{468x60.media}
Mr. Weber

Hospitality Law

Your Hospitality Industry Trade Secrets May be at Risk

By Steven D. Weber, Founder, Weber Law, P.A.

The hospitality industry may be able to protect their trade secrets using newly enacted federal legislation. The Defend Trade Secrets Act of 2016 (the "DTSA") was signed into law on May 11, 2016. The DTSA creates a federal cause of action for an owner of a trade secret that is misappropriated if the trade secret "is related to a product or service used in, or intended for use in, interstate or foreign commerce." The DTSA also provides a powerful new remedy of allowing ex parte applications for an order allowing the seizure of property necessary to prevent the dissemination of the trade secret that is the subject of the action.

Under the DTSA, a "trade secret" encompasses a wide variety of forms and types of information but only if "(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information." Pursuant to the DTSA, prohibited "misappropriation" includes both the acquisition of a trade secret by improper means and the trade secret's disclosure by a person who knew at the time of disclosure that the knowledge of the trade secret was "derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret," or other circumstances. The protections, secrecy measures, and access limitations that a trade secret owner puts in place may determine the rights and remedies afforded them under the DTSA.

The hospitality industry may also be able to take advantage of state law rights and remedies related to trade secrets. The Uniform Trade Secrets Act ("UTSA") was intended to make uniform the state law regarding theft of trade secrets. One hospitality hot spot, the state of Florida, adopted the UTSA as the Florida Uniform Trade Secrets Act ("FUTSA"). FUTSA provides damages and other relief related to the misappropriation of trade secrets.

Under FUTSA, a trade secret may be (i) information, (2) that derives independent economic value from not being generally known or ascertainable and (3) is the subject of reasonable efforts to maintain its secrecy. For example, in the case Premier Lab Supply, Inc. v. Chemplex Indus., Inc., 10 So. 3d 202, 206 (Fla. 4th DCA 2009), a Florida appellate court found that a thin film spooling machine was properly a trade secret because, inter alia, evidence was presented "that the design of machine is very specific and involves many calculations", "without access to the machine one would be unable to obtain the required measurements" necessary to reproduce it, the "machine was kept in a separate room away from the public", and that "only certain individuals who operated the machine were authorized to enter" the room where the machine was stored. Notably, there, the lack of a confidentiality agreement did not defeat the argument that the machine was a trade secret - however, this will not always be the case. Accordingly, the protection a company provides to its hospitality trade secrets could determine whether they are in fact found to be trade secrets.

The need to protect hospitality trade secrets is not merely a hypothetical concern. There are numerous cases that relate to allegations of misappropriation of hospitality trade secrets. In 2009, Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") sued Hilton Hotels Corporation n/k/a Hilton Worldwide ("Hilton") and certain individuals alleging that Hilton induced those individuals to leave Starwood and work for Hilton, and that Hilton, the individuals, and others, "stole hundreds of thousands of electronic files and documents constituting confidential and proprietary Starwood information and/or trade secrets [] for use by Hilton across all of Hilton's luxury and lifestyle brands in direct competition with Starwood." See Amended Complaint ¶¶ 7, 9, DE 31, Starwood Hotels & Resorts Worldwide, Inc. v. Hilton Hotels Corporation N/K/A Hilton Worldwide, No. 09 Civ. 3862 (S.D.N.Y). Starwood plead a claim of misappropriation of trade secrets (among other claims) and alleged that through the actions of Hilton and the individuals, they knowingly misappropriated and used, or aided and abetted the misappropriation and misuse of, Starwood's trade secrets.

Although it appears that the parties reached a settlement, a key issue in the case would have been whether the protection that Starwood provided to the information at issue was sufficient to find that the information constituted a trade secret. In Starwood's complaint, it alleged that the individual defendants signed employment agreements, including a "Non-Solicitation, Confidentiality and Intellectual Property Agreement." Starwood also alleged that the individuals signed agreements that were "subject to 'all Starwood policies, procedures and directives as they currently exist or as they may be adopted or changed from time to time,' which included Starwood's Code of Business Conduct," which required, among other things, that each employee protect and keep confidential certain non-public information. Starwood further alleged that its data is maintained on secure servers and hard drives, that remote access is permitted only upon proper certification, that employees may not access Starwood's systems through computers not properly certified by Starwood's IT staff, and that employees are not permitted to forward confidential materials to outside systems, "including their own homes or personal e-mail accounts." While the court did not determine whether Starwood's measures are adequate, this case is a good example of the steps that a company may be required to take to protect its hospitality trade secret information.

