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NDS Scrambles to Respond to Vivendi-Canal+ Suit

12 Mar, 2002 By: Holly J. Wagner


Canal+ Group, a division of Vivendi Universal and its subsidiaries, Canal+ Technologies S.A. and Canal+ Technologies Inc. sued London-based NDS Group today, accusing News Corp.-controlled NDS of cracking its digital broadcast security system and circulating the information to pirates.

Although and NDS spokesman said the company had not been served, he said the case is "outrageous and baseless" and that NDS will countersue once it receives the complaint, which was filed in the U.S. District Court for the Northern District Court of California. NDS president and CEO Abe Peled said Canal+ is trying to make NDS a scapegoat.

"This lawsuit is a blatant attempt by Canal+ 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," he said.

The suit alleges NDS engaged in a conspiracy to harm Canal+'s competitive position in the digital television market by extracting a security code from Canal+'s set-top-enabling smart cards in Europe, then then "providing the code to a Web site frequented by counterfeiters."

"After the code was published on the Internet, criminal organizations flooded the market with counterfeit cards," a Canal+ press release contends. Canal+ estimates NDS's actions, if proven, have cost Canal+ in excess of $1 billion in revenues.

Peled denied his company had any involvement with the significant piracy problem Canal+ has suffered since 1999.

"That problem is due solely to the inferior nature of Canal+ 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," Peled said. "The clear evidence is that the pirate community targeted Canal+ early in 1998 and succeeded without any help from anyone, particularly NDS."

The case echoes a similar case over DeCSS, the descrambling code for DVD security. That case, which is headed for another appeal, defends the right of Web magazine 2600 to publish DeCSS, so named because it descrambles the Content Security System (CSS) code.

The suit alleges violations of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, the Copyright Act, the California Unfair Competition statute, and other violations of tort law.

"The future of digital television depends on the industry working together to combat signal theft and to protect the integrity ofdistribution systems," said Francois Carayol, EVP of Canal+ Group and chairman and CEO of Canal+ Technologies. "No person or company is above the law and we intend to see the law applied to halt NDS's illegal actions."

Peled counters that Canal+ is a victim of its own weak business strategy , citing Canal+ approaching NDS for a possible buyout in 1999 as an admission of its superior technology.

"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."

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