Google unveils smartphone pay service, PayPal sues

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NEW YORK (AP) - Google Inc. hopes to nudge consumers and merchants into a world where the smartphone has replaced the wallet as the container for credit cards, coupons and receipts.

While it tackles that challenge, Google also will have to spar with the biggest online payment service, eBay Inc.’s PayPal, in a legal battle that could be filled with corporate intrigue.

After Google unveiled its tap-to-pay technology in New York on a smartphone equipped with its Android software, PayPal struck back in a California court with a lawsuit alleging the service is the byproduct of intellectual theft and betrayal.

The central figure in the 28-page complaint is Osama Bedier, now Google’s vice president of payments after spending nine years at PayPal. He was part of the team that showed off a new service called “Google Wallet.”

The suit alleges Google hired Bedier four months ago primarily to pick his brain and steal PayPal’s trade secrets for its new phone-as-a-wallet service.

PayPal alleges Bedier put the latest information about PayPal’s mobile payment strategy on his own computer just before he started his new job at Google. The suit also names a former eBay executive, Stephanie Tilenius, who went to work for Google in 2009 and began to woo Bedier last year. Tilenius, Google’s vice president of commerce, also appeared at the New York event to tout the benefits of Google Wallet.

“Sometimes the behaviors of people and competitors make legal action the only meaningful way for a company to protect one of its most valuable assets _ its trade secrets,” PayPal wrote on its blog Thursday.

Google spokesman Aaron Zamost said the company isn’t commenting until it has had more time to review the suit.

Luring Bedier away from PayPal was so important, according to the lawsuit, that both Eric Schmidt, then Google’s CEO, and co-founder Larry Page met with him last fall. Page has since replaced Schmidt as CEO.

Google made its first formal job offer to Bedier on Nov. 12, according to the lawsuit, which was filed in Santa Clara County Superior Court. That was just three days before Schmidt appeared at a technology conference and talked about the possibility of Google creating a phone that could supplant wallets.

In Google’s vision detailed Thursday, shoppers will touch their phone screen to select a card, then tap the phone to a credit-card reader in a store or restaurant. Google would make money by selling coupons and advertising that come along with the experience.

It’s a goal shared by PayPal and others. The Internet search and advertising company also faces tough competition from cellphone companies and payment card issuer Visa Inc. All of them want to play the central role of tying together phones, retailers and banks into a new payment system.

This isn’t Google’s first attempt at electronic payments. The company introduced an online payment service called “Checkout” five years ago. It hasn’t posed a serious threat to PayPal.

Google views its digital wallet as a way to sell advertising at a pivotal moment: when shoppers are in stores, ready to spend money and even more receptive to coupons and other discount offers.

Nick Holland, an analyst at Yankee Group, said that although all parties stand to benefit from Google’s system, Google itself has the most to gain. That’s because the Google Wallet would allow the company to “own” the market for advertising that’s tied to the user’s location.

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