In Legal Battle With Google, PayPal Faces Uphill Battle in California

Heres a phrase PayPal might want to keep in mind as it wages a civil battle against two former executives who defected to Google: Location, location, location.

Because when it comes to employment breach of contract and trade-secret cases, California can be a much pricklier state for aspurnedemployer to prevail within than many others.

California law is very hostile to these types of suits, saidJason Shultz, acting director of the Samuelson Law, Technology & Public Policy Clinic at the UC Berkeley School of Law, Id say over at PayPal, they have a little bit of uphill battle.

While much of PayPals allegations against Stephanie Tilenius and Osama Bedier revolve around alleged breach of employment contract and non-compete violations, provisions within theCaliforniaBusiness and Professional Codeactually limit theenforceabilityof non-compete disclosures that companies like Pay Pal make employees sign.

The result regardless of whatever contracts an employer forces a worker to sign when they start a job is that contracts often fall apart when they get in front of a judge.

Californiais very pro-competition, especially here in the Silicon Valley. Think of startup culture. We like toenticeemployees to jump ship and compete with former employers, Shultz said. This state has a veryfree-trade approach to labor markets. You cant lock in your employees forever. You have to compete to keep them.

PayPal filed suit in Santa Clara County Thursday, accusing former employees Stephanie Tilenius and Osama Bedier, as well as Google, of misappropriation of trade secrets, breach of contract, and a host of other claims related to the recruitment of PayPal employees and the alleged improper use of PayPals confidential information.

Other aspects of PayPals claims could be held up to extrascrutinyin California as well. In its legalcomplaint, the company argues Bediers def! ection f rom PayPals mobile payments division to Googles will result in theinevitabledisclosure ofunspecifiedproprietarytrade secrets.Its called the inevitable disclosure doctrine. Essentially they are saying hes the man who knows too much and cant leave and work elsewhere, Schulz said. Californiahas rejected that doctrine as well.

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