Paypal-Google Lawsuit Reveals More About How Android Market Deal Went Awry

Mobile developers for months have wondered why a long anticipated Paypal integration in Android Market never came to fruition. With Paypal owner eBay’s recent lawsuit against Google, we now have a partial answer.

Paypal is suing Google along with two former executives, Osama Bedier and Stephanie Tilenius, who defected to the search giant for misappropriating trade secrets to build the rival solution Google unveiled this week.

Apparently, a deal to incorporate Paypal into Android Market was ready to go on October 26, 2010 following two years of negotiation on deal terms and development on the software integration. At the time, Bedier, who was then Paypal’s vice president of platform, mobile and new ventures, had completed a set of interviews with Google unbeknownst to the company. Just as the deal was ready to be signed last fall, Google professed a change in mindset at the last minute on the structure of the deal, according to the lawsuit.

Two days after that on October 28, Bedier had a conversation with Android head Andy Rubin about how the deal could still move forward. Then three days after that, Google offered him a job. He subsequently had another meeting with Rubin — but this time it was about how he could help Google compete with Paypal. He ultimately left in January after taking a few months to decide on his career.

Google and Paypal again came close to an agreement in February. Rubin had even signed the document with approval from then chief executive Eric Schmidt, but hadn’t communicated that fact to Paypal, according to the lawsuit. But four days after Larry Page assumed control of the company last month, Google scuttled the deal and decided to build a competing product. Bedier and Tilenius also allegedly recruited other Paypal employees in violation of agreements they had signed including a key player and director-level engineer Usman Abbasi.

More bits and pieces about why the deal fell apart are coming out of the woodwork as we speak. What we had heard prior to the lawsuit from sources connected to the deal is that Google had wanted to white-label Paypal inside Android Market — a condition which would have been absurd for Paypal to accept. There was also internal tension over which group, Tilenius’ commerce team or Andy Rubin’s Android team, would have control over any payments solution inside the app store.

GigaOm also reported that Tilenius lost face after championing the acquisition of virtual currency provider Jambool and that after a management shuffle now she and Bedier, whom she recruited, are both reporting to senior vice president of commerce and local Jeff Huber. In addition, there are still tensions over whether Google should focus on direct carrier billing or build its own payment solution.

PayPal Sues Google and Former Employees Over Mobile Payments System