Following on the heels of the Mattel v. Bratz trial, in which Mattel successfully sued Bratz for copyright infringement regarding the highly successful Bratz line, comes Starwood v. Hilton. Starwood has filed suit against Hilton, alleging that two of Starwood's key executives misappropriated thousands of confidential, trade secret documents and brought them to their new employment with Hilton, allowing Hilton to steal Starwood's concept for a new luxury hotel chain.
The executives were president and vice-president of Starwood's luxury-brand group, and were key to the success of Starwood's W Hotel chain. Starwood alleges that after Hilton began recruiting the executives, they begin misappropriating over 100,000 documents containing confidential information relating to a new luxury hotel brand that Starwood was developing.
Hilton allegedly discovered the documents in a separate dispute between Hilton and Starwood, and sent them over to Starwood in several boxes with a cover letter indicating that the material "appeared to be neither sensitive nor confidential" but that Hilton was "returning them nonetheless in an abundance of caution."
Starwood alleges that not only were the documents confidential, they went to the critical trade secrets behind a concept that Starwood was developing for W referred to as a "den of zen." Last month, Hilton launched a global luxury brand hotel chain called "Denizen." Starwood alleges that Hilton stole its "brand in an box," and is seeking a court order prohibiting the new Hilton chain from opening.
Regardless of how this case comes out, it offers a powerful reminder to California employers of the importance of having strong policies to prevent trade secret misappropriation. Employers with confidential trade secret information need to make sure that all employees sign a valid confidentiality agreement. After the decision by the California Supreme Court last year in Edwards v. Arthur Anderson, most non-compete provisions are invalid to the extent that they attempt to do more than protect trade secret information. In addition, employers need to take steps to safeguard the confidentiality of information, including using passwords, locking information in a safe area, marking information confidential, limiting access to and removal of information, and taking steps when employees depart to make sure that they have returned all company property.
