Monday, May 21, 2018
Business

Company says HSN stole its system for selling digital media

ST. PETERSBURG — A California digital music company has filed a lawsuit against HSN alleging the home shopping network stole its system for selling digital music, books and movies.

Digital Trellis said HSN wrongly broke a contract to create a digital media store for the retail company, then used Digital Trellis' technology to launch a similar system with another company.

"They were working together for a significant period of time, then all of a sudden the relationship was terminated,'' said Melissa Medrano, an attorney representing Digital Trellis from the law firm Kelley/Uustal.

She described her client as David taking on Goliath, noting that the Fort Lauderdale-based law firm took the case on contingency. HSN Inc., which owns HSN and Cornerstone brands, did $3.4 billion in sales last year.

The lawsuit filed Jan. 24 in Pinellas County Circuit Court seeks damages in excess of $15,000, attorney fees and an injunction to stop HSN from using its trade secret information. Under terms of the agreement, Digital Trellis would have received a cut of digital products sold through HSN.com and every download — or about 48 cents on an $8 digital album.

A spokesman for HSN said he could not comment on pending litigation, as per company policy.

The lawsuit says Digital Trellis founder and CEO Ruben Lozano approached HSN in mid 2012 about selling digital media to boost profits and broaden its customer base. At the time, HSN was selling CDs, books and music, but not in digital format.

Lozano said HSN executives wanted to launch the HSN Live Music Store using his services and asked Lozano not to communicate with HSN's competitors, such as QVC and ShopNBC.

HSN began aggressively pursuing the digital music store in January 2013. The next month, Lozano visited HSN's corporate offices in St. Petersburg to show executives how the system worked.

"Chief Executive Officer Mindy Grossman expressed to Lozano her excitement about the project and personally explained to Lozano that digital media products were not only important to (HSN) from a financial perspective but as another way to serve its customers,'' the lawsuit states.

HSN and Digital Trellis, which does business under the name Loudbytes, signed a "letter of intent'' in March 2013 and started planning a June 21 launch, bundling digital music CDs and tracks with HSN merchandise around a "summer of love'' theme.

As concerns about meeting deadlines emerged, Lozano said HSN told him the June 21 launch date could be changed, but that the company would need a firm date. On May 8, after Lozano didn't respond as quickly as requested, HSN terminated further business with Digital Trellis.

Lozano urged HSN to reconsider based on all the work, information, technology and software that had been provided to HSN, but to no avail. On or around June 21, HSN unveiled on its website a new partnership with Songza Media, which provides music streaming and downloads similar to Digital Trellis' services.

Songza had "essentially taken the role that Digital Trellis was fully capable of providing, as the parties had agreed,'' the lawsuit alleges.

HSN went on to do deals with musician Richie Sambora and his partner Nikki Lund, a fashion designer, to promote their fashion line. In November, HSN teamed up with Mary J. Blige on a concert event, which included a download of her music for HSN customers.

HSN has until March 21 to respond to the lawsuit.

Susan Thurston can be reached at [email protected] or (813) 225-3110.

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