Reports of corporate espionage appear to be on the rise.  According to U.S.A Today, Starwood Hotels recently sued the Hilton Hotel chain accusing it of stealing trade secrets to help it launch a rival luxury chain quickly and cheaply.  The WSJ.com reports that the lawsuit accuses the Starwood executives "smuggled more than 100,000 documents and electronic files out of Starwood — and that Hilton used the information to create a new luxury hotel brand, called Denizen."

The NY Times reports that Hilton received a federal grand jury subpoena from the U.S. Attorney’s Office for the Southern District of New York asking for documents relating to the two former Starwood executives indicating a criminal investigation is underway.

While the allegations in Starwood/Hilton, if true, are extreme, there has been a dramatic increase in litigation between competitors over the theft of confidential, proprietary and trade secret information.  According to a recent survey conducted by Symantec and the Ponemon Institute, more than 59 percent of ex-employees admitted to stealing former employer’s confidential information such as employee records, customer information, and contact lists. The ease that employees can quickly and covertly appropriate large volumes of electronic data using portable storage devices or web-based personal e-mail accounts should cause all employers with confidential, proprietary or trade secret information and intellectual property great concern.

The large percentage of ex-employees that appear to be taking their employers information without permission can expose their next employer to expensive litigation and potential damages.  Whether the new employer will be liable will depend on a number of factors such as whether (and when) the new employer learns of the theft; how the new employer responds to that knowledge; and how the appropriated information was used. 

Employers that hire employees from competitors should take steps to ensure that they do not inadvertently end up in a civil suit or criminal investigation because of the hiring of those employees. Some measures employers can take in hiring employees from competitors include: ensuring that those employees are not under enforceable noncompetion agreements or restrictive covenants that prohibit the contemplated employment; ensure that employees are advised to and heed the warning not to bring any information (confidential or not) from their previous employer; and advising new hires not to use or disclose any their former employers confidential, proprietary or trade secret information.Continue Reading Reports of Corporate Espionage Between Competitors on the Rise