Starwood Sues Hilton, Alleging Corporate Espionage

Starwood Hotels & Resorts Worldwide Inc sued rival Hilton Hotels and two of its top executives for corporate espionage last Thursday, accusing the pair of ex-Starwood workers of stealing trade secrets to speed Hilton’s entry into the “lifestyle” market.

Starwood claimed the two executives at Hilton, a unit of Blackstone Group LP , stole “truckloads of documents” — more than 100,000 electronic files — before and after they changed jobs.

The Hilton executives named were Ross Klein, head of luxury & lifestyle brands, and Amar Lalvani, head of development for the segment. The lawsuit was filed in the U.S. Southern District of New York.

Both executives had been closely involved in Starwood’s W Hotels brand, said Starwood, which seeks monetary damages and a court order that would stop Hilton’s new Denizen “lifestyle” brand projects. Starwood operates the Sheraton, W and St. Regis chains.

“This … is a blatant case of theft of trade secrets, computer fraud and unfair competition,” Starwood’s general counsel, Kenneth Siegel, said in a statement.

Hilton, taken private last year in a leveraged buyout by Blackstone, declined immediate comment.

“Hilton Hotels Corporation is aware that a lawsuit has been filed, but we have not yet seen a copy. We will respond appropriately in due course,” Hilton spokeswoman Ellen Gonda said in an email.

Starwood is moving ahead with a $4 billion overhaul of its core Sheraton name despite an economic slump that has crimped business and personal travel.

The world’s No. 8 hotel group by rooms said its initiative — begun in 2007 — will bankroll new hotels, renovate existing rooms and involve changes throughout its network.

In its complaint, Starwood said the two executives were “aided and abetted by Hilton” and “stole massive amounts of proprietary and highly confidential Starwood information which was used to expedite Hilton’s entry into the lifestyle hotel market, reposition its luxury brands and substantially reduce its costs and risks of doing so.”

Hilton announced last month the launch of a new lifestyle brand called Denizen, led by Ross, with developments planned in cities from Beverly Hills to Abu Dhabi.

Starwood said that Klein was its former president of Starwood Luxury Brands Group, while Lalvani was formerly senior vice president of the same unit. The hotelier accused both men of recruiting Starwood employees over to Hilton, and said Hilton aided in the theft of “confidential information about Starwood’s W hotel brand.”

“The wholesale looting of proprietary Starwood information, including a step-by-step playbook for creating a lifestyle luxury hotel brand, unfairly enabled Hilton to launch a new brand in only nine months instead of the usual three to five years,” Siegel said.

The case number is: U.S. 09 CIV 3862. (Reporting by Deena Beasley; Editing by Edwin Chan; Editing by Gary Hill)