The Trade Secrets of Luxury Hotel Concept Allegedly Stolen: Starwood Hotels v. Hilton Hotels

Hilton Hotels was sued by Starwood Hotels & Resorts Worldwide Inc., the third-largest U.S. lodging company, over claims it stole trade secrets to improve its luxury brands.

The complaint, filed in federal court in New York, claims two former Starwood executives hired by Hilton stole information about Starwood’s W hotel brand to develop Hilton’s Denizen hotels.

Hilton recruited the employees, Ross Klein and Amar Lalvani, after it was acquired by Blackstone Group LP in 2007, according to the suit. Both men were involved in developing White Plains, New York-based Starwood’s “lifestyle and luxury” hotels, including the St. Regis, W and Luxury Collection brands, and downloaded confidential Starwood information to use later at Hilton, the suit claims.

“This case involves corporate espionage and the looting through computer fraud of a mountain of information,” the lawsuit claims. “Klein and Lalvani took and encouraged other Starwood employees to take with them to Hilton over 100,000 electronic and hard copy files, many containing highly confidential and proprietary Starwood information and trade secrets,” according to the complaint.

The materials included strategic development plans, negotiation tactics, explanations of how to convert hotels into luxury brands, and marketing and demographic studies.

“We fully intend to move forward on the development of our newest brand, Denizen Hotels,” Michael Buckley, a spokesman for Beverly Hills, California-based Hilton, said in an e-mailed statement. Hilton will defend against the suit, which is “without merit,” Buckley said.

Klein said in an interview last month that Denizen will compete with independent hotels and boutique properties including Starwood’s W line, Morgans Hotel Group Co. and Thompson Hotels.

The company sees Denizen as a return to the luxury of Hilton’s past without making customers look “guilty on an expense report,” Klein said in the interview. “We hope it’s going to disrupt the lifestyle and boutique arena.”