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Canal Plus, NDS interact with legal system - Broadcasting & Cable

Canal Plus, NDS interact with legal system

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Once again, two interactive-TV companies are battling in court. The latest
lawsuit was filed earlier this week when Canal+ Group and its subsidiaries,
Canal Plus Technologies S.A. and Canal Plus Technologies, accused NDS Group
plc of "engaging in a conspiracy to harm Canal Plus' competitive position" in the
digital-TV market.

Canal+ charged that NDS cracked the code on its digital-TV smart cards, which
are inserted into cable set-top boxes to access programming signals. According
to Canal+, NDS provided the code to a Web site used by
counterfeiters, www.dr7.com. It wasn't long after, Canal+ said, that counterfeit cards
began appearing.

Canal+ calculated the harm at in excess of $1 billion and alleged violations
of the Racketeer Influenced and Corrupt Organizations Act, the Copyright Act,
and the California Unfair Competition statute.

NDS called the claims baseless and said it will file a counterclaim once it
finishes reviewing the suit. NDS president and CEO Abe Peled said all
smart cards can be hacked if left in the field long enough. He acknowledged that
Canal+ has had piracy problems, but he said NDS had no involvement.

"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," Peled said. "The clear evidence is that the pirate community targeted Canal Plus
early in 1998 and succeeded without any help from anyone, particularly NDS."

NDS said that last December, Canal+ approached it about merging the two
companies and attempted to use the allegations to gain leverage in those talks.
NDS also said Canal+ has admitted that it has reverse-engineered competitors'
cards.

"NDS intends to counterclaim against Canal Plus for this tortious conduct, as
well as tortious interference with other employment and contractual
relationships of NDS," the company said. Peled added, "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."

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