AfterDawn: Tech news

Microsoft sued over Xbox 360 memory unit lockdown

Written by Andre Yoskowitz (Google+) @ 24 Nov 2009 11:32 User comments (34)

Microsoft sued over Xbox 360 memory unit lockdown In late October we reported that Microsoft was blocking all "unlicensed" Xbox 360 storage devices, successfully forcing gamers to only purchase memory cards sold by Microsoft, at a higher price.
Large peripheral manufacturer Datel has struck back today however, filing an antitrust lawsuit.

Says Datel representation Howard Rice: "Microsoft has taken steps to render inoperable the competing Datel memory card for no visible purpose other than to have that market entirely to themselves. They accomplished their recent update by making a system change that will not recognize or allow operation of a memory card with greater capacity than their own. We believe that with the power Microsoft enjoys in the market for Xbox accessories this conduct is unlawful."

At the time of the update, Xbox Live senior exec Larry "Major Nelson" Hryb had said: "If you’ve moved your profile or saved games onto one [unauthorized memory unit] to 'back it up,' you’d better move it back onto an authorized Xbox 360 storage device prior to taking the update. If you continue to use an unauthorized memory unit after the update, you will not be able to access your stored profile or saved games."

Datel is asking for a jury trial, given the anti-competitive nature of the move. "Microsoft's purpose in disabling Datel's memory cards is to prevent consumers from choosing a Datel product that offers far better value for the price. There is no benefit to consumers from Microsoft's decision to target and disable Datel's memory cards."

A 512MB Microsoft Memory Unit sells for $30 USD while "unlicensed" storage devices like the 2GB Datel Memory Unit sells for $40 USD.

Previous Next  

34 user comments

124.11.2009 11:57

YAYY! Fanboys start talkin? Just joking guys-lighten up. That's crazy that it is coming to this. Makes you wonder, Playstation 3 let's other companies utilize their memory back-up capabilities with no repercussions. Wow, maybe they will learn to stop being so money grubbin.

224.11.2009 12:06

I think Datel has this case in the bag. I've tried to see how MS could justify their move, but really nothing justifies it. It's anticompetitive and anticonsumer any way you slice it.

324.11.2009 12:43

I can see if people mod there XBox to play pirated games that Microsoft has the right to ban the XBox, but not if one decides to add a legally purchased memory card.

Microsoft is being rather hypocritical? Meaning all the time when Microsoft was getting sued over their WinXP and other OS's a while back, anyone else remember Bill Gates saying "Microsoft need to have the ability to innovate in order to provide customers with the best product possible..." Anyone else remember those statements, and if so then shouldn't other companies also have the right to innovate and provide consumers with a better product?

Come on MajorShaft, you can't have it both ways.

424.11.2009 12:51

they only thing that can save MS here is to make this case last as long as it can.
I really cant see a way that MS can get out of this.

524.11.2009 13:18

Major Nelson and all the rest of those M$ execs can shove it. It's about time Datel stepped up.

Hopefully the government will blow this case open and realize how dumb it is that the consumer is even allowed to put saves on their USB drives, just because M$ wants more money. They say it's for quality control. I don't know about you but my USB drive has been in the wash plenty of times and is still chugging along. I would put money on the fact that my Memory Unit wouldnt stand a chance in the washer.

624.11.2009 16:00

The only problem with Datel's argument is that the xbox is a microsoft product. It is not the only gaming machine around, i.e. MS did not stop every console on the market from using Datel's product, only their own consoles. For this to be a monopoly they would have to control the entire console market. If you don't like what MS has to offer their are other choices, hence no monopoly. While I think it's a DB move on MS's part, I am not so sure that it's illegal. Essentially, what Datel is arguing is that MS manufactures a console and won't let a 3rd party provide peripherals. To play devil's advocate, in the name of profit why would MS let them make peripherals? ---Chikn

724.11.2009 16:11

Originally posted by ChiknLitl:
Essentially, what Datel is arguing is that MS manufactures a console and won't let a 3rd party provide peripherals. To play devil's advocate, in the name of profit why would MS let them make peripherals? ---Chikn
Can the same argument be made for any third party peripherals? For example controllers? They are everywhere. Just curious.

