Starwood Hotels Alleges Trade Secret Theft

W Hotel
W Hotel

Starwood Hotels, owners of the W Hotel brand of boutique hotels, filed a lawsuit against Hilton Hotels and several former Starwood executives hired by Hilton. The lawsuit alleges trade secret infringement.

The complaint alleges that Hilton lured key W Hotel executives and that these individuals misappropriated W Hotel trade secrets to help Hilton with the launch of its Denizen brand of boutique hotels. The trade secrets listed in the complaint include:

  • Proprietary marketing and demographic studies that cost more than $1,000,000 to develop.
  • Training and operational materials.
  • The names of designers, property owners and developers.
  • Guidelines for how to create the “Ultimate W Experience’ in converted properties.
  • A dining concept called a “restro-lounge” designed to optimize food and beverage services in the W Hotel lobby-bar areas.

This is just another example of how far-reaching intellectual property has become. As brands become more important and as innovation touches on customer experiences created by companies, the intellectual efforts used create these assets will increase in strategic importance.  This kind of competitive knowledge is safeguarded by contracts called confidentiality agreements. Starwood Hotels required its executives to sign them, and this may be an important factor in this trade secret fight.

To read the entire complaint filed in District Court of New York, click here:  starwood20complaint

Wall St. Bonuses Are Not Trade Secret

According to The Wall Street Journal, the public may soon know the names of hundreds of top bankers at Merrill Lynch who received hefty bonuses prior to that company’s merger with Bank of America. Merrill Lynch paid out $3.6 billion in bonuses before it was rescued by its merger with Bank of America.

Bank of America, which has received tens of billions of dollars in taxpayer funds since that merger,  recently tried to prevent the disclosure, claiming the banker’s names and salary data are protected by trade secret law. This argument was made in Bank of America’s legal action against New York Attorney General Andrew Cuomo, who requested the bankers’ names and salaries.

On March 18, a New York state judge denied the trade secret claim, saying:

“The record indicates that Bank of America has not taken the kind of measures to protect the secrecy of its employee-compensation information that one would expect it to have taken if this information were a trade secret.”

The judge found that the bankers were not legally required by their employers to keep their salary information secret.In a February 24th deposition, John Thain testified that he did not know of any policy that prevented Merrill Lynch employees from discussing their compensation, and that he knew that bankers routinely mention their compensation to external parties, such as headhunters.

A common measure required to protect trade secrets are legal contracts that prevent disclosures to outside parties. These contracts are called non-disclosure agreements (NDAs). Apparently, neither Bank of America or Merrill Lynch required their bankers to sign NDAs relating to their salaries.

To learn more about trade secret NDAs, please see this prior post.

Create your own Non Disclosure Agreement (NDA)

When I teach, I often make references to non-disclosure agreements, a.k.a. the NDA. These contracts are used by innovators to secure their trade secret intellectual property when they disclose the secrets to external parties, such as partners, employees, suppliers, investors, and customers.  NDAs are important since they prohibit the external party’s unauthorized disclosure or use of the information.

I am often asked by students, how do I create an NDA? I wish I had heard of this site earlier: “NDAs for Free”.