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Datel suing Microsoft over memory-unit lockout

British maker of high-capacity, low-price storage units takes legal action against software giant, accusing it of antitrust violation.

In October, Microsoft revealed that the fall Xbox Live Update would lock out what director of programming Larry "Major Nelson" Hryb termed "unauthorized Memory Units." Though not mentioned by name, the company most affected by the move was Datel, which sells Xbox 360 Memory Units with both higher capacities and lower prices than those made by Microsoft.

Datel's 2GB and 4GB memory cards were locked out by Xbox Live's latest update.

Datel's 2GB and 4GB memory cards were locked out by Xbox Live's latest update.

Now, just days after the Xbox Live Update went live, Datel has fired back at Microsoft--in court. This morning, the law firm of Howard, Rice, Nemerovski, Canady, Falk, & Rabkin announced it had filed a lawsuit in a San Francisco federal court on behalf of the UK-based peripheral maker.

Submitted late Friday, the suit accuses Microsoft of violating antitrust laws by requiring 360 owners to buy only Microsoft-made accessories. It asserts that doing so is an illegal practice, tantamount to a car manufacturer forcing auto owners to buy only a certain brand of tires in perpetuity.

"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," said Howard Rice director Marty Glick in a statement. "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."

As of press time, Microsoft had not responded to requests for comment about Datel's suit. The action asks that Microsoft be found to have violated federal antitrust laws and ordered to remove the part of the Xbox Live update that blocks current and future Datel devices. It also asks that Microsoft pay three times the cost of any damages Datel suffers from the lockout, as well as compensate the company for all attorney and court fees.

536 Comments

  • SoreThumbsBill

    Posted Jun 22, 2011 6:25 am GMT

    After reading this I don't feel so bad for pirating Vista and Office.

  • KittenNipples

    Posted Mar 28, 2010 1:13 pm GMT

    ***http://www.gamespot.com/news/6254231.html?tag=latestheadlines;title;2***

    Hows datel gonna fight this one..?

  • evo4x4hardcore8

    Posted Mar 23, 2010 5:55 pm GMT

    Datel had all rights to sue. They are trying to make an AFFORDABLE hard disc thing, Like the Vii. A 29.99 dollar Wii that only plays the 50 games preloaded on it. Datel needs this to keep alive. The action Replay Wii, DS, x360 and PS3 aren't going to hold them up. @fillup0, They do be dirty and @Hanzoadam- That's right about the 3rd party stuff.

  • Hanzoadam

    Posted Mar 20, 2010 11:26 am GMT

    Microsoft are redicuously money grabbing getting rid of 3rd parties so they have no other choice than xbox. Thats why I'm with playstation now

  • fillup0

    Posted Jan 30, 2010 1:14 pm GMT

    Companies like this who are giving us more value for money are being phased out by big greedy corporate fat suits like Microsoft. Sure, the SD card function allows people to download games for free, but Datel can fix that by creating a 20GB memory card. Microsoft doesn't like competition, so they play dirty.

  • vengeance00

    Posted Jan 25, 2010 10:12 am GMT

    I really hope this goes in Detel's favour. i bought the product today along with a 512mb micro SD card (still cheaper then a official memory card) and its perfect simply plug in, format it and its ready to go. for the same price as a official memory card (£30) i can get a 4gb max memory one and the 4gb is the micro SD card which i can swap out for a highest it takes which is 16gb. when Detel wins this case and microsoft undoes the patch i'll stick the 2gb card back in. also the official one should be at least 4gb for its price.

    aside from that microsoft chose the wrong way of stopping hackers by blocking high capacity memory cards, why don't they do something to detect software and files that shouldn't be on the console in the first place.

    @ Mr_arizona
    no GC third party support? i've got several memory cards and controllers for my GC that aren't official and they work fine. i don't know whats happened but the third party accessory market seems to of vanished with this generation's consoles. unless its been paid by a game developer to make game-branded items like the MW2 controllers and mics.

  • DiscGuru101

    Posted Dec 1, 2009 3:21 am GMT

    @ Mr_arizona: Resident Evil remake, and Factor 5 before they fatally aligned themselves with Sony is why I was a GC fanboy. The controller helped. Foremost, it was actually comfortable to hold for hours, unlike most other controllers to this day.

  • madSomnambulist

    Posted Dec 1, 2009 2:18 am GMT

    Dear Microsoft: Remember how things went the last time you went through an anti-trust suit over how you deliberately and forcefully shoved away any attempts at competition? That didn't really go so well. Just let them make the things since they hardly cut your bottom line. You have to give Sony the win on this since they semi-promote (or at least don't at all discourage) flash drives be used to move media files and don't at all fight people on backing up saves on them. It's very refreshing, especially considering how Sony forces their format in their other electronics.

