April 10, 2008 / 3:54 AM / 11 years ago

Dish network tells court News Corp unit hacked it

SANTA ANA, Calif., April 9 (Reuters) - Hackers hired by a News Corp NWS.N unit stole and posted data that allowed free access to Dish Network’s (DISH.O) satellite television service, the company said, in a corporate spying trial against its rival that could be worth hundreds of millions of dollars.

Dubbed the “Black Hat Team,” the computer whizzes flooded the market with smart cards that allowed free satellite TV access, a lawyer for Dish said on Wednesday. The suit was brought by EchoStar Communications which later split into two companies, Dish and EchoStar Corp.

A lawyer for News Corps’s NDS Group NNDS.O denied that the company engaged in spying, saying during opening statements in the trial that it was instead engaged in reverse engineering by obtaining the codes and were monitoring piracy.

“Because this is a competitive business, NDS also monitors competitors,” NDS attorney Richard Stone told jurors. “NDS has done nothing to illegally harm or damage EchoStar. All NDS has done is compete hard and fair in the marketplace.”

Dish is suing NDS and NDS Americas in a corporate espionage trial that U.S. District Judge David Carter said could bring an award of “hundreds of millions or perhaps billions.”

The potential damages are based on claims of lost revenue and the cost of fixing the compromised system.

“(NDS) came up with a plan - take these hackers off the streets and turn them on the competitors,” Dish’s lead attorney, Wade Welch, told the jury. “They called it the Black Hat Team.”

NDS, which provides encryption technology to a global satellite empire that includes News Corp’s DirecTV in the United States, “made the calculated decision to hire the worst and most well-known satellite pirates and hackers in the world in an effort to establish and maintain control ... over its competitors’ technology” EchoStar claims in its lawsuit.

The spying allegedly began in 1998 when DirecTV was constantly getting hacked and was debating whether to leave NDS and sign on with EchoStar’s superior system, Welch said.

The covert operation was shut down in 2001 when federal authorities visited the California home of NDS’ primary hacker, Chris Tarnovsky. The primary location where the cards were created was NDS’ research facility in Haifa, Israel, according to the suit.

Dish is claiming copyright violation, conspiracy, and piracy in a case that is expected to last a month and produce testimony from hackers and top company officials from as far away as Israel, Europe, Switzerland and Canada.

Stone admitted that NDS worked with Tarnovsky but the goal was to shut down major piracy networks and aid law enforcement in prosecutions. NDS has been extremely proactive in working with police and prosecutors, Stone said.

But EchoStar claims Tarnovsky’s real role was to cause their undoing and posted EchoStar’s access codes on piracy web sites, causing uncontrollable damage.

“We tried to plug up the hole,” Welch said. “But it was hopelessly cracked.” As a result, EchoStar had to replace each subscriber’s smart card that goes inside the black box at a cost of $90 million.

Stone said Tarnovsky wasn’t the hacker who posted the code on the Internet and they’ve found the real culprits to be several other individuals. (Editing by Dan Whitcomb and Louise Heavens)

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