There's No Such Thing as Free HBO 

Satellite television giant DIRECTV is suing thousands who may or may not have hijacked its signal. And you thought the music industry was tough.

Meet Michael and Mike. No last names, since both East Bay residents are embroiled in a legal battle with digital satellite provider DIRECTV that involves tens of thousands of people and has raised serious concerns about civil liberties. Michael is a college student from Alameda, Mike an electrical engineer from Blackhawk. What they have in common is that they've been accused of pirating DIRECTV's signal using a cheap and readily available device called a smart card.

Unlike your ATM card, which gets you into a computer network to do your banking, a smart card contains a chip that can store a considerable amount of information. This emerging technology has a growing number of everyday applications -- nearly two billion cards were sold last year. The American Express Blue smart card, for instance, allows secure online shopping. Starbucks uses the technology in its prepaid debit cards. Smart cards also can be used to store computer passwords, or to control employee access to buildings and authorized areas. More to the point, DIRECTV uses them to control customers' access to its 225-plus channels of programming and pay-per-view movies. People who buy the service get a satellite dish and a card that lets their TV-top decoder box unscramble the signal.

But smart cards are hackable, and some people have hacked them to get their DIRECTV fix for free. Alongside legitimate products, some Web sites and mail-order outlets have hawked smart-card programmers as devices for reprogramming DIRECTV access cards, in addition to "preflashed" cards that have been coded to steal DTV's signal. In the fall of 2002, the satellite TV giant raided a half-dozen such businesses and seized their customer lists. Now, in what may be the largest legal action in US history, it is threatening to sue everybody on those lists, including Michael and Mike.

The company has written to roughly 150,000 of these customers, warning that each may be liable for up to $10,000 per device -- $100,000 if the devices are resold. In most cases, DIRECTV will back off if the accused agrees to shell out a $3,500 settlement, surrender the devices in question, and sign a pledge to never pirate the company's signal again. So far, it has sued at least 22,100 people who have refused to settle. Very few cases have proceeded all the way through the court system. DIRECTV has had a handful of court victories, including a $30,000 judgment this month against a Florida man. The company also dropped a few cases at the last minute, although it won't reveal how many it has dropped or settled.

Technology and civil liberties experts worry that many of the defendants bought smart cards for legitimate purposes and never stole a second of DIRECTV's signal. The experts view the suits as a ploy to make anxious techies cough up $3,500, and they complain that DIRECTV's actions are crimping development of a promising new technology. The San Francisco-based Electronic Frontier Foundation and Stanford's Center for Internet and Society Cyberlaw Clinic have teamed up to launch, a Web site that disseminates advice and matches up the accused with local lawyers.

EFF staff attorney Jason Schultz acknowledges that businesses advertising smart cards for illegal purposes are breaking the law. Yet there's no reason a person can't own a smart card if it's used legally. "When somebody buys a sports car, you could assume that at some point they will break the law," he says, "but we don't preemptively give out tickets."

Civil liberties experts say DIRECTV has cast its net far too wide. Schultz says the company has sued people who don't even own satellite dishes, and viewers who subscribe to rival services. DIRECTV has even sued its own paying customers. And the growing pool of defendants includes many who can't afford the settlement. "We've talked to people who are on welfare, in trailer parks," Schultz says. "We talked to one guy whose wife was sued while she was in a coma in the hospital."

In addition, DIRECTV sends out its accusatory letters without proof of wrongdoing. Michael, who describes himself as an electronics hobbyist, had purchased smart cards as well as a programmer. "I bought it to tinker with," he says. When two warning letters arrived in 2002, he ignored them. DIRECTV sued him last year. In December Michael represented himself in mediation with the company, since hiring a full-time lawyer was too expensive. Altogether, he owned nonflashed "virgin" smart cards, a satellite dish, and a programmer that had been preflashed with code that could assist a user who wanted to alter smart cards to pirate DIRECTV's signal. Still, he says, the company can't prove he used the technology for illegal purposes. "They'd have to be standing outside of your house when you had a dish up and you were watching TV," he says.