  • LastPRmarine

    Posted Nov 30, 2009 12:59 pm GMT

    The problem was not the card itself the problem is what people were doing with it. I like the idea of cheap and huge capacity cards but people used it to put illegally downloaded games on it. I like Datel and they will win and game companies will feel it and I don't mean in a positive way

  • Mr_arizona

    Posted Nov 30, 2009 12:14 pm GMT

    @DiscGuru101
    I will agree the GC was an ok console but it lacked many of the great things PS2/Xbox had. No online, no third party support, and no dvd function.

  • The_Dragon_Born

    Posted Nov 30, 2009 8:56 am GMT

    Heck yea. I love my xbox but seriously. 50 bucks for 512 memory card? Really? really... I'm glad someone is not putting up with price gouging...

  • meateater79

    Posted Nov 30, 2009 7:42 am GMT

    I've owned a couple of Datel's peripherals before and they've performed as they should. It's gonna be pretty difficult for Microsoft to look like anything but money-grubbing. Wonder if there's research into the failure rate of third-party peripherals? Probably next to the report on the failure rate of 360s...

  • DiscGuru101

    Posted Nov 30, 2009 1:09 am GMT

    @ Mr_arizona: Honestly, the GC was underrated. It was far better than the N64 and the controller was actually very ergonomic.

  • DiscGuru101

    Posted Nov 30, 2009 12:19 am GMT

    I have never trusted 3rd party memory cards. Not since the unlicensed memory cards screwed up my PSOne anyway.

  • junglist101

    Posted Nov 29, 2009 10:00 pm GMT

    @shawn_mitchel : Or Microsoft could compete with Datel by making a cheaper and larger memory card instead of sticking it to their loyal customers by forcing them to overpay for their products. Generally these kind of moves are more out of greed rather then neccessity.

  • shawn_mitchel posted Nov 29, 2009 2:13 pm GMT (does not meet display criteria. sign in to show)

    shawn_mitchel

    Posted Nov 29, 2009 2:13 pm GMT (hide)

    Now,...i know you all want Datel to win because of various ugly acts from Microsoft.

    Ok,....Relax a bit.

    Imagine yourself as the CEO, one of the Heads or Managers of a department at Microsoft.

    Now, would you like other companies to make money from a recent product(in this case, its the Xbox 360) your company has just developed?

    Also, put in to context the fact that your company is already losing sales on DVD games sold due to piracy on the Xbox 360!

    Also put in to context the fact that you have a major competitor(in this case,its SONY PS3), and your biggest competitor's hardware isn't hacked yet and the expensive price of his disk format(empty or blank Blu ray) makes it unacttractive to pirates.

    Now, as a CEO, president, head, or manager of Microsoft or the Xbox division,....... WHAT WOULD YOU DO?

  • Mr_arizona

    Posted Nov 28, 2009 9:53 pm GMT

    Zerabp Posted Nov 28, 2009 10:39 pm CT @Mr_Arizona

    Look up Antitrust Microsoft is clearly in the wrong and will most likely lose this case handily as they are clearly doing this so they can continue to price gouge which violates our right as consumers. Why is it I get the feeling that if Sony did this you'd be singing the exact opposite tune to what you are singing?

    I'm not a fanboy if thats what you are suggesting I'm just saying if you made a product you would be mad other people are useing their products on it taking money away from you.
    If I was a fanboy it would be Nintendo cause I've had every system of theirs except Wii. I've just been very dissapointed with them after the GC.

  • Zerabp

    Posted Nov 28, 2009 8:39 pm GMT

    @Mr_Arizona

    Look up Antitrust Microsoft is clearly in the wrong and will most likely lose this case handily as they are clearly doing this so they can continue to price gouge which violates our right as consumers. Why is it I get the feeling that if Sony did this you'd be singing the exact opposite tune to what you are singing?

  • Mr_arizona

    Posted Nov 28, 2009 7:04 pm GMT

    M$ owns the rights to the 360 so they get to decide what is accessible to their consoles so although they seem to be monopolizing the 360 they have every legal right to do it.

  • MagicOneUp

    Posted Nov 28, 2009 6:47 pm GMT

    the other day when i was looking for a memory card to transfer my save data to a new hard drive ( bought an Elite) i was looking at the MS official 512mb card for $60aud!! (for that much i can get a 12gb sd card!!!) i felt it was a rip off so i declined to give in to MS. i hoped MS will lose this court battle....

