In Xbox case, Microsoft cites Apple's win over Psystar

Microsoft Corp. last week cited a 2008 legal victory by rival Apple Inc. as it asked a federal court to toss out antitrust claims brought by a company that sells Xbox 360 accessories armed with video game cheats.

As first reported by TechFlash, Microsoft on Friday asked U.S. Magistrate Judge Elizabeth Laporte to dismiss the antitrust lawsuit filed in November 2009 by Datel Design & Development Ltd. Staffordshire, England-based Datel makes what it calls “video game enhancement products;” Microsoft calls them “cheating systems.”

Datel's lawsuit accused Microsoft of violating federal antitrust laws by requiring Xbox owners to download an October update that disabled unauthorized third-party memory cards or game controllers, such as 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 said.

Microsoft denied it has a monopoly in the video game market — it competes with Sony, Nintendo and others — and argued that antitrust laws don't apply to a single-brand aftermarket like the Xbox as long as customers knew, or agreed in advance, that they would be able to buy accessories only from the company that made the original product.

Those were some of the same arguments that Apple used to respond to antitrust allegations in 2008, when Florida clone maker Psystar Corp.'s lawsuit accused Apple of owning a monopoly in the single-brand Mac market. In that case, U.S. District Court Judge William Alsup dismissed Psystar's charges.

Apple's victory prompted Microsoft to cite its rival's legal shrewdness.

“Psystar alleged that Apple had 'erected technical barriers that prevent Mac OS from operating on non-Apple computers' (like Datel's claims that Microsoft has placed technical limits on the use of memory cards and controllers with the Xbox 360),” said Microsoft's motion. But Microsoft was free to do so, its lawyers claimed, because Xbox 360 owners “knowingly and voluntarily gave Microsoft the right to prohibit the use of unauthorized accessories” when they agreed to the console's software licensing agreement “that the Xbox 360 software can be used only with Microsoft authorized accessories.”

Apple's case was spot on, Microsoft argued. “Judge Alsup granted Apple's motion to dismiss all of Psystar's antitrust claims, holding that Psystar had failed to plead a plausible aftermarket claim because through 'its End User License Agreement and other means, Apple specifically restricts the use of Mac OS to Apple-labeled computer hardware systems' and '[c]ustomers, therefore, knowingly agree to the challenged restraint,'” Microsoft's motion continued.

Although Alsup's decision in November 2008 to dismiss Psystar's antitrust claim did not end Psystar's legal battle with Apple, it was the first serious blow suffered by the clone maker. Psystar later tried to resurrect its countersuit while fending off Apple's original lawsuit, but eventually lost on all counts when Alsup granted summary judgment to Apple and slapped an injunction on Psystar that blocks it from selling clones equipped with Mac OS X.

To comply with the injunction, Psystar stopped selling systems and software before the first of the year; the only item it now sells on its Web site is a $15 T-shirt.

Laporte will hold a hearing on Microsoft's motion to dismiss on March 2.