I wrote an application on Google Appengine with Jersey to handle simple file uploading. This works fine when it was on jersey 1.2. In the later versions (current 1.7) @FormD
For the benefit of those struggling when using Eclipse with GPE (Google Plugin for Eclipse) I give this slightly modified solution derived from @yves' answer.
I have tested it with App Engine SDK 1.9.10 and Jersey 2.12. It will not work with App Engine SDK 1.9.6 -> 1.9.9 amongst others due to a different issue.
Under your \war\WEB-INF\classes folder create a new file called jersey-multipart-config.properties. Edit the file so it contains the line jersey.config.multipart.bufferThreshold = -1.
Note that the \classes folder is hidden in Eclipse so look for the folder in your operating system's file explorer (e.g. Windows Explorer).
Now, both when the multipart feature gets initialized (on Jersey servlet initialization) and when a file upload is done (on Jersey servlet post request) the temp file will not be created anymore and GAE won't complain.