Legal News

In Trade Secrets Flap, Might Criminal Charges Be Heading Hilton?s Way?

By Ashby Jones

Corporate espionage. Man, the phrase just makes us tingly all over.

The latest big case involving allegations of corporate espionage involves Hilton Hotels and Starwood Hotels. We first heard about it last week, when Starwood, which runs the W line of hotels, among others, filed suit against Hilton and two former Starwood executives, alleging that the executives, who ultimately went to work for Hilton, smuggled more than 100,000 documents and electronic files out of Starwood — and that Hilton used the information to create a new luxury hotel brand, called Denizen.

The news out today: Hilton said it recently received a federal grand jury subpoena from the U.S. Attorney’s Office for the Southern District of New York asking for documents relating to the situation. Click here for the story, from the WSJ’s Tamara Audi.

Hilton said Tuesday it is temporarily suspending development of Denizen as a precautionary move. The brand has not opened yet, but Hilton was actively pursuing contracts and development deals and planned to open the first Denizen in 2010.

Hilton has also placed two high-ranking employees named in Starwood’s suit, Ross Klein and Amar Lalvani, on paid administrative leave “pending Hilton’s review of the situation,” according to a statement. The hotel company has also placed its luxury and lifestyle development team-many of them former Starwood employees-on paid administrative leave.

That name, Denizen? Among the information Starwood claims Klein and Lalvani took was a concept called the "zen den" that Starwood planned to implement at W Hotels. Hilton executives have referred to the Denizen brand as a "den of zen," the complaint alleges, adding, "within Starwood the name has a familiar ring."

Let us just say something here. As much as we love this lawsuit, we have to admit we don’t entirely understand it — or perhaps we should say, we don’t understand the hospitality industry well enough to get why it would take 100,000 documents to fully explain what makes a W hotel a W hotel. You take some of those little candles (maybe line a stairway with them), dim the lights, and throw out some fresh-cut tulips. If all else fails, just make sure to ply your customers with those ginormous martinis, and they’ll barely notice any differences.

Full post as published by Law Blog - WSJ.com on April 21, 2009 (boomark / email).