824.11.2009 17:37

Originally posted by emugamer:
I think Datel has this case in the bag. I've tried to see how MS could justify their move, but really nothing justifies it. It's anticompetitive and anticonsumer any way you slice it.
Even though it's a load of crap - I have a sneaky suspicion the term "anti-piracy measure" will be uttered by m$ and courts will start clapping and cheering and throw the case out instantly. :(

924.11.2009 18:02

Originally posted by ChiknLitl:
The only problem with Datel's argument is that the xbox is a microsoft product. It is not the only gaming machine around, i.e. MS did not stop every console on the market from using Datel's product, only their own consoles. For this to be a monopoly they would have to control the entire console market. If you don't like what MS has to offer their are other choices, hence no monopoly. While I think it's a DB move on MS's part, I am not so sure that it's illegal. Essentially, what Datel is arguing is that MS manufactures a console and won't let a 3rd party provide peripherals. To play devil's advocate, in the name of profit why would MS let them make peripherals? ---Chikn
It doesn't work that way. To have monopoly power for purposes of the antitrust laws, you don't have to be the only game in town; you simply have to have the ability to control prices or exlude competition. The fact that MS can charge more and render the competition inoperable means they have monopoly power, for purposes of the antitrust laws.

This one is really a no-brainer. I'm amazed that MS's legal department let this one get off the ground, especially after the hammering MS took in the last antitrust case.

1024.11.2009 18:11
abms
Inactive

ya F*** you microsoft. you already shove enough marketing crap down our throat with the new nxe. i hope datel pockets alot.

1124.11.2009 18:25

If Datel or other 3rd party companies properly paid or got authorization/licensing to make compatible memory cards, controllers or whatever for the XBox 360 then MS is in the wrong here The key being if they got the proper authorization and licensing and if they have that then MS should be sued for this.

I just say that because I know companies have made compatible products without proper licensing in the past or assumed that because they can make one accessory like a controller they can make others like storage devices or cables.

1224.11.2009 19:00

Quote:

It doesn't work that way. To have monopoly power for purposes of the antitrust laws, you don't have to be the only game in town; you simply have to have the ability to control prices or exlude competition. The fact that MS can charge more and render the competition inoperable means they have monopoly power, for purposes of the antitrust laws.

This one is really a no-brainer. I'm amazed that MS's legal department let this one get off the ground, especially after the hammering MS took in the last antitrust case.
They are excluding competition from making a peripheral for their own product, over which they have proprietary rights. They do have monopoly control over the xbox360. They control what plugs in or out, what runs on the console, etc. They control the prices at an artificially high rate also. The HDD for example, $100+ for a 120GB drive? If it wasn't for the proprietary ss.bin on the HDD we probably would have seen a 3rd party HDD already. And MS would have fought tooth and nail to disable them. If they change the code and something that they do not support breaks then that's not their problem. They can use whatever argument they want in court because they don't officially support the peripheral, e.g. the peripheral might cause instability or operational problems of the console, etc, even though it's BS. This would be akin to someone sueing Apple because they could not use a certain peripheral with a Mac computer because the operating system doesn't support it or they have changed their code to exclude the device, as happened recently with a certain smart phone and iTunes. ---Chikn

1324.11.2009 19:17

Obviously people here have forgotten that Datel did not have permission by MS to make 3rd party devices for their console, unlike Intec who does. MS will try to argue that point, that Datel did nothing to make a deal with them to continue having 3rd party hardware on their console. If Datel wants to make memory units, then they too can make their own console for it and if so choose, not let MS make memory units for said console. I guess we'll see which argument the judge will agree with

1424.11.2009 19:46
atomicxl
Inactive

It's MS' device that they made. To me this feels like Honda getting sued because (made up example) their cars are built in a way that only fits Honda engines. With the Windows stuff I can kinda sorta understand it since Windows dominates and including certain software with it would make that dominate Windows, which means dominating the large bulk of computer owners. You can't make that claim about the 360 and video games though. There are two other consoles (one with almost double the sales of the 360) and hundreds of computer manufacturers Datel could turn to. It's not like they are locked out of the gaming data card market.

Anti-trust was never the part of business law I took a liking to, but can they honestly sue MS for this? Are proprietary systems against the law? I don't think that officially licensed products are the calling card of anti-trust. Whatever I guess. Sucks for MS that they spend millions or billions creating products and aren't allowed to have say so in how their product operates.

If a Sony camera only has a slot for the Sony brand memory sticks, can they be sued for eliminating MicroSD from the handheld Sony product card memory storage market?

