Smart cards lead to legal headaches

DirecTV beams more than 200 television channels to millions of homes nationwide, but that's not all the company has been dishing out.

It's been delivering subpoenas, too, hauling people into court and charging them with using mail-order electronics to steal TV programming.

From Dowagiac to Drummond Island, some 390 Michigan residents are being asked to shell out thousands of dollars in civil damages, federal court records show. They are among nearly 12,000 people across the country snared in the company's aggressive campaign to thwart signal piracy.

"They want me to pay $4,000. I'd rather give my attorney that money," said Dubois McIntosh of Portage. "I build computers on the side and I ordered some parts for computers and I got stuck with this (lawsuit)."

Like most of the defendants in the civil lawsuits, McIntosh, 56, is charged with purchasing electronic "smart card" equipment to unscramble DirecTV's signal without having to pay a monthly fee.

Here's how it works: DirecTV beams its programming into more than 10 million homes across the country via satellites orbiting some 22,000 miles above Earth.

That signal is encrypted. Paying customers' receivers are equipped with a credit card-sized microchip -- a smart card -- programmed to unscramble the signal.

Hackers have learned to program their own smart cards. The cards and the devices used to program them, sometimes called "unloopers" and "boot loader boards," can be purchased online for $50 to $150. Through law enforcement raids, DirecTV obtained sales records of some online distributors and began sending out subpoenas. Lots of them.

"It's difficult to know how many people in total are stealing the signal," company spokesman Robert Mercer said. "We've been able to identify tens of thousands of these individuals through these business records."

Dish Network, the nation's second largest satellite TV provider, does not comment on piracy, a spokesman said. News reports this year indicated Dish Network has not taken the same sweeping legal approach as its larger counterpart.

In most lawsuits, DirecTV is asking for $10,000 per purchased device. Fredrick Jensen, an Allegan attorney defending about 60 people from around the state in DirecTV suits, said the company has ventured onto thin legal ice.

"They obviously assumed that (people) buy these devices in order to steal DirecTV," said Jensen. "That is a huge legal leap, especially in light of the fact that these devices could be used for other legitimate purposes."

Smart card technology is employed in home security systems and experimental personal identification systems. Merely owning a smart card or programmer should not be illegal, Jensen said.

"There's a lot of innocent techies and hobbyists out there who purchased these things without the knowledge that they could be used to steal DirecTV's signal," Jensen said.

Elsewhere in the country, that defense has held water. A South Carolina judge recently tossed out similar cases because DirecTV was unable to show defendants owned both the devices and the satellite equipment necessary to get the signal.

DirecTV may not have won at trial, but the company has won settlements. A 69-year-old Berrien County man gave the company $4,500 to drop the lawsuit.

"It scared me to death. I think what we did was take the cheapest way out," said the retired electrician who asked that his name be withheld. "I guess the lesson is never order anything on the computer that you don't know what it is."

Before actually filing a lawsuit, the company sends one or two warning letters demanding the accused person pay a fine. Jensen said negotiations usually start at $3,500 -- that's more than eight years of DirecTV service at the basic $35 monthly rate.

Many defendants are not willing to settle. Some, like Jason Jespersen of Muskegon, filed countersuits against the company.

"They just did a massive lawsuit against many people. In my opinion, it was to play a percentage -- to see how many they could collect on with a written threat," Jespersen said. "I did not settle because I did not do anything wrong."

"I bought some things over a Web site -- a programmer and an unlooper thingy," said Sandra Batchelor of New Buffalo. "I don't understand what the big concern is because I've never gotten it (DirecTV). I don't know how they can prove whether I did or didn't, anyway."

In federal court for the Western District of Michigan, which covers the western half of the Lower Peninsula and all of the Upper Peninsula, DirecTV has filed 72 cases naming about 150 defendants.

Most are accused of buying a single device, though some are charged with purchasing multiple items. Angela Castellani of Kalamazoo could be on the hook for $90,000 -- for nine devices allegedly purchased between August 2000 and April 2001, according to court papers.

Castellani runs Computers For All, a nonprofit organization supplying used computers to low-income families. She orders computer parts all the time, she said, to fix up old, donated computers for her organization.

"We order hard drives, video cards, sound cards -- things like that," she said. "I'm being harassed by them (DirecTV). My understanding of the law is you're innocent until proven guilty and their way ... is telling you (that) you're guilty until proven innocent."