  • SanderDolphin

    Posted Nov 28, 2009 2:43 pm GMT

    Why do so many people say it was "illegal" to run this memory-unit, it isn't illegal, there's no law against it. It's against the Terms and Conditions imposed by Microsoft, but that's something entirely different.

  • route151

    Posted Nov 28, 2009 9:39 am GMT

    It goes back to the days of Gates in college. He was part of the team that did the administration switch to an electronic system. While doing this he programed his name to be in classes which were a majority of girls.

  • shimya

    Posted Nov 28, 2009 6:49 am GMT

    peripheral manufactures should be embraced not locked out. Microsoft's monopoly of storage units and hard drives really stunts the 360. The datel memory card was a very well executed idea. I hope they win and get it unlocked on consoles. It's a very good way to back up save games and content.

  • DiabloNeonX

    Posted Nov 27, 2009 9:10 pm GMT

    Microsoft really should know better, considering how many different antitrust lawsuits that they've been involved in over the years. While I get that business is business, you can't pull moves like this to squeeze out the competition. Competition has to be able to compete in some capacity. If Datel or any other competitor fails, that's on them. But, to write code that locks competitors out, that could very easily been in federal court as Microsoft trying to monopolize the 360 memory unit market.

    I see Microsoft losing this fight. They've gotten off lucky in past antitrust suits, but I see them getting punished for this one.

  • Bozwell99

    Posted Nov 27, 2009 5:45 pm GMT

    "Walker34
    Posted Nov 25, 2009 6:54 am GMT

    I just bought another 360 because it got banned. I have no clue why it got banned if it was my memory unit or what. "

    If my console got banned for 'no reason' I sure wouldn't be buying a replacement. I'd be on the phone demanding my account was unlocked. If however you're not telling the full story and you console is running a hack then you're breaking the law and get little sympathy. I'm guessing it's the latter because only a moron would go and buy a new Xbox when they hadn't done anything wrong.

  • Shinkada

    Posted Nov 27, 2009 11:41 am GMT

    I'm normally a bit of a Microsoft fanboy, admittedly, but MS has really been pissing me off as of late. Between crap like this and the new version of Windows Live Messenger being an absurd 130mb download, they're really propagating... Seemingly everything the competition has always said about them being too bulky memory-wise and too monopolistic hardware-wise.

    C'mon. Windows 7 was an awesome step away from all that, why go back on that now?

  • Yokuz1166

    Posted Nov 27, 2009 10:58 am GMT

    Good. Microsoft's "accessories" are exorbitantly priced. $160 for a 160gb hard drive? You can get a 1tb external for half that price. I hope this lawsuit is successful, not so that the plaintiff receives a monetary settlement, but that Microsoft gives us fair pricing.

  • AlphaCommando posted Nov 27, 2009 6:36 am GMT (does not meet display criteria. sign in to show)

    AlphaCommando

    Posted Nov 27, 2009 6:36 am GMT (hide)

    It seems that both Microsoft and Sony are going for the 'buy our products or you miss out' approach. I would object to it, but I understand that a business is a business. Awesome games make up for the mistakes these businesses make.

  • buft

    Posted Nov 26, 2009 9:18 pm GMT

    accesories are over priced but i cant count the number off times 3rd party peripheral's have let me down in there shoddy build quality or questionable functionality and i had wished i'd bought official, this is in no way a reflection of the datel products just an observation on my part.

  • Flint247

    Posted Nov 26, 2009 1:55 pm GMT

    I support Xbox 360 and I want one, but I do hope that Microsoft lowers its accessory prices. If this suit causes them to do so, then so be it.

  • Mattsano

    Posted Nov 26, 2009 10:29 am GMT

    I buy only Microsoft accessories personally, but I know plenty of people that use Datel's accessories on their 360's, and of course other consoles. It is very unfair for Microsoft to do this now, when people have bought these products, and will not be able to use them. I can see why Microsoft is doing this, and in my opinion they are right to do so - but not years into the consoles life, and certainly not when they won't offer a similar priced alternative. Good luck to anyone who uses these products

  • master_of_nfs

    Posted Nov 26, 2009 4:17 am GMT

    Microsoft usually try to take it so far for your own pockets these days. I mean basically sure the X360 is a popular console since its release, but caused a lot of upset for example: Charging for repairs involving the red ring of death which is basically their own fault for releasing a console that was not yet fully tested and safe to sell (No chance I'd pay $100 [£60] to get it repaired) and of course over charging for their products which have limited capabilities. Microsoft cannot afford another mistake in their systems, otherwise they may lose customers to the current leaders Sony & Nintendo with their consoles. Now I'm not just a one console fan (I have all 3 after all), I just think that Microsoft is just taking it too far just to get their pockets full of money and "claim" to be the winners of these game console wars. I wouldn't be too surprised if they actually never could produce their next console due to "bad rep". So, now we just have to see their future responses and if they fail to please the customers on Xbox Live, etc, then most likely everyone will send their consoles back to Microsoft and buy a PS3 or even a Wii.

