Canal Plus-NDS link near before squabble

Bitter parting for pair

NEW YORK — Units of Vivendi Universal and News Corp., which have been trading lawsuits and insults this week over alleged piracy, had been discussing a merger or other amicable settlement until as late as last Friday.

Corporations have a noble history of suing, then merging, or vice versa. Gemstar and TV Guide dropped dozens of copyright infringement cases between them when they joined forces several years ago. EchoStar and DirecTV also had litigation pending that was halted when they started merger talks. The satcasters inked their deal but may well return to court if it doesn’t close.

In this case, Vivendi’s Canal Plus Technologies filed suit Monday claiming NDS poured resources into decoding its “smart card” and posted its results on the Web, costing the French pay TV giant $1 billion in revenue. Canal said NDS approached it last September about a merger. French group said it then revealed the findings of a piracy investigation in December and tried to settle.

NDS insists it was approached by Canal in December about a merger, and claims Canal used the findings of its investigation to pressure its rival into a deal. NDS says the piracy of Canal Plus digital signals across Europe and Asia was due to the French group’s inferior technology. Some insiders also speculate that Canal chief Pierre Lescure wants to justify the group’s red ink.

Vivendi CEO Jean Marie Messier has basically given Canal management two years to turn the money-losing enterprise around.

Still, the detail in the lawsuit, filed in U.S. District Court in San Jose, could imply cooperation of a former NDS employee.

“It’s a window into this weird little world where everyone is a thief,” said one media exec. Because their field involves security and encryption, rivals are constantly examining each other’s smart cards and technology. Making the information public, however, would be another matter.

(Reuters contributed to this story.)

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