May 13, 2008— -- Today a federal jury in Los Angeles resumes deliberations in a corporate espionage lawsuit filed against a company owned by Rupert Murdoch seeking $1 billion in damages.
Two previous lawsuits alleging similar claims of corporate espionage by Murdoch's company, however, never made it to a courtroom, and a fourth is still pending. Critics say the company's business tactics extend beyond playing hardball to predatory piracy and even illegal conduct.
Two current lawsuits and two previous ones against the Murdoch-owned company, NDS, allege a similar pattern of behavior. NDS accesses the secure computer codes and trade secrets of companies and then misappropriates the technology to pirates or hackers, causing huge monetary losses to the companies, according to the plaintiffs.
NDS, which has offices in Israel and California, is currently being sued in federal court by competitor EchoStar TV. That case goes back to the jury today. [Read about the case.]
But two previous lawsuits against NDS brought by DIRECTV and Murdoch rival at-the-time Canal+ never made it to the courtroom. In the case of DIRECTV, Murdoch bought the company itself. In the case of Canal+, he made a deal that compelled the suit to be dropped.
In March 2002, Canal+ filed suit against NDS, claiming the Murdoch-owned company engaged in "cloak and dagger" operations by making counterfeit Canal+ smart cards which allowed satellite TV viewers to steal signals "on a massive scale." That suit also sought $1 billion in damages.
The suit was subsequently dropped when Murdoch bought the Italian pay-TV company, Telepiu, from Canal+'s parent company, Vivendi.
In another suit filed against Murdoch's NDS back in 2000, DIRECTV, which is now owned by Murdoch, said it hired NDS to manufacture secure smart cards, a microprocessor used by DIRECTV customers to receive satellite signals. The suit claimed that NDS then designed smart cards that "were not secure, and were easily susceptible to being hacked."
The suit also alleged that after the initial cards were made and when NDS's contract was ending with the company, that NDS "fraudulently induced DIRECTV to sign a new contract in 1999 based on promises that NDS had designed a newer and more secure card." The lawsuit claimed, however, that the new card had the same vulnerabilities and that it wasn't an upgrade at all.
"It was simply an opportunity for NDS to sell tens of millions of new cards to DIRECTV," the complaint states.
DIRECTV, like Canal+, also alleged that NDS misappropriated DIRECTV's trade secrets which threatened to lead to "a new wave of massive piracy."
DIRECTV's lawsuit also died after Murdoch bought DIRECTV in 2003.
There is yet a fourth lawsuit still pending against NDS brought by Spanish cable TV provider Sogecable that is before the same judge as the EchoStar case. Again the allegations are very similar.
"We have essentially accused NDS of engaging in a pattern," said Sogecable's attorney David Elkins. "This is a pattern of actions to compete, not in the marketplace, but by taking less appropriate means to compete."
Both Sogecable and EchoStar allege that NDS hired a well-known computer hacker, Christopher Tarnovsky, to make sure the codes got into the hands of the hacking community.
"Tarnovsky made elaborate arrangements for the codes to be posted on a Web site managed from Canada and known in North America piracy circles for providing tools and information for hacking encrypted satellite television signals," says the Sogecable complaint.
After working for Murdoch for years, Tarnovsky was fired from News Corporation shortly before he gave testimony in the EchoStar case. In his testimony, Tarnovsky repeatedly denied any involvement in posting hacked information on the Internet or in helping to produce any counterfeit cards.
Both Tarnovsky and the lawyers for NewsCorp deny the hacking charges and say that they were simply engaging in what they call reverse engineering, a common practice in the high-tech world to improve their own anti-piracy security.
Murdoch has declined repeated requests to be interviewed by ABC News. He scoffed at the allegations after a recent appearance at Georgetown University in Washington, D.C. [Watch the video.]
"We always have ethical business practices," Murdoch said. He also denied any allegations that his NDS employees participated in hacking.