"Why do they (defendants) go to a Web site that exists solely for the purpose of selling devices ... used to steal satellite programming?" he said. "The devices themselves are designed exclusively for satellite piracy."

Castellani is accused of purchasing some devices from a company whose Web site features images of DirecTV access cards and a tool to calculate the precise angle one should point a home receiver dish into space for the best reception.

"If you're a pirate or a signal thief, you're not going to want a legitimate installer in your house," Mercer said. "You're going to want to do it yourself undercover."

Castellani's $90,000 suit pales in comparison to others. George McKellar Sr. of Grand Blanc is accused of purchasing and reselling 81 devices. He could not be reached for comment.

All cases in the Western District have been assigned to Grand Rapids U.S. District Judge Gordon Quist, who consolidated most of them. A mass hearing is scheduled for Nov. 25.

"People use these illegally hacked cards because they think they can get away with it," Mercer said. "We send demand letters and give them a fair chance to respond to us. If you don't respond ... you're going to find yourself on the wrong end of a lawsuit."

This all stems from cell phones...

When congress made it illegal to own a receiver that received cell phone frequencies a major long-standing individual right was lost. Never before was it illegal to receive radio signals that were present on your property (or own equipment that could receive them).

Simply stated the satellite TV people should have the total burden of protecting their signal as a commercial interest in ways making it impossible for unintended recipients from getting it, not the other way around. So much for the public airwaves...

I for one have a big problem with this.

Did you ever wonder if this was a revenue plan of Directv? Consider.. years went by while piracy was unchallenged by Directv, thereby encouraging more and more piracy. In fact, many may have felt that Directv really did not mind too much as they did not prosecute anyone. I often thought they may allow piracy, feeling that someday the pirate would tire of the updates needed, but be so hooked on the service that they would subscribe. But now it seems possible to me that Directv let the piracy go unchecked in order enlarge the base of potential defendants and then send out the letters and collect. The word "entrapment" keeps coming to mind.

Simply stated the satellite TV people should have the total burden of protecting their signal as a commercial interest in ways making it impossible for unintended recipients from getting it, not the other way around. So much for the public airwaves...

I agree with you about the ECPA; as a ham, "playing" with radio equipment is fun, and any one frequency is pretty much like any other in terms of hardware.

However, this isn't the FCC busting people for having local oscillators and dishes. These are civil suits, by DirectTV, against people for having equipment which can decode their signal, again not for having LOs and dishes. DirectTV isn't suing them for receiving the signal, they're suing the people for being able to decode it.

That is, IMHO, the satellite TV people protecting their interest in a legitimate manner. I'm vaguely OK with it, with the caveat that any of these programs is "a tool to calculate the precise angle one should point a home receiver dish into space for the best reception." I've got several of them. Also, I was thinking of putting together one of these automatic car starting systems. Should I expect a subpoena? Absolutely not. DirectTV ought to have to show, by clear and convincing evidence, that a specific defendant did receive and decode the transmission before the case goes to trial. A parallel technique is the insurance fraud guys who videotape those people "out on disability" bowling and stuff. DirectTV ought to have to have some evidence more than just a receipt that these people decoded the DirectTV signal.

Why should having any hardware that doesn't pose a risk to other people be anybody else’s business unless it is stolen?

Again, a "decoder" is just a more complicated receiver. If the legal standard is no unauthorized reception to sue someone why the need for encryption at all to sue? How much encoding is enough to qualify for legal protections? Just sue to protect your signal... There would be little or no legal burden on them to encode it all if that were the basis.

When a commercial interest places their signals on my property they have the obligation to protect their commercial interest by encoding it in such a way that prevents me from being able to decode it on an economical basis or their business isn’t viable. They should have no right to prevent me from creating and owning my own hardware that decodes whatever. Either they protect their signal sufficiently or keep it off my property. They have no right to intrude on what I can do on my property.

The simple fact that electronic devices that do not interfere with others are now deemed illegal to possess is a major step against our freedoms. Now that that threshold has been crossed it is up to the courts as to what is legal and illegal electronic hardware to own. The line will move as time goes on to making who knows what “illegal”. Will it become illegal to have an unauthorized MP3 player in the future?

I will say they have a right to sue those who build for resale hardware to decode their signals based on patent and copyright protection. Having possession of this hardware is a different issue. That is protected by neither.

If you were to build your own receiver with a functional decoder, what have you done that should be legally actionable? All your activities occurred in private and have no effect on anyone else.

The law is wrong and will have profound consequences over time.

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