Microsoft sued over dashboard update requiring Xbox gamers to use “authorized” memory units only

November 24, 4:12 AMSacramento Xbox ExaminerBrad Cook

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Xbox 360 Memory Unit (512MB)

(Microsoft)

A few weeks ago Microsoft announced that gamers would only be able to use authorized memory units on their Xbox 360, forgoing the ability of third-party industry competitors to offer similar devices to consumers.

The announcement came just prior to the system wide release of the latest November update, which aside from introducing features like Facebook, Twitter, and Last.fm, also introduced the aforementioned firmware lock on all unauthorized peripheral memory units. Gamers who had previously enjoyed the use of third party storage units are now confronted with the inability of using such devices for the storage and transfer of data.

In response to the update lockout, Datel, a UK based manufacturer of Xbox 360 compatible memory units, has enlisted the aid of San Francisco based law firm Howard, Rice, Nemerovski, Canady, Falk, & Rabkin to introduce an antitrust lawsuit against Microsoft within a San Francisco federal court.

According to the lawsuit, the Datel Max Memory card is designed to provide more capacity, extra functionality, and a comparable price than that found in similar devices being offered my Microsoft.

“The Max Memory card plugs into the Xbox 360 and allows a user to store games, characters, and similar information. It permits a player to transport game information between Xbox systems. The Microsoft memory card does exactly the same thing—with the difference that it offers only one-quarter the memory while listing for the same retail price. Datel engineered the Max Memory card to be 100% compatible and over 50,000 Max Memory cards have been sold without a single report of harm to the Xbox console,” said Mike Connors, founder of Datel.

While news of the lock-out no doubt brought a groan from many gamers who use third-party memory units, Microsoft spokesman David Dennis was reported to have said as recently as October 23rd that, "Microsoft goes to great lengths to protect the Xbox 360 and Xbox Live service from cheating, which is the primary purpose of these unauthorized memory units,” and adding that, “Unauthorized memory units are not tested for compatibility or certified for safety and compliance standards and thus could damage customer's Xbox 360 consoles."

However, despite the intention Microsoft claims as its primary motivation for the recent changes, some gamers, and now manufactures, are crying foul at the console creator, stating that preventing “cheating” is simply a pretext for forcing consumers to purchase Microsoft memory cards.

Marty Glick, the senior attorney representing Datel in the lawsuit went on to solidify his client’s position by adding, “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.”

The Datel memory card stores as much as 2GB of data, compared to the 512MB that the largest Microsoft memory card permits. In addition the Datel card is also being offered at a price of $39.99 MSRP, while the Microsoft card currently maintains an equal price with less capacity. Datel also offers memory units as much 4GB, but for a higher price.

According to Datel’s complaint, “"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."

Also found within the complaint is the assertion that the recent dashboard update also extends into other aftermarket products such as gamepads and controllers, which are prevented from use by way of “the implementation of predatory technological barriers” that “do not constitute improvements of the product in any respect, but rather are arbitrary contrivances intended to perpetuate Microsoft's market power.”

Datel is seeking a jury trial in the matter and also maintains that, since its May 2009 release, the Datel Max Memory card is currently the only source of memory cards compatible with the Xbox 360 other than Microsoft itself.

Datel is seeking three times the cost of any damages suffered by the lock-out in addition to attorney and court fees, and the removal of the part of the dashboard update prohibiting the use of current and future Datel devices.

Microsoft has not yet responded to the filing.