Friday, January 15, 2010, 1/15/2010 02:07:00 PM

Amended Complaint in Starwood Hotels v. Hilton Hotels Corporate Espionage and Trade Secrets Case - Doh!!!

By Todd

We first covered the Starwood Hotels v. Hilton Hotels trade secret war here: http://wombletradesecrets.blogspot.com/2009/04/starwood-hotels-v-hilton-hotels-trade.html


The Wall Street Journal is reporting that on Thursday Starwood Hotels filed an amended complaint in U.S. District Court, White Plains, N.Y., claiming that Hilton's misconduct reached the highest levels of the McLean, Va., chain's management, including its chief executive officer, Christopher Nassetta, and its head of global development, Steven Goldman. The complaint says that the alleged theft was known to and condoned by at least five of the ten members of Hilton's executive committee. A Hilton spokeswoman declined all comment. You can read the amended complaint here: http://www.usatoday.com/travel/hotels/starwoodfiling.pdf.

The amended complaint comes amid ongoing settlement discussions between the two companies. Those negotiations are complicated by the fact that Starwood wants more than monetary damages, according to the complaint. It has asked the court to appoint a monitor to oversee Hilton's future conduct. Further, it says it wants to impose a "penalty box" on Hilton that would prohibit it from developing its own luxury brand for a period of time, according to the complaint.

"This case is about restoring a level playing field for fair competition, not just substantial monetary damages," said Kenneth Siegel, Starwood's general counsel.

In February 2009, Hilton delivered to Starwood a batch of Starwood confidential documents, which included among other things details on development sites and marketing strategies. Hilton's general counsel attached a letter to the boxes saying that much of the material appeared "to be neither sensitive nor confidential" and were being returned "in an abundance of caution."

Thursday's filing alleges for the first time that Mr. Nassetta had knowledge of the documents about three months before Hilton began returning them to Starwood. In November 2008 Mr. Nassetta was informed that proprietary Starwood documents were placed on Hilton's computer server and were being used to develop Hilton's luxury and lifestyle brands, it claims.
That month, Hilton hired counsel to investigate the matter which resulted in its returning documents to Starwood, according to people familiar with the situation.

Starwood alleges Mr. Goldman, Hilton's development chief, used Amar Lalvani, a Starwood official, as a "corporate spy" for Hilton. According to the complaint, Mr. Lalvani while at Starwood provided Mr. Goldman with confidential information about hotel developers, including one interested in opening a W branded hotel in Thailand. Mr. Lalvani was later hired by Hilton.
"Here's an interesting one [developer]," Mr. Lalvani emailed, according to the filing. "This is going to be fun!!" A lawyer for Mr. Lalvani did not respond to requests for comment.

The 86-page complaint includes excerpts of emails between Hilton executives. In one, an executive discusses "Hiltonizing" the confidential Starwood documents and "sharing it with the Exec Group ASAP." The complaint says Hilton employees "scrubbed" the Starwood brand from documents so they could be routed freely among its managers. At least 44 Hilton managers were sent, received or copied on Starwood confidential documents, it says.
This is going to get uglier before it gets resolved. We'll be keeping an eye on it for you.

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