This all sounds like Datel going belly up because the days of Memory Cards are dead, even on the 360. Technology changed and now their company is obsolete. They can go out with a whimper or do some far reached last-chance-for-the-founders-to-possibly-get-a-check thing about how it's evil that Microsoft dominates the Microsoft Console market.

1524.11.2009 22:12
Fudgebar
Inactive

Wait...isnt this the same Datel that sells a $2 Transfer cable for the 360 in a package called the XPort 360 for $50???....Is THAT the Datel we are talking about?.....F em! I hope MS bankrupts them!

1624.11.2009 22:25

For what it's worth, I'm an attorney in the US with 20 years experience in business litigation, including antitrust matters.

Here's the bottom line: No amount of "proprietary rights" allows you to keep a competitor from selling an accessory or peripheral that consumers can use with your product. Like it or not, that's how the antitrust laws work.

This case is really not that different than the prior Microsoft antitrust case. In that case, a federal judge concluded that Microsoft had violated antitrust laws by trying to prevent competitors from making and selling internet browsers compatible with Windows. That case cost Microsoft many billions of dollars, and Bill Gates has acknowledged that the stress of that litigation played a significant part in his decision to retire. Beyond that, the federal prosecutors ultimately forced Microsoft to turn over its proprietary source code to its competitors so that they could develop internet browser add-ons that would compete with Internet Explorer. The courts in that case said what every antitrust lawyer will tell you: You don't get to keep competitors from making accessories/peripherals for your product -- not even in the name of "proprietary rights" or "guarding against piracy."

The laws may or may not make sense to you, but that's how they work. Microsoft is going to get killed in this one.

1724.11.2009 22:57

Originally posted by SoTired:
For what it's worth, I'm an attorney in the US with 20 years experience in business litigation, including antitrust matters.

Here's the bottom line: No amount of "proprietary rights" allows you to keep a competitor from selling an accessory or peripheral that consumers can use with your product. Like it or not, that's how the antitrust laws work.

This case is really not that different than the prior Microsoft antitrust case. In that case, a federal judge concluded that Microsoft had violated antitrust laws by trying to prevent competitors from making and selling internet browsers compatible with Windows. That case cost Microsoft many billions of dollars, and Bill Gates has acknowledged that the stress of that litigation played a significant part in his decision to retire. Beyond that, the federal prosecutors ultimately forced Microsoft to turn over its proprietary source code to its competitors so that they could develop internet browser add-ons that would compete with Internet Explorer. The courts in that case said what every antitrust lawyer will tell you: You don't get to keep competitors from making accessories/peripherals for your product -- not even in the name of "proprietary rights" or "guarding against piracy."

The laws may or may not make sense to you, but that's how they work. Microsoft is going to get killed in this one.
That being said isn't it true that a 3rd party company wanting to make an accessory that has to fit in patented memory, controller, or cable slots/ports has to procure proper licensing on the patents used to design those slots? Now I have read different articles on this very case and it has been said that Datel and others were in violation of their licensing agreements with Microsoft. The products they offered either are not properly licensed or do not meet the quality standards to be used with the system. If that is the case doesn't Microsoft have the right to protect its patents or disallow companies from releasing products that do not meet the standards to protect their best interest.

Now some of that may be speculation but if any of the above is true then Microsoft does have a case. Now if they are solely doing this to prevent competition then they deserve to be sued but that remains to be seen.

And as far as the anti-trust browser case goes some feel that because Microsoft gave IE free with the OS and NetScape was charging for browser that meant anti-trust. Maybe MS did play a bit of hardball but hey look at it this way. If that didn't happen we could all be paying $25+ for a an internet browser today. I know I was one that was happy when IE came out. That meant I no longer had to pay money for an ISP disc that came with Netscape.

1825.11.2009 0:50

Microsoft will get off...they always do. Datel is a tiny company compaired to the giant microsoft.

If you don't like paying microsoft money for nothing, then you should not buy a 360.

1925.11.2009 1:31

Buy a 360 and mod the living shit outta it.
Bill Gates got bent over and pounded by modders with the first xbox, and rightly so.(lol, still got mine with 109xbox games plus all the other emulators and crap)

If i found a genie in a bottle i'd ask to create a mem card for 360, called The Pirate, and every time you pop it into your 360 Bill G gets a kick in the nuts.

2025.11.2009 2:23

i think it would be just happy to see a download that you can re-enable the hard disk and open the home brew market. that would simply make things interesting. im amazed the xbox 360 has had so much support considering big brother has tried to screw the public on every turn with it.

