacting support and no one ever answered. I offered to sign something making my personally liable if there was a lawsuit (as I had shipped the item). After all of that, their response was to refund the money so I was out the product and money, and close my account.
Don't act like I'm the only person who's got problems with Paypal. If you have had only great experiences with them, more power to you, but there's many more people who have been wrong by Paypal than other money processors:
"paypal sucks" About 65,800 results
"visa sucks" About 3,970 results
"mastercard sucks" About 1,760 results
If they had a true competitor, they'd be struggling to stay in business.
Holding your money for 6 months without interest IS the banking regulation. That's a rule that comes straight from the Visa Operating Regulations which was written by the member banks that comprised Visa and MasterCard. Those regulations specifically say 180 days and that the funds be held in a non-interest-bearing account. It's exactly the same policy enforced on every merchant account underwritten by every regulated bank in the country.
PayPal has customer service by phone, and they answer on the first ring. No automated system on the business support line either.
Except PayPal is not a bank (in the US), and your account with them is not a merchant account. Consequently the 180-day hold rule does not apply.
I don't agree with proexploit's assertion that we'd be better off without PayPal, but I also wouldn't carry signs and chant slogans in the streets if the US government forced them to be better stewards of their customers' hard-earned money.
To be fair, PayPal does offer real merchant accounts underwritten by real banks. PayPal Website Payments Pro accounts are underwritten by one of these banks: JP Morgan Chase, HSBC, Wells Fargo and National Westminster Bank.
The point of my comment was that proexploit makes it sound like the 180 day hold follows from PayPal not being a regulated bank, where the reality is that regulated banks have the same 180 day hold.
I fear I may sound fishy standing up for PayPal considering its unpopularity (despite so many on HN using it without problems), but I don't like to see the perpetuation of untruths. The people that write these complaints must have never read a merchant account agreement. The list of banks that underwrite the Payments Pro accounts are on the PayPal website under the Legal Agreements link. I do read every contract I agree to.
You're absolutely right that my initial comment made the 180 day hold sound different than it is. To be fair, I'm not talking about PayPal Website Payments Pro accounts at all but basic personal or business Paypal accounts. It sounds like you've had a pleasant experience as you've been using a different product. Speaking of baseless opinions: "despite so many on HN using it without problems". I'd love to see a source for that. The fact is, even if 80% of people using Paypal have a great experience, too high of a percentage is being screwed over.
If 20% of PayPal users were having a negative experience, you'd see a lot more complaints than you do. That'd be around 46 million people.
Even if only 1% of PayPal's users were dissatisfied you'd have much more activity than a couple dozen forum posts a month spread across the web and an outdated PayPalSucks site. That'd be over 2 million people with a reason to vehemently complain. The level of chatter you hear makes it much more likely that significantly less than 1% of their user base has serious problems with the service.
No, I'm not using a different product than you. I've been using the plain-jane standard PayPal payment links and subscriptions since 2000. I'm not immune to their risk department either; someone called me just this month to express concern at my account's refund rate after I cancelled some suspicious looking orders.
I'm sure my account has enough notes on it that I'm a single mis-step away from being frozen myself through no fault of my own. But that's nothing less than I'd expect from any of my payment providers. This is business, I understand why their policies are what they are, and I'm prepared for the chance that they may choose to stop doing business with me at some point in time. A little bit of basic knowledge about the financial industry they operate in and you'd run your risk department the same way.
For a good read, get a copy of the book "Founders at Work: Stories of Startups' Early Days". One of the stories is that of the founding and early growth of PayPal. The only reason they are here today, where their great many competitors during the dot-com boom aren't, is that they figured out how to manage fraud risk. They were hemmorhaging tens of millions of dollars a month to fraud losses, but they held on long enough to build the risk management systems you need to provide payment processing to the masses.
Other companies have to manage fraud too and do it without upsetting so many people. The exact number doesn't matter, it's a lot higher than other financial services companies. The fact that they had to lock down against fraud to keep their business from failing doesn't excuse their business practices and customer service. There's multiple open loopholes for scammers that do not treat honest people well. We could debate this forever but we're going to have different opinions as we don't have a lot of exact statistics and perfect knowledge of their company policies / fraud prevention measures. I will continue to recommend people do everything they can do stay away from Paypal and you will continue using it. That's ok because we don't have to agree and although I feel differently, I recognize your right to your opinion.
