Starwood & Hilton Hotels: A case of corporate espionage
The term `corporate espionage’ has been around for decades and is often used by the media to infer a top secret method used by a foreign power to winkle out industrial secrets which could make or break western civilization [Chinese American Scientist Lee Wen Ho, who was accused in 1999 by US Federal authorities of stealing nuclear arsenal secrets for China, springs to mind]. However, far more common than this is the corporate espionage that affects the business operations of everyday entities ranging from small businesses to large corporations. A case in point demonstrating Intellectual Property & Brand Protection abuse involving Hilton Hotels and Starwood are before the courts right now.
The type of information which is usually targeted during a corporate espionage operation is somewhat mundane in comparison to government backed spying operations but can be equally damaging to the victimized organisation. Likewise, the players in these operations tend more to be managers who happen to have access to crucial information due to chance, proximity or reporting structure rather than a grand design by a foreign spy network.
A good example is the recent stoush between the hotel groups Starwood and Hilton. According to media reports, Starwood has accused Hilton of poaching their senior employees as well as stealing thousands of documents regarding their successful W Hotel and St Regis Brands. Hilton denies this. Starwood claims that two of their top executives took with them thousands of documents when they jumped ship to Hilton. These documents supposedly contained the bulk of the Intellectual Property [IP] developed by Starwood over years of operating their luxury chain. This IP included such diverse information as how to negotiate with property developers, training employees, development plans, marketing, demographic data and methods for operating the whole hotel. Starwood contends that this IP is worth tens of millions of dollars and effectively allows a competitor to leapfrog the failures and setbacks of developing their own brand.
Ironically, the documents were returned to Starwood by lawyers from Hilton after they discovered them during preparation for arbitration over the two executives joining Hilton. Hilton claims that the documentation would be of little use to them [though the two executives apparently thought otherwise].
As the threat of losing IP to a departing or disgruntled employee can be critical to the life of a business [a smaller company or one dependent on its IP can be wiped out by such an event], what can be done to prevent or reduce the risk of internal corporate espionage of this type?
Below are some simple precautionary steps that may reduce the risk. Such methods are best employed sooner rather than later:
1. Pre employment screening – background profile any prospective managers or executives to assess their allegiance and previous pattern of behaviour.
2. Non Disclosure Agreement [NDA] – have all employees, interns, contractors, etc. sign up to a non disclosure agreement preventing them from passing on company IP either during or post employment.
3. Policies & Procedures – ensure that these cover the company’s principals governing the use, access, storage and communication of IP and that all employees are regularly reminded of their responsibilities.
4. Create an audit trail – implement a system either electronically or in hard copy which tracks the access to and movement of critical IP so that any possible leaks can be investigated.
5. Restrict access to information on a need to know basis – only allow those employees who really need to know or access the IP as part of their work to have open access to the IP. Why widen the circle when it is not necessary?
6. Closing down access – once an employee indicates that they may be leaving the company, reduce their access to any IP and monitor their activities during the period before they depart [a law firm we assisted found a PA emailing templates, letters, client lists etc to her personal email address during her last week of work].
7. Make it plain – brief all employees during induction, training and at regular intervals of the perils of losing or unauthorised disseminating of company IP and that there are procedures in place to prevent and arrest such leaks [without specifying actual steps taken].
The Starwood/Hilton saga won’t be the last alleged diversion of company IP by a former employee that we will hear about. As employee turnover continues to be high [with a subsequent decrease in loyalty and affinity to the company] the threat is always present. By taking some basic steps a company can at least limit the exposure to this happening – and support any subsequent court case by showing that the company valued its IP, sought to keep it confidential and that the former employee knew he / she was acting dishonestly when it was removed.
