Starwood vs. Hilton: Trade Secret Theft Claims

Posted by: Michael Orey on April 21, 2009

In the annals of corporate spying, things don’t get much juicer than the current tussle between Starwood Hotels and Hilton. Today, according to the Wall Street Journal, Hilton said it has received a federal grand jury subpoena connected to allegations by Starwood that Hilton has been using purloined Starwood files to develop a new luxury hotel chain. On April 16, Starwood filed a lawsuit in federal district court in New York, claiming that two of its former executives who defected to Hilton last year made off with confidential documents. The material, Starwood alleges, details Starwood’s plans for future development of its luxury brands, including the St. Regis and W Hotels, as well as other information. All told, Starwood’s complaint says, the executives were involved in “the ransacking and theft of more than 100,000 electronic and hard copy files containing Starwood’s most competitively sensitive information.” This, the filing states, “is the clearest imaginable case of corporate espionage.”

Just how clear a case it is will have to be duked out in court. But one thing is certain: This kind of stuff happens all the time. The courts are full of lawsuits in which businesses allege that former employees have made off with confidential files. Even the most sophisticated companies have alleged to be victims, as I noted in an article last fall about a case brought by Intel. If a technology leader like Intel can’t assure data security, who can? In this era of DVDs and portable flash drives, is there anything companies can really do to prevent this from happening?

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Reader Comments

Denise Lee Yohn

April 22, 2009 04:16 PM

as a "brand as businessTM" consulting partner, i read this piece through the lens of brand protection -- what i find interesting is the suggestion that hilton could actually steal starwood's ideas and execute them -- in my mind, starwood's brand identity is completely different from hilton's, so if hilton was trying to develop a starwood-designed hotel concept, it would fail for lack of credibility and equity in the space.

i'm sure there are folks who would disagree with my esteem for starwood, but the point is that a brand's values and attributes can/should/do differentiate a product (in this case, a hotel concept), thus making any attempt to create the same product an exercise in futility.

Jon Ngin

July 7, 2009 08:11 PM

they would still be penalized wouldnt they? if espionage is proven?

if you actually use the information or not will not matter becausey ou stole it.

Peter Eckle

October 15, 2009 10:08 PM

Starwood thinks they are above the law when it comes to their practices and alledged wrongdoings in the sale of timeshares. For example, both Starwood and Raintree Vacation are now being sued for taking more than $25 million from unsuspecting purchasers of a fractional ownership timeshare project known as Grand Regina Villas in Los Cabos Mexico, which they were supposed to construct and deliver. Neither of these companies should be trusted with anything until they make good on the money they extorted.

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How can you manage smarter? BusinessWeek writers Nanette Byrnes, Patricia O’Connell, Emily Thornton, Matthew Boyle, Michelle Conlin and Diane Brady synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.

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