It is hard to compare PayPal to other companies. Their business is 100% online payments (higher risks then B&M transactions) with a huge share of international transactions (even higher risks).
Paypal is a bank in Luxembourg and obeys luxembourgish banking rules, thus also fraud detection and money laundring detection, which is probably the cause when of why you see many people complaining of having to sent in an ID or more.
There's nothing ambiguous about that case. Accepting pre-orders and "donations" is an enormous risk for a payment processor. The merchant isn't sending anything out in exchange for the payments. They could fail to complete or send the product. The risk continues to increase the more pre-orders come in. The merchant can't substantiate that they can fulfill the orders since they have no history of shipping that product in the past. If they were taking payments through a real merchant account (why aren't they? well, they'd have a real tough time getting underwriting to allow it), the bank's risk department probably would've frozen them or required establishment of a risk reserve account too.
Strange. Isn't that the business model of kickstarter ?
There was this system for iphones allowing to film at 360°.
The collected money is mainly preorders and they obtain nearly 8x the money they asked for.
Because PayPal is seeking to also sue people whose names they do not yet know:
6. eBay and PayPal (collectively “Plaintiffs”) are ignorant of the true names and capacities, whether individual, corporate or otherwise, of defendants named herein as Does 1 through 50 and Plaintiffs sue said defendants by their fictitious names. Plaintiffs will seek leave to amend this complaint to assert allegations against the Doe defendants when their true involvement in these matters and capacities are ascertained.
In other words, PayPal employees that PayPal alleges that the former employees recruited to Google.
As I understand it, this is very standard lawsuit boiler plate, such that if they later realize there is another party involved, they can just tell the court, "so-and-so is Doe 1," allowing them to very rapidly fold in new parties without refiling the suit.
If you're really thinking about incorporating in Delaware then you might want to check out this post, "Why incorporating my startup was my worst mistake" http://news.ycombinator.com/item?id=2399139
It's about the experience another HN user had incorporating his startup in Delaware and also generated a nice discussion about things to think about before you decide to incorporate (and specifically in Delaware).
This seems like a desperate move. I'm not aware of the timelines but it seems ridiculous that Paypal just sat around knowing their "secrets" were taken to Google and hoped the person(s) that took them would remove all traces and not divulge them to Google. Would make me believe that Paypal was incapable of actually delivering a quality product and Google seemed like a more viable candidate for actually getting the idea implemented. Lawsuits like these are increasingly only a mechanism for the lazy or inept to feel validated. I guess this is why we're told ideas are pretty much worthless.
I'm sure this makes it at least a little harder to hire talent. I wonder how much. I know I'd never work for a company that thought it owned me, and was entitled to control who I could recruit to work with me after I left. I wonder how many other people feel the same way.
Reading the complaint, it's not just that a PayPal employee went to work at Google. According to the complaint, Bedier (one of the defendants) was negotiating a payment deal between Google and PayPal while interviewing with Google. And soon after Bedier left, Google apparently scuttled the entire deal. And there's the matter of Bedier putting PayPal strategy documents on his personal machine days before leaving PayPal for Google.
Of course, we're only hearing one side of the story at this point, but at least from PayPal's perspective, this isn't just about losing a couple of executives to Google.
Osama Bedier was a big deal at PayPal. He ran the whole mobile and point-of-sale organization. Everyone know who he was, and everyone was shocked when he left for Google.
It's not that PayPal want to control their employees after they move on, it's that they want to maintain their trade secrets and make sure the employees actually stick to what they agreed to in their contracts.
This is silicon valley, the wild west. Everyone knows the direction technology will take, it's execution that's so tough. I see Google paying a settlement on this one just like they did with adwords http://news.cnet.com/Google,-Yahoo-bury-the-legal-hatchet/21...
Makes one think that we are moving from a world of corporations to a world where only people matter, and everyone works as a contractor directly with a VC.
Stephanie Tilenius broke her contractual agreement with eBay after she recruited Bedier (and attempted to recruit many other PayPal employees).
"Bedier was the senior PayPal executive accountable for leading negotiations with Google on Android during this period. At the very point when the companies were negotiating and finalizing the Android—PayPal deal, Bedier was interviewing for job at Google without informing PayPal of this conflicting position. Bedier’s conduct during this time amounted to breach of his responsibilities as PayPal executive."
I'm not a lawyer, but it looks like they have pretty good reason to be upset.
1. http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC...