Google has issued a pretty tepid statement to what appears to be a highly problematic situation.
In its complaint (http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC...), PayPal alleges in meticulous detail how its chief negotiator over some two years on a major deal with Google for mobile payments on Android brought the deal between the companies to within a hair of signing and then, at the end of the process, did a series of interviews with Google to take a position working on its mobile-payment system. Not only was this person the chief negotiator on that deal, he was also PayPal's senior executive in charge of this area for his employer. On the eve of the anticipated signing (October 31, 2010) after two years of negotiations, Google told PayPal it wanted a restructuring the deal even while it was giving the negotiator a job offer. The negotiator accepted the offer, notified PayPal and was confronted about how this step was seriously problematic from a legal standpoint. He then changed his mind and told Google no. The parties once again revved up the deal and got to a signing stage for the second time by February, 2011. At that point, Google changed its CEO and, with Larry Page back in that role, Google killed the deal and hired the PayPal executive to lead its work in the mobile-payment area.
In the midst of all this, you also have a second PayPal employee who had been hired by Google in 2009 and was under a legal restriction not to solicit PayPal employees for a period of one year. With that restriction still in effect (or so PayPal alleges), she was actively soliciting not only the senior PayPal executive mentioned above but (according to the allegations of the complaint), a series of other PayPal employees who were part of the mobile-payments group.
It is way too early to tell what happened here, but here are a few thoughts:
1. The complaint is incredibly detailed, with much specific evidence of communications and events that do not look good for Google or the individuals sued. This level of detail is highly unusual for a complaint of this type and suggests to me that this is a very serious case, well-prepared and meticulous (and, of course, when the lead attorney is named G. Hopkins Guy III, as he is, you just know you are in trouble).
2. Employees owe a fiduciary duty to their employers to act in the best interest of the company and playing both sides of the fence at the end of a major negotiation is almost certain to raise serious issues about whether such duties were breached. This is possibly an even more serious problem here than is the trade secrets case.
3. California does not recognize the "inevitable disclosure" doctrine by which a former employee can be enjoined from taking a position on grounds that it will be "inevitable" that he would need to disclose important trade secrets in order to perform his duties. That said, any such case involves highly problematic issues and it would not take much evidence for a court to look at the whole picture and say, "what the hell is going on here." Google may be treading on thin ice here.
4. This sort of conduct usually evidences a cynical power play by a major company along "might makes right" grounds. Here, though, it is hard to believe that Google would be that cynical. Nor is PayPal a small company without resources. This part remains puzzling.
5. The real test will come if, as I assume, PayPal seeks to get a preliminary injunction blocking Google from using its mobile-payment technology because it allegedly based on a misappropriation of PayPal's trade secrets. This is where the evidence on both sides will come out and it will be much clearer whether Google did in fact commit wrongs as alleged. Until then, it really is hard to tell.
There is federal law that defines theft of trade secrets as a crime.
The federal Espionage Act of 1996 provides: "Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for . . . interstate . . . commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly . . . steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information . . . shall . . . be fined under this title [i.e., up to $5 million] or imprisoned not more than 10 years, or both."
That said, it would be highly unusual for the authorities to attempt to prove a criminal violation in this sort of case. I think the overwhelming odds are that it will be treated as a purely civil case.
Is there any sort of time frame attached to something like this? Perhaps something along the lines of a non-complete agreement? If you worked for someone like PayPal, could you never again work for a company that has a payment service or does this only come into play if you're hired to help -build- a payment service?
In general, every employee in California may freely work for a competitor after leaving a job and may do so right away.
But - in doing so, he has no right to pilfer his former employer's trade secrets and either use or disclose them in the new position. An employee can use his general skills and expertise freely in any position, as these are not tied to misuse of confidential, proprietary information. The tension lies between your right to work freely using your skills and restrictions placed on you to the extent you learn confidential things in your old position.
Thus, the general answer to your question is that, yes, you can work for another company doing a payment service even if you have worked for PayPal, but you can't use or disclose trade secrets from your former employer in your subsequent job. Do gray areas come up in such situations? All the time. Usually, they don't lead to lawsuits. In extreme cases, they do; in abusive cases, they also do, though these are not justified (i.e., where a former employer wants to chase and punish an employee just for having left employment). In the vast majority of cases in California, nothing happens and the former employee freely moves on - at times immediately, at other times after some delay. (Results may vary in other states where the law may be different and particularly where non-competes are enforced).
Thanks for the detailed explanation. I had forgot we were talking about California where non-competes are not really enforced (from what I've heard). I can definitely see how there are some grey areas, but it's good to know that generally the employee is free to move on to other employment in the same field.
Beautiful comment with lots of juicy insights grellas. Glad I read your comment first instead of the Techcrunch article. I saved time and feel I got the goods.
I'll be looking out for more of your comments in the future.
In its complaint (http://www.ebayinc.com/assets/pdf/fact_sheet/2011_PayPal_DOC...), PayPal alleges in meticulous detail how its chief negotiator over some two years on a major deal with Google for mobile payments on Android brought the deal between the companies to within a hair of signing and then, at the end of the process, did a series of interviews with Google to take a position working on its mobile-payment system. Not only was this person the chief negotiator on that deal, he was also PayPal's senior executive in charge of this area for his employer. On the eve of the anticipated signing (October 31, 2010) after two years of negotiations, Google told PayPal it wanted a restructuring the deal even while it was giving the negotiator a job offer. The negotiator accepted the offer, notified PayPal and was confronted about how this step was seriously problematic from a legal standpoint. He then changed his mind and told Google no. The parties once again revved up the deal and got to a signing stage for the second time by February, 2011. At that point, Google changed its CEO and, with Larry Page back in that role, Google killed the deal and hired the PayPal executive to lead its work in the mobile-payment area.
In the midst of all this, you also have a second PayPal employee who had been hired by Google in 2009 and was under a legal restriction not to solicit PayPal employees for a period of one year. With that restriction still in effect (or so PayPal alleges), she was actively soliciting not only the senior PayPal executive mentioned above but (according to the allegations of the complaint), a series of other PayPal employees who were part of the mobile-payments group.
It is way too early to tell what happened here, but here are a few thoughts:
1. The complaint is incredibly detailed, with much specific evidence of communications and events that do not look good for Google or the individuals sued. This level of detail is highly unusual for a complaint of this type and suggests to me that this is a very serious case, well-prepared and meticulous (and, of course, when the lead attorney is named G. Hopkins Guy III, as he is, you just know you are in trouble).
2. Employees owe a fiduciary duty to their employers to act in the best interest of the company and playing both sides of the fence at the end of a major negotiation is almost certain to raise serious issues about whether such duties were breached. This is possibly an even more serious problem here than is the trade secrets case.
3. California does not recognize the "inevitable disclosure" doctrine by which a former employee can be enjoined from taking a position on grounds that it will be "inevitable" that he would need to disclose important trade secrets in order to perform his duties. That said, any such case involves highly problematic issues and it would not take much evidence for a court to look at the whole picture and say, "what the hell is going on here." Google may be treading on thin ice here.
4. This sort of conduct usually evidences a cynical power play by a major company along "might makes right" grounds. Here, though, it is hard to believe that Google would be that cynical. Nor is PayPal a small company without resources. This part remains puzzling.
5. The real test will come if, as I assume, PayPal seeks to get a preliminary injunction blocking Google from using its mobile-payment technology because it allegedly based on a misappropriation of PayPal's trade secrets. This is where the evidence on both sides will come out and it will be much clearer whether Google did in fact commit wrongs as alleged. Until then, it really is hard to tell.