NDS Suit Hangs Over News, Hughes


In a strange twist, if News Corp. does succeed in acquiring control of DirecTV Inc., the company could potentially find it is suing itself.

It all stems from a suit filed by Hughes Electronics Corp.'s DBS unit in September against its conditional-access system provider, News Corp.-owned NDS Group PLC, charging breach of contract, fraud, breach of warranty and misappropriation of trade secrets, among other things.

NDS returned the favor in October, filing a countersuit against DirecTV and a chip manufacturer, charging that DirecTV for the past two years has been secretly working with the chipmaker to develop a duplicate of NDS's smart card. NDS claimed that infringes on its patents, and that the two companies had leaked information about its technology to pirate Web sites.

In January, a U.S. District Court judge in California dismissed most of DirecTV's claim, except for one charge of misappropriation of trade secrets. That portion of the case is still pending, along with the NDS countersuit.

In the conference call earlier this month, News Corp. co-chief operating officer Chase Carey — who has been tabbed to take over as president and CEO of Hughes once the merger is complete — said there would not be a standstill agreement between the two parties as the merger proceeds.

"There is not a standstill," he said. "I think that all of us would prefer to work something out on a business basis as opposed to litigation. We all recognize we prefer to find a business solution here."