Choice to appeal ruling that it 'stole' idea for hotel

October 13, 1992|By Ellen James Martin | Ellen James Martin,Staff Writer

When Silver Spring-based Choice International Hotels introduced a low-cost chain of hotels, it ran into a legal tangle with McDonald's over the proposed McSleep Inn's name.

After Choice took the dispute to federal district court in Baltimore, the hotel chain was blocked from using the name. So it changed to "Sleep Inns."

But now the company, owned by Manor Care Inc., has run into trouble again.

Another federal district court -- this one in Rochester, N.Y. -- has ruled Choice must pay a $2.5 million judgment to Microtel Franchise and Development Corp. of Rochester. The court ruled that Choice was "stealing" the concept of a no-frills, small-room hotel used by Microtel's Hudson Hotel unit.

Choice didn't appeal the McSleep court ruling, but it will appeal this one, says James H. Rempe, general counsel to its parent Manor Care.

"Our position is that the concept of a small-room hotel in the economy segment of the industry is not a trade secret. A small room is generally known in the industry," Mr. Rempe said.

Specifically, the award by the Rochester court, made Sept. 25, was based on allegations that Choice had stolen the trade secret of the Microtel concept by offering a scaled-down room and waiving "costly and unnecessary amenities."

Microtel said that after being introduced to the concept as a possible participant in the franchise, Robert Hazard, now chairman and chief executive of Choice, decided to develop a rival chain.

The jury found that Microtel President Loren Ansley had shown the Microtel concept to Mr. Hazard in confidence and that the information had been misappropriated.

"Obviously, a judgment like this bothers us. But obviously what bothers us more is that the concept of a small room is implicitly a trade secret. Normally, a trade secret is something unique in the law of the land. And this is not something unique," Mr. Rempe said.

The Sleep Inn concept was launched by Choice Hotels in September 1988. The franchise chain was designed "to offer an alternative in the economy lodging segment for both consumers and developers," according to a company statement. One of the scaled-down Sleep Inn hotels, with 100 rooms, can operate with as few as 12 full-time employees, the statement says.

Thirty-two Sleep Inns are now operating in parts of United States, Great Britain and Canada and another 38 are under construction, Mr. Rempe said.

Still, he said, expansion of the chain -- which requires the building of new hotel properties to meet the specifications set by Choice -- has been slower than expected in the United States.

He blamed the "credit crunch," which has made hotel financing difficult.

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