We can't tell you -exactly- what this is, but we can give you some general direction.
On the Mac, Digital Editions 1.5 stores an encryption key (to make sure our client to server calls are secure) in your OS X Keychain.
If there is a problem creating this key then E_AUTH_BAD_DEVICE_KEY is the error you'd see.
The key information is stored as an application password in your keychain. Likely causes of failure include denying access to Digital Editions, or locking your user keychain, and not entering their password when prompted.
If you're denying access explicitly to Digital Editions, well don't do that (ha. )
Now, you may not be doing this intentionally. The access permissions on OS X are complicated, so this could be a side effect of some other permission work. You can explicitly grant Digital Editions access to the the keychain item:
Open Keychain Access (Applications/Utilities)
Select Passwords from Category
Select Digital Editions from password list
Click info button (or press Cmd+i)
(Dialog labeled Digital Editions should appear)
Select Access Control tab
Click + button
Navigate to our install directory and select ADE 1x5
Click Save
Close Dialog
Launch Digital Editions.
Anyway, hopefully this helps you narrow the issue down.
Regards,
Bentley Wolfe
Senior Support Engineer, Flash/Flash Player/Digital Editions