Another dispute regarding hospitality trade secrets arose in the case Atmosphere Hospitality Management, LLC, v. Curtullo, et al.., No. 5:13-CV-05040-KES, (D.S.D). In an order dated January 12, 2015, the court there set forth allegations that plaintiff Atmosphere Hospitality Management, LLC ("Atmosphere") entered into agreements with certain defendants that gave those defendants the right to operate a hotel in Rapid City, South Dakota, under Atmosphere's brand, 'Adoba', and gave management of the hotel to Atmosphere. Litigation ensued after certain defendants allegedly terminated the agreements and claimed the right to continue using the Adoba brand. Atmosphere filed a complaint alleging misappropriation of its trade secrets, and other claims, and later Atmosphere sought a protective order preventing disclosure of three documents that they deemed to be proprietary: "Adoba's Brand Standards for 2012, Adoba's business plan, and Adoba's Brand Standards for 2013."

Noting the importance of protecting proprietary business information, the court undertook an analysis of whether a protective order was warranted for trade secret information. During a hearing, the court stated that one of Atmosphere's agents testified that prior to disclosing documents such as the three at issue to a party, Atmosphere required the party to sign a confidentiality agreement. The court stated that if that party were to make further disclosure of the information to others, Atmosphere required those others to sign a confidentiality statement. The court found that Atmosphere established good cause for issuance of a protective order because "[Atmosphere's] 'Adoba' concept is the creation of an ecologically 'green' hotel, from the design of the hotel itself, to the services provided", "[h]ow [Atmosphere] accomplishes this and who [Atmosphere's] partners and competitors are, all constitute sensitive proprietary information", and the "record indicates that [Atmosphere] has, in the past, taken appropriate steps to protect this information." Whether the party took steps to protect its information was thus an important consideration in the analysis of whether the information at issue was entitled to protection as a trade secret.

The possibility that trade secrets could be misappropriated should be at the top of any hospitality company's mind. While some may assume that executives and employees working at the corporate headquarters may present the greatest risk of misappropriation, a company must take protective measures beyond those walls. E-mail, text message, other communication applications, and smart phones all present a risk of misappropriation of trade secrets. Given the emphasis on the hospitality experience offered to consumers, even low level employees on the front line of a hotel may have the opportunity to misappropriate a company's hospitality trade secrets. Front line employees may receive special training or instructions that are instrumental in implementing the very experience that was thought up at headquarters and heavily protected there - but not at the specific hotel.

As a result, protecting against the misappropriation of proprietary information by employees such as those who manage and operate the concierge desk, the reception area, and housekeeping functions may be only the beginning of an effective plan to protect trade secrets in compliance with the applicable law. In some cases, failure to institute adequate protections at those locations may impact the ability to obtain relief or the relief you obtain. The person misappropriating the information may only be located in a certain location and without establishing protections at that location, understanding how to obtain jurisdiction over those persons, understanding how the local courts interpret the law of trade secrets, and understanding what protections must be implemented to take full advantage of the legal protections offered by the law, a hospitality company may not be able to obtain a remedy for trade secret misappropriation.

Hospitality brands should take steps to protect their trade secrets because protecting them and properly responding to misappropriation can mean the difference between obtaining relief and not. Although not a complete list, hospitality brands should consider, in conjunction with other necessary steps:

  • Gaining a basic understanding of federal and state laws that protect trade secrets and complying with their relevant requirements, such as, in the DTSA, the notice requirements necessary for an employer to be awarded exemplary damages and attorneys' fees and costs in a civil action.

  • Adopting concrete procedures for securing information that may be trade secrets, such as requiring relevant employees to sign confidentiality agreements.

  • Adopting a plan if trade secrets are misappropriated.

  • Identifying and keeping track of those persons who have access to information that may be entitled to trade secret protection.

  • Understanding your competition, your product, and your level of risk based on the competition.

