Canal+ Sues NDS for Alleged Anti-Competitive Acts; NDS Plans to Countersue

Canal+ Group, one of Europe's largest pay-TV providers, has filed a lawsuit against NDS Group Plc in the U.S. District Court for the Northern District Court of California, alleging that NDS engaged in a conspiracy to harm Canal+'s competitive position in the DTV market. Canal+ accuses NDS of attacking its smart card s
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Canal+ Group, one of Europe's largest pay-TV providers, has filed a lawsuit against NDS Group Plc in the U.S. District Court for the Northern District Court of California, alleging that NDS engaged in a conspiracy to harm Canal+'s competitive position in the DTV market.

Canal+ accuses NDS of attacking its smart card security system. Smart cards inside set-top boxes are part of a conditional access system that protects DTV signals from unauthorized viewing. Canal+ further alleges that NDS extracted the code from the smart card system and provided it to a technology piracy Web site, resulting in the creation of counterfeit cards. Canal+'s suit estimates that the business has suffered more than $1 billion in damage.

NDS calls the suit "baseless" and is preparing to countersue. The president and CEO of NDS said that Canal+'s piracy problem is due to "the inferior nature of Canal+'s conditional access technology," that the company's business plan did not provide for periodic replacement of the cards or electronic countermeasures against counterfeiting and that the piracy community targeted Canal+ on its own in 1998.

NDS pointed out several factors to support its case:

* Canal+ approached NDS in December 2001 with a merger proposal, and may be using the allegations to gain leverage in negotiations.
*·Canal+ has acknowledged that it has reverse-engineered competitors' cards.
* Canal+ has been trying to hire the NDS employee it accuses of leading the alleged NDS piracy effort.