2125.11.2009 2:55

The only reason for M$ to do this is greed.

Another example is how many games in the Game for Windows Live series which support controllers, often only correctly work with an official Xbox/360 controller. Other controllers often have problems, a common one being the analog joystick directions becoming "stuck" or reversed. Look up "gamepad problem" or "controller issue" together with any game in the GFW series and you'll see what I mean. After years of users having problems with this you'd think it would be fixed by now. M$ obviously wants to frustrate users into giving in and buying an Xbox controller rather than properly support other brands.

Yay for greed.

2225.11.2009 4:51

the issue:

Retailers selling xbox360/ps3 consoles and games make zilch on either. Yeah, a big goose egg.

So, companies like MS and Sony sweeten the deal by also giving the retailers high-profit items such as controllers, memory cards, or any other peripherals.

If MS steps up and fights... they sit well in the end with all the retailers because they can go back and say hey we tried knowing all well they don't stand a chance.

Lastly, this is no different than saying you cant use a. model headphone with b. model mp3 player.

2325.11.2009 5:52

Originally posted by trainmstr:
the issue:

Retailers selling xbox360/ps3 consoles and games make zilch on either. Yeah, a big goose egg.

So, companies like MS and Sony sweeten the deal by also giving the retailers high-profit items such as controllers, memory cards, or any other peripherals.

If MS steps up and fights... they sit well in the end with all the retailers because they can go back and say hey we tried knowing all well they don't stand a chance.

Lastly, this is no different than saying you cant use a. model headphone with b. model mp3 player.
These "high profit items" are only profitable to microsoft/sony/nintendo...the difference between the lowest prices and the highest prices for a dualshock3 is less than $10...and that is only enough to cover shipping from the online sites with the $10 lower prices. If the proffit margin was large, then they would all be undercutting eachother's prices, and you could buy online for a few bucks more than their costs...you might even get it "at cost" as a means of attracting new customers.

The retailers don't make much of anything on the consoles, this is true. This is why they sell games...most games are at least $5 cheaper on newegg than at bestbuy...and newegg is making enough profit to offer free shipping. The truth is that a retailer makes more money on the 2GB Datel unit than they would make on a 512MB microshaft unit. The same goes for the controllers, and even the bluetooth headsets.

I'm still suprised that people were even willing to buy the datel unit...$40 for 2GB is terrible when you can get a 8GB microSD for under $15 shipped...the adapter can't cost more than $10 to make.


2425.11.2009 9:30

Sounds like microsoft monopoly.They start with all the squares and you have to sue them to get a square.

2525.11.2009 11:31

Who buys Memory Cards anyways?
Who buys 360s new now anyways?

2626.11.2009 9:09

M$ dose not have a proper 3rD party licensing system which adds to the problem of people making crap for the 360. Its MS's fault for proving a proper setup so they can easily ban stuff that dose not meet basic hardware standards.... but no they want a highly controled and antiseptic environment on the 360 and that makes gaming generic and weak....

2727.11.2009 15:56

Just another example of how cruel MS can be. Knowing its wrong but doing it anyway.

2827.11.2009 17:29
pspbarry
Inactive

"For what it's worth, I'm an attorney in the US with 20 years experience in business litigation, including antitrust matters.

Here's the bottom line: No amount of "proprietary rights" allows you to keep a competitor from selling an accessory or peripheral that consumers can use with your product. Like it or not, that's how the antitrust laws work.

This case is really not that different than the prior Microsoft antitrust case. In that case, a federal judge concluded that Microsoft had violated antitrust laws by trying to prevent competitors from making and selling internet browsers compatible with Windows. That case cost Microsoft many billions of dollars, and Bill Gates has acknowledged that the stress of that litigation played a significant part in his decision to retire. Beyond that, the federal prosecutors ultimately forced Microsoft to turn over its proprietary source code to its competitors so that they could develop internet browser add-ons that would compete with Internet Explorer. The courts in that case said what every antitrust lawyer will tell you: You don't get to keep competitors from making accessories/peripherals for your product -- not even in the name of "proprietary rights" or "guarding against piracy."

The laws may or may not make sense to you, but that's how they work. Microsoft is going to get killed in this one."

I would be amazed if some where in the xbox 360 gobble de gook it doesnt say xbox 360 is ours and we have the right to do what the hell we want to it and stuff the lot of you!