Steven Weber, founder of Weber Law, P.A., began in New York as an attorney for one of the world’s largest public law offices. Mr. Weber‘s clients ranged from elected officials to government agencies with budgets of over $1 billion. After transitioning to private practice with law firms in New York and Florida, he successfully aided individuals, management of private companies, and even other counsel through numerous public and private scenarios. Mr. Weber ultimately founded Weber Law to provide clients with exceptional levels of legal services and customer service. He has received the highest rating possible from Martindale Hubbell and has been named a Rising Star by Florida Super Lawyers. Mr. Weber can be contacted at 305-377-8788 or sweber@weberlawpa.com Please visit http://www.weberlawpa.com for more information. Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
RESOURCE CENTER - SEARCH ARCHIVES
General Search:

OCTOBER: Revenue Management: Technology and Big Data

Gary Isenberg

Hotel room night inventory is the hotel industry’s most precious commodity. Hotel revenue management has evolved into a complex and fragmented process. Today’s onsite revenue manager is influenced greatly by four competing forces, each armed with their own set of revenue goals and objectives -- as if there are virtually four individual revenue managers, each with its own distinct interests. So many divergent purposes oftentimes leading to conflicts that, if left unchecked, can significantly damper hotel revenues and profits. READ MORE

Jon Higbie

For years, hotels have housed their Revenue Management systems on their premises. This was possible because data sets were huge but manageable, and required large but not overwhelming amounts of computing power. However, these on-premise systems are a thing of the past. In the era of Big Data, the cost of building and maintaining an extensive computing infrastructure is incredibly expensive. The solution – cloud computing. The cloud allows hotels to create innovative Revenue Management applications that deliver revenue uplift and customized guest experiences. Without the cloud, hotels risk remaining handcuffed to their current Revenue Management solutions – and falling behind competitors. READ MORE

Jenna Smith

You do not have to be a hospitality professional to recognize the influx and impact of new technologies in the hotel industry. Guests are becoming familiar with using virtual room keys on their smartphones to check in, and online resources like review sites and online travel agencies (OTAs) continue to shape the way consumers make decisions and book rooms. Behind the scenes, sales and marketing professionals are using new tools to communicate with guests, enhance operational efficiencies, and improve service by addressing guests’ needs and solving problems quickly and with a minimum of disruption. READ MORE

Yatish Nathraj

Technology is becoming an ever more growing part of the hospitality industry and it has helped us increase efficiency for guest check-inn, simplified the night audit process and now has the opportunity to increase our revenue production. These systems need hands on calibration to ensure they are optimized for your operations. As a manager you need to understand how these systems work and what kind of return on investment your business is getting. Although some of these systems maybe mistaken as a “set it and forget it” product, these highly sophisticated tools need local expert like you and your team to analysis the data it gives you and input new data requirements. READ MORE

Coming Up In The November Online Hotel Business Review




{300x250.media}
Feature Focus
Architecture & Design: Authentic, Interactive and Immersive
If there is one dominant trend in the field of hotel architecture and design, it’s that travelers are demanding authentic, immersive and interactive experiences. This is especially true for Millennials but Baby Boomers are seeking out meaningful experiences as well. As a result, the development of immersive travel experiences - winery resorts, culinary resorts, resorts geared toward specific sports enthusiasts - will continue to expand. Another kind of immersive experience is an urban resort – one that provides all the elements you'd expect in a luxury resort, but urbanized. The urban resort hotel is designed as a staging area where the city itself provides all the amenities, and the hotel functions as a kind of sophisticated concierge service. Another trend is a re-thinking of the hotel lobby, which has evolved into an active social hub with flexible spaces for work and play, featuring cafe?s, bars, libraries, computer stations, game rooms, and more. The goal is to make this area as interactive as possible and to bring people together, making the space less of a traditional hotel lobby and more of a contemporary gathering place. This emphasis on the lobby has also had an associated effect on the size of hotel rooms – they are getting smaller. Since most activities are designed to take place in the lobby, there is less time spent in rooms which justifies their smaller design. Finally, the wellness and ecology movements are also having a major impact on design. The industry is actively adopting standards so that new structures are not only environmentally sustainable, but also promote optimum health and well- being for the travelers who will inhabit them. These are a few of the current trends in the fields of hotel architecture and design that will be examined in the November issue of the Hotel Business Review.