  • jamesh-42

    Posted Nov 26, 2009 12:59 am GMT

    @Joel_Sherrouse: I'm not sure the DMCA says what you think it does. The DMCA does allow Microsoft to implement technological measures to protect their copyrighted material and makes it illegal for others to circumvent those measures, but how does that affect the case at hand?

    The blacklisting of non-Microsoft memory cards is certainly a technological measure, but what copyrighted material is it protecting? And if Datel was circumventing some technological protection measure, why didn't Microsoft just sue them? (my original question).

    And I'm not arguing that Microsoft shouldn't have any control over consoles after they are sold. For instance, they should have the right to refuse access to Xbox Live for consoles that have been modified in a way that will affect multiplayer use. But I'm at a loss how a third party memory card is going to affect that, so there is no reason for the EULA to extend to such matters. I wouldn't be surprised if the judge in the case agrees.

  • hatieshorrer posted Nov 25, 2009 11:41 pm GMT (does not meet display criteria. sign in to show)

    hatieshorrer

    Posted Nov 25, 2009 11:41 pm GMT (hide)

    Suddenly a lot of people are complaining that Datel should win. I also think that MS is over charging for X360 accessories (especially data storage) on its console but I think thats unrelated and what Datel did is still illegal. Let me put it this way to you.

    If you buy a third party data storage device and it destroys your X360 what would you do. You cant go to MS who told you not to buy unlicensed products for your X360 and the third party company will probably tell you its not their problem.

  • Joel_Sherrouse

    Posted Nov 25, 2009 10:46 pm GMT

    @jamesh-42 Xbox is more than the console in your living room - it's a brand and a platform. I own an Xbox console, but I don't own the Xbox brand. Microsoft has a legal right to protect the brand in any way they see fit. According to the Digital Millenium Copyright Act, Microsoft has the right to restrict the use of unauthorized software/hardware on Xbox on the grounds that Microsoft can't be sure said products are not used for unauthorized/illegal uses. Furthermore, they have a legal right to disable any unauthorized devices or ban any accounts using them according to the End User License Agreement all Xbox Live users must accept before signing in for the first time or recovering a profile to another unit (which may have unauthorized devices). If you use the Datel memory unit and never connect to Xbox Live, it will continue to work and your account will not be banned. Once you accept the EULA, you are bound by it. I agree with everyone that the memory units are overpriced and undersized. I understand that the people over at Datel feel that Microsoft is being unfair. Unfair isn't illegal though. Microsoft doesn't have a monopoly, a majority, or even a plurality of the market with games or consoles, restricting use of devices in violation of an EULA is not anti-competitive, and the DMCA gives hardware and software manufacturers a great deal of freedom regarding the restrictions they can place on their products. Is it unfair? Yes. Is it illegal? No.

  • green_dominator

    Posted Nov 25, 2009 9:19 pm GMT

    I'm a big XBOX supporter but honestly I hope Datel wins their suit, It's wrong, unfair and in some cases unlawful to hold a monopoly on anything.....
    If MS just sold their memory units and hard drives cheaper things wouldn't have gotten this far......
    I mean come on, 60 gb for $100.00 is asking quite a bit.....
    Especially when I can get 500 gb for less than $100.00 in some places.........

  • acsam12304

    Posted Nov 25, 2009 8:52 pm GMT

    i hope M$ gets it bad. its stupid for M$ to pass the update.

  • ClaTheNinja

    Posted Nov 25, 2009 3:42 pm GMT

    @W1ckedGo0se

    I'm not saying I don't understand why Microsoft is doing this from a business standpoint. And yes, it's a cheap low blow on their behalf that should be looked down upon. But I don't understand how it can be illegal to restrict what can and can't work on YOUR OWN product.

    If you can say this memory-unit lockout monopolizes Datel and others and should be legally punished, then what's to stop you from saying that anti-piracy measures monopolize hackers and those who sell modding services, tools, and pirated games. Should Microsoft also not be allowed to stop them too?

  • pukemon

    Posted Nov 25, 2009 3:28 pm GMT

    the other side effect of this is all the peeps who go out and buy another console gives microsoft number bragging power. for shame for shame.

