NDS calls $1 billion TV smart card cracking lawsuit baseless

The lawsuit claims that an NDS employee then leaked the cracking codes to a hacking web site called DR7.com which fuelled a proliferation of counterfeit smart cards being sold in pubs, clubs and at market stalls. According to The Guardian, ITV Digital claims to have lost £100 million as a result of the piracy. Around 100,000 counterfeit cards are said to be in circulation in the UK.

NDS specialises in the conditional access technology used in television set-top boxes. It yesterday rejected the allegations as “outrageous and baseless” and said it plans to counter-sue once it has had an opportunity to fully review Canal Plus' suit.

NDS President and CEO Dr Abe Peled denied his company had any involvement with the significant piracy problem Canal Plus has suffered since 1999. Dr Peled said:

“That problem is due solely to the inferior nature of Canal Plus' conditional access technology, the failure of its business plan to contain measures to protect against piracy and its failure to deal with piracy once it began</>

”The clear evidence is that the pirate community targeted Canal Plus early in 1998 and succeeded without any help from anyone, particularly NDS. All smart cards can be hacked if left in the field long enough, which is why NDS' business plan calls for periodic replacement of cards. NDS also designs its system to permit electronic counter measures to be sent over the air to disable counterfeit cards. Canal Plus' card has not provided effective counter measures.

NDS claims that it was approached by Canal Plus in December 2001 with a view to a merger. NDS describes this as an acknowledgement by its rival of the “inferiority” of its conditional access technology. It adds that Canal Plus “attempted to use these baseless allegations to gain leverage in the negotiations.”

NDS also claimed in a statement:

“For the past year, Canal Plus has been trying (without success) to hire away the very employee they claim gave their code to DR7. In fact, their own lawyer has been involved in this poaching process, despite the fact that the employee is under contract with NDS. Why would Canal Plus want to hire a person they claim was involved in such activity? NDS intends to counterclaim against Canal Plus for this tortious conduct as well as tortious interference with other employment and contractual relationships of NDS.”

Dr Peled concluded:

"This lawsuit is a blatant attempt by Canal Plus both to deflect criticism of its new generation card, which is not believed to be state of the art, and to shift blame for its inadequate technology and its past losses."

Canal Plus is owned by Vivendi Universal, a media rival to Rupert Murdoch. Murdoch’s son Lachlan is a director of NDS; Murdoch’s company, News Corporation, owns 80% of the shares in NDS. Its technology is used in 27 million pay TV set-top boxes worldwide. Its only significant rival is Canal Plus with smart card technology used in 12.5 million set-top boxes worldwide, including those of News Corporation’s rival digital TV companies.