DirecTV Trying to 'Misappropriate' Pay TV Technology from Licensor, Alleges Complaint

It was DirecTV’s second attempt to misappropriate intellectual property developed by Synamedia and its predecessor, NDS, following a dispute in the early 2000s involving DirectTV “misappropriating NDS’s intellectual property” as it sought to build its own conditional access (CA) system, alleged the complaint. Following that dispute, DirecTV agreed in 2004 that NDS would be its exclusive supplier for CA services for six years under a security services agreement (SSA) and statement of work (SOW), it said. The agreement has been extended several times, it said.

The licensing agreement is due to expire July 31. Until recently, the companies had been engaged in negotiations for another extension, as it's “undisputed” that DirecTV wants to continue to use Synamedia’s CA system for a period that was redacted in the complaint. DirecTV was negotiating for the right to extend the agreement until about six weeks ago “when it took matters in a surprising direction,” the complaint said.

After being “apparently displeased” with Synamedia’s renewal proposal, DirecTV “withdrew its last offer and declared that it does not need the license it was negotiating for,” alleged the complaint. The satellite and streaming TV provider began asserting, “on the eve of the expiration of the Agreement,” that it “is entitled to use Synamedia’s conditional access system in 'perpetuity’” without paying the type of license and service fees it has been paying Synamedia over the past 20 years, the complaint said.

DirecTV is also demanding access to and use of Synamedia’s intellectual property, “including trade secrets, many of which have never before been provided” to the licensee, the complaint said. DirecTV’s “proclamation” for a perpetual license and demands for Synamedia’s IP rest on an April 30 “so-called Declaration of Transition,” under which DirecTV would be allowed to take steps during the term of the agreement “to build a conditional access system” to Synamedia’s system “to migrate to this new conditional access system at the Agreement’s expiry,” it said.

Those conditions “are not met here,” said the complaint, since DirecTV has “effectively waved any Transition right” because it can’t develop a compatible CA system in the weeks remaining before the agreement’s expiration, the complaint said. It would “take years" to develop such a system due to provisions in the agreement along with “the realities of the complex technology at issue,” it said.

DirecTV also “made clear it has no intention of transitioning to a new conditional access technology,” either its own or a third party’s, the complaint said. Instead, it “simply intends to continue exploiting Synamedia’s CA technology long after the expiration” of the agreement, which isn't allowed under the agreement, the complaint said. DirecTV has “refused to withdraw” its declaration of transition despite Synamedia’s request that it do so, it said. If DirecTV isn't enjoined, it will continue to use Synamedia’s trade secrets “to implement its scheme” to continue using Synamedia’s CA system and “exploit” its trade secrets after the agreement expires, alleged the complaint.

Synamedia requests that the court hold DirecTV liable for trade secret misappropriation and permanently enjoin the company from using or disclosing its trade secrets. The plaintiff also demands that the court issue a judgment declaring that DirecTV has not validly declared a transition as contemplated by the parties’ agreement; that DirecTV has waived any right to declare a transition because it “waited too late to do so”; and that DirecTV “does not possess a ‘perpetual license’" to Synamedia’s IP rights following expiration of the parties’ agreement. It also seeks compensatory and punitive damages, fees and costs, and pre- and post-judgment interest. DirecTV didn't comment Thursday.