Judge tosses Microsoft's 'Psystar' antitrust defense

Court order rejects all but one of Microsoft's motions to dismiss charges in Xbox case

A federal judge last Friday denied all but one of Microsoft 's motions to toss out antitrust claims brought by a company that sells Xbox 360 accessories armed with video game cheats.

In her order, U.S. Magistrate Judge Elizabeth Laporte also quashed Microsoft's attempt to tie Apple 's legal victory over a Mac clone maker to its battle against Staffordshire, England-based Datel Design & Development Ltd.

Laporte granted just one of the six requests Microsoft made in last January when the company's lawyers asked her to dismiss multiple antitrust allegations by Datel. The maker of video game memory boards and controllers first filed antitrust charges against Microsoft in November 2009.

"We're gratified that the case will proceed and Datel looks forward to reestablishing the benefits of competition in the accessory market for all Xbox 360 users," said Daniel Asimow, an attorney with San Francisco-based Howard Rice, the law firm representing Datel.

Datel's lawsuit accused Microsoft of violating federal and state antitrust and unfair business practice laws by requiring Xbox owners to download an October 2009 update that disabled unauthorized third-party memory cards or game controllers, like the ones made by Datel. "Microsoft's... upgrade is... intended to foreclose competition from Datel in the sale of other aftermarket Xbox accessories and add-ons, including gamepad controllers, through the implementation of predatory technological barriers," Datel charged in November.

Laporte allowed five of Datel's six claims to proceed, knocking out only the charge that Microsoft monopolized the online gaming market with its Xbox Live.

Noting numerous precedents, including cases that have gone to the U.S. Supreme Court, Laporte rejected that claim, saying that Datel had not shown it was harmed by Xbox Live. "Plaintiff introduced its memory cards in May 2009, but alleges that Defendant dominated the market since 2006," Laporte said. "Thus, it does not appear that blocking Plaintiff's products in October 2009 was a necessary step in Defendant's alleged market dominance, which is alleged to have started much earlier."

But Laporte rejected Microsoft's attempt to compare its battle with Datel to that of Apple's with Florida Mac clone maker Psystar. In 2008, another federal judge dismissed Psystar's antitrust claims against Apple, bouncing Psystar's argument that Apple had erected technical barriers to prevent Mac OS X from running on non-Apple hardware.

Although Psystar has appealed a federal injunction that bars it from selling computers equipped with Mac OS X, it suspended sales of all its systems in early December 2009.

In her motion, Laporte rebuffed Microsoft's comparison. "The license agreement [of Microsoft] in this case was not as clear as the license [of Apple] in Psystar," Laporte said. "Thus, the reasoning in Psystar is not applicable to this case as pled."

Microsoft seemed to take Laporte's rejections in stride. "We are pleased that the court dismissed one of the claims, even at this initial stage, and look forward to addressing the remaining claims in subsequent proceedings," said Kevin Kutz, Microsoft's director of public affairs.

Asimow said Datel would proceed with the antitrust case on the basis of the five remaining antitrust charges, but added that Datel was undecided whether it would change its original complaint to reassert the charge Laporte dismissed.

Microsoft's size doesn't intimidate Datel, Asimow said when asked what he thought his client's chances of winning the case were. "That's what antitrust laws are for, to counter abusive conduct," he said. "We think we have a very strong case."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld . Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com .

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