Digg works by ranking news stories on its site according to readers' votes and found many of its leading stories this week contained a secret code which unlocks the anti-piracy systems of high definition DVDs.
The site received cease and desist letters from entertainment companies that use the system to protect their copyrighted material, and under the threat of legal action deleted any stories that gave out the 32-character code from the site.
Lawyers for trade group the Advanced Access Content System Licensing Administrator (AACS) claimed that the posting of the code violated its rights under the Digital Millennium Copyright Act (DCMA).
A massive user backlash prompted the firm to allow the stories to be posted in a U-turn that could open Digg up to legal action.
"You’d rather see Digg go down fighting than bow down to a bigger company,” said Kevin Rose, Digg’s founder, in his blog. “We hear you, and effective immediately we won’t delete stories or comments containing the code and will deal with whatever the consequences might be.”
Digg chief executive Jay Adelson said in an interview with CNN that he accepted that the legal consequences of that U-turn could spell the end for the company. "We understand that it could lead to a big lawsuit," he said. "We understand that this could be end of Digg. Do I believe that risk is very high? I really don’t know. The information is in the public domain, it has been for quite a while."
Fred von Lohman, an attorney at the Electronic Frontier Foundation, said in his blog that sites which carry the code or links to it are unlikely to be able to use a traditional defence of 'safe harbor'.
"While no court has ruled on the issue, AACS will almost certainly argue that the DMCA safe harbors do not protect online service providers who host or link to the key," he said. "The DMCA safe harbors apply to liabilities arising from 'infringement of copyright.' Several courts have suggested that trafficking in circumvention tools is not 'copyright infringement,' but a separate violation of a 'para-copyright' provision."
"The AACS takedown letter is not claiming that the key is copyrightable, but rather that it is (or is a component of) a circumvention technology," said von Lohman. "The DMCA does not require that a circumvention technology be, itself, copyrightable to enjoy protection."