2928.11.2009 7:44

Originally posted by atomicxl:
It's MS' device that they made. To me this feels like Honda getting sued because (made up example) their cars are built in a way that only fits Honda engines. With the Windows stuff I can kinda sorta understand it since Windows dominates and including certain software with it would make that dominate Windows, which means dominating the large bulk of computer owners. You can't make that claim about the 360 and video games though. There are two other consoles (one with almost double the sales of the 360) and hundreds of computer manufacturers Datel could turn to. It's not like they are locked out of the gaming data card market.

Anti-trust was never the part of business law I took a liking to, but can they honestly sue MS for this? Are proprietary systems against the law? I don't think that officially licensed products are the calling card of anti-trust. Whatever I guess. Sucks for MS that they spend millions or billions creating products and aren't allowed to have say so in how their product operates.

If a Sony camera only has a slot for the Sony brand memory sticks, can they be sued for eliminating MicroSD from the handheld Sony product card memory storage market?

This all sounds like Datel going belly up because the days of Memory Cards are dead, even on the 360. Technology changed and now their company is obsolete. They can go out with a whimper or do some far reached last-chance-for-the-founders-to-possibly-get-a-check thing about how it's evil that Microsoft dominates the Microsoft Console market.
I don't know if you are aware of the fact but similar situation has gone unresolved in Olympus digital camera. Try and use any other brand and the camera will not recognise it. Format an Olympus memory card in any other system and you lose its use on Olympus camera. Olympus branded SD and micro SD cards cost anywhere from 2 - 3 x of any other competitive brand.

I am not into gaming at all but if Datel manufactured an electrically and physically compatible memory device - without being sued by M$ you can be pretty sure that M$ does not hold a patent on it like Sony does on its memory stick. Till recently none other than Sony branded ones were available. In this situation Datel are absolutely justified in their case ans M$ should be taken to the cleaners.

3028.11.2009 11:10

Thats probably why I haven't seen many Olympus cameras being sold or with consumers.

3130.11.2009 11:58

Just one more reason I won't own a Microsoft console. I keep seeing prices come down, but then I keep reading stories like these that remind me why I don't want to support companies that do this kind of crap.

3230.11.2009 12:04

Originally posted by IguanaC64:
Just one more reason I won't own a Microsoft console. I keep seeing prices come down, but then I keep reading stories like these that remind me why I don't want to support companies that do this kind of crap.
Sounds like you don't own much technology then do you. All companies that make a proprietary or patented device have such terms like this. If a company wants to make a controller, memory unit, game, or any other accessory for a game console be it Microsoft, Nintendo, or Sony they need approval and proper licensing and the manufacturer can deny them because it is their console and they own the patents on how the controllers, games, or accessories communicate with the system.

When it comes to the software either on the console or computer itself or the software/games you buy you do not own them either. What you pay for is a license to use it. The only way you own a piece of software is if you wrote it yourself and making any kind of MOD to a console like that is changing the software so you violated the license agreement.

3319.1.2010 17:02

I think Datel may have a case here. Although Microsoft own the 360 console etc etc, they can't control whether or not a competitors product works on it and still maintain a fair market with adequate consumer choice. Thinking about it in other terms if Microsoft win the case, and set a precedence, then they could legally prevent 3rd party developed games to work on their consoles as well. Why let Activision make shed-loads of money off of their console when they can just put Halo and other MS Game Studios content out there? Sure, there are people who wouldn't buy those games, but for those of us who can only afford the 1 console, we'd be stuck with our lack of choice.

3419.1.2010 19:08

Originally posted by Zaurett:
I think Datel may have a case here. Although Microsoft own the 360 console etc etc, they can't control whether or not a competitors product works on it and still maintain a fair market with adequate consumer choice. Thinking about it in other terms if Microsoft win the case, and set a precedence, then they could legally prevent 3rd party developed games to work on their consoles as well. Why let Activision make shed-loads of money off of their console when they can just put Halo and other MS Game Studios content out there? Sure, there are people who wouldn't buy those games, but for those of us who can only afford the 1 console, we'd be stuck with our lack of choice.
errr... 3rd party devs pay licensing fees you know....
Hardware devs do as well but MS has the system so screwy its a mess....
This message has been edited since its posting. Latest edit was made on 19 Jan 2010 @ 19:09

Comments have been disabled for this article.

News archive