In a media protection system and method, an original media item is
encrypted before it is distributed. At the point of sale (POS) or point
of distribution, the consumer presents his personal smart token to the
clerk who inserts it into a POS reader along with a companion digital
identifier (CDI.TM.). The POS reader extracts a digital key from the
CDI.TM. and merges it with the player list in the consumer's smart token.
The POS reader then destroys the CDI.TM. and returns the smart token to
the consumer. The digital key for the media item is now stored on the
consumer's personal smart token, merged with the player identifiers for
the players possessed by the user. When the user returns home, he inserts
the media item into his player along with his smart token, and the
digital key is extracted and used to decrypt the encryption key for the
material that is stored on the media item itself. Then, the player
decrypts the media item as it is played. The consumer may remove the
smart token, and the encryption key is stored in the player. If the
consumer wants to play the media item in a player other than the one on
his list at the time he bought the media item, he inserts his smart token
in the new player and its public key is transferred to his smart token.
He then inserts the smart token into one of his currently authorized
players and activates a "new player" function, which generates a new set
of records on the smart token encrypted with the public key of the new
player and accessible only to the new player.