Michael says the suit has caused him a great deal of stress, particularly as he had to juggle his defense preparations with final exams. He says he was offered a settlement during mediation, but it was still too high. "I've got bills and rent to pay like everyone else and I'm not working forty hours a week," he says. "I hope I don't have to file for bankruptcy to make this go away."

Then there's Mike, an electrical engineer who used to be a circuit designer for a Silicon Valley company. His work included developing smart cards for medical and security applications. He initially bought nonflashed cards and programming devices so he could telecommute from Blackhawk, and says he shopped online since Web sites offered cards that were both cheaper and more versatile than those available in stores. "At the time I bought the programmer, DIRECTV had not yet embarked on its extortion path and I thought nothing of buying a perfectly legal piece of equipment as I had no plans to use it illegally," he says.

After he was laid off in 2002, Mike decided to launch his own business based on the technology, and bought more equipment to program and test cards at home. None of his devices were even DIRECTV-capable, he insists, but the company sent him the threatening letters anyway. Mike hasn't been served yet, but if he does get sued, he says he's willing to go to court. As an engineer, he is outraged at DIRECTV's presumptuousness. "There are many companies large and small who use and have used this technology long before DIRECTV existed," he says. "In fact, satellite uses for smart-card technology represents only a minuscule fraction of uses."

The satellite provider grudgingly concedes that the technology has legitimate applications. "Yeah, if it's a card reader or programmer that has not been specially programmed to steal programming, I guess so," spokesman Robert Mercer says. "But every one of these devices we've seized or seen on the market is preflashed with code that makes them principally designed for one purpose only, which is to steal DIRECTV programming."

The people who have received warnings, Mercer says, were all clients of electronics distributors that advertised some of their products as a way to pirate DIRECTV's signal. The spokesman adds that owning a device coded to steal satellite TV is a federal crime. "They get caught and they're going to come up with fifteen different stories about how they were conducting field research in smart-card technology or trying to fix their garage-door opener," he says.

The company's legal actions are intended in part to counter any public perception that pirating its programming is legal or that the only victim is a faceless corporation. Piracy, Mercer says, jacks up rates and deprives local retailers of their full share of monthly subscriber fees. "This stuff is not up there for free," he says, referring to the company's $2 billion-plus investment in infrastructure. "If you want free programming, go out and buy some rabbit ears."

Simply prosecuting shady vendors wasn't enough, the spokesman adds. "Sure, we shut them down, and another one pops up," he says. "There continues to be a strong demand for these devices, so by taking this aggressive approach we're looking to put a chill on the market."

Too big a chill, the EFF says. It's unclear, for instance, how the company came up with its $3,500 settlement offer. With DTV's premium service running $85.99 a month, a customer would have to subscribe for three years to run a tab that high. "They picked an amount of money that is lower than what it would cost you to hire a lawyer," Schultz points out. "You end up paying the money because that takes care of it."

The lawyer acknowledges that the majority of those being sued probably have pirated DIRECTV's signal at some point. "But they're catching a lot of innocent people in their dragnet, and that is wrong," he says. "We don't want to send one hundred people to jail so we can catch ninety criminals."

Mercer concedes that some people have been falsely accused; he cites one man whose case was dropped when he proved the smart card in question was bought on his stolen credit card. "These instances of innocent people getting swept up in the net are very rare indeed, but it does happen," he says.

In the meantime, Web forums like and rage with the howls of defendants who claim the lawsuits are motivated by greed, or even intent to defraud. One countersuit against DIRECTV was thrown out last year, but is being appealed -- other countersuits have accused the company of fraud or racketeering. Although none of the suits has prevailed, Schultz adds: "I think over time those might become viable weapons," especially if DIRECTV's mass legal action comes to be seen as an abuse of the justice system.

The cure for piracy, Michael says, won't be hashed out in the courtroom. "They're trying to scare everybody into not hacking their signal, but they should probably invest their money in better technology and a better system," he says. "Maybe that's what they're doing with their settlement money."

DIRECTV says it is indeed beefing up security and plans to release new harder-to-hack access cards. But for now it intends to convince any would-be signal jackers that their actions are criminal. Under the circumstances, the satellite provider should perhaps consider changing its name to something more fitting like, say: Court TV.

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