Lawyers for a consortium of entertainment companies warned that posting the code violated their intellectual property rights. So Digg, which generates revenue by selling ads, began removing any mention of the code and deleting the accounts of members who posted it.
"In order for Digg to survive, it must abide by the law," Digg Chief Executive Jay Adelson wrote on the site Tuesday afternoon, adding, "We all need to work together to protect Digg from exposure to lawsuits that could very quickly shut us down."
That didn't sit well with Digg's libertarian-leaning users, who fill the site each day with commentary and links to stories about new technology, politics and a wide range of other topics. One particularly hot topic on the site has been the media industry's practice of wrapping movies, TV shows and songs in anti-piracy software.
Members accused Digg of kowtowing to Hollywood.
Digg cultivated a culture of free exchange among its members and then it betrayed those ideals by ripping down posts and deleting accounts, frequent user Ryan McGuire said.
"Certainly it's their website," said the 27-year-old computer programmer from Cedar City, Utah, "but it's contrary to how I feel it was designed in the first place, which is to be an open forum."
Late Tuesday, Digg reversed course. Soon other news stories started making it back into Digg's front page top-10 list.
Bernoff, the analyst, said that the 25-person company might be appeasing its members in the short run by capitulating, but that it risked a larger legal battle that could financially wipe out the company down the road.
But once the site gave in, even some of the executives who support the encryption code said they had little appetite for a suit.
"The law says they have to take it down when they're told about it," said one technology executive who declined to be identified. "But no one ever envisioned that the users would lock the system to stop it from getting taken down."
Michael Avery, a Toshiba Corp. attorney who manages the encryption consortium, declined to discuss his next move. But he acknowledged that the legal threats had spread the offending sequence and that a suit might do more of the same.
"If you try to stick up for what you have a legal right to do, and you're somewhat worse off because of it, that's an interesting concept," Avery said.