  • Timstuff

    Posted Nov 25, 2009 3:02 pm GMT

    Microsoft is gonna lose this one bad methinks, and deservedly so. They have no business telling people what brand of memory cards they can and cannot use, and I think the courts will agree.

  • Walker34

    Posted Nov 25, 2009 12:01 pm GMT

    @Pukemon

    I know. Why do you think i'm upset? I just posted that because it's a perfect example of what MS is doing. I have 90 days to return this pile of crap i don't even like anymore and I honestly don't want to give them another cent. But this is exactly what MS is doing. They are trying to boost holiday sales, and milk every last cent they can out of people. You wonder why we are in this cycle when companies like MS pull this kind of stuff. This has nothing to do with Piracy or what MS will have you believe.

  • LosDaddie posted Nov 25, 2009 5:34 am GMT (does not meet display criteria. sign in to show)

    LosDaddie

    Posted Nov 25, 2009 5:34 am GMT (hide)

    MS should win this lawsuit easily

  • Blue-Sky

    Posted Nov 25, 2009 4:32 am GMT

    We don't license our systems, we buy and own them. So the analogy about "forcing owners to buy only a certain brand of tires" fits the bill perfectly. I hope MS loses.

  • jamesh-42

    Posted Nov 25, 2009 3:47 am GMT

    @Joel_Sherrouse: I'd think most Xbox owners would think that they own their console rather than Microsoft.

    As for accessories having to be licensed, if that was the case wouldn't Microsoft have just sued Datel and forced them to pay a royalty on the product? The fact that they used technical means to lock out competitors would seem to indicate that they don't have a legal standing, and the fact that it wasn't just an unintentional incompatibility probably breaches the competition laws of many countries.

  • skrat_01

    Posted Nov 25, 2009 2:59 am GMT

    MS are accessory pigs when it comes to the 360. This is logical, and I sure as hell hope they fail miserably.

  • pukemon

    Posted Nov 25, 2009 2:45 am GMT

    Walker34

    Posted Nov 24, 2009 10:54 pm PT

    I just bought another 360 because it got banned. I have no clue why it got banned if it was my memory unit or what. So if i plug my 3rd party charge kit to charge my controller am i going to get this console banned too? This is ridiculous. MS should have their balls cut off imo(which they don't have anyways) and I hope Datel wins that lawsuit.


    This is the equivalent of the supermarket disabling my oven because i didn't buy their brand of pizza. It was at best buy. It was cheaper. Why would i buy ms's overpriced pile of doodoo? Now i have gone out and bought another 360 because they suck and I have no recourse?

    not singling you out walker, but you my friend did exactly what microsoft wanted.

  • Joel_Sherrouse

    Posted Nov 25, 2009 2:37 am GMT

    First off, I know Microsoft charges WAY too much for accessories. That being said, Microsoft owns the Xbox. Console sales are not the revenue stream for the industry. Licenses are. Console makers risk uncanny amounts of money in R&D, production, and marketing of their devices, and often sell them at a loss. The "products" that console makers sell are a platform (console) from which to launch other products and a market (console owners). Their customers aren't gamers, but developers of games and accessories. It's analogous to a land developer renting space (platform) to a restaurant across from a large apartment complex (market) that was built by the same developer. If a manufacturer wants to put something on Microsoft's console, Microsoft has the right to ask for a cut (rent). Microsoft occasionally reduces or outright eliminates the licensing fees on certain products in order to have a title released exclusively on MS owned platforms to entice more customers to buy their product over the competition to increase installed base. As it is, it wasn't until several years into the lifespan of their SECOND console that the Xbox division even turned a profit. These ideas keep console prices low enough for large numbers of consumers to adopt the platform, lowering the risk in game and accessory development. If Datel wins this suit, the precedent could seriously hurt the entire console market.

  • imprezawrx500

    Posted Nov 25, 2009 2:04 am GMT

    hope they win, ms needs some accessories competition to bring those prices down.

  • Darth_Slayer

    Posted Nov 25, 2009 1:27 am GMT

    Says the one who spent $599 on a PS3. People in glass houses shouldn't throw stones.

  • Normaral85

    Posted Nov 25, 2009 1:25 am GMT

    No no, I WANT to pay more for things and I don't want a cheap alternative. Please don't give me a way to save money in this struggling economy. Pleasse don't. XboxFanboys are extreme clowns when then try to defend M$ in these situations. Just goes to show that M$ targeted the right consumers to bone. They seem to enjoy it, they just blindly support them no matter what.

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