Judge Won't Dismiss Antitrust Charges Against Microsoft For Breaking 3rd Party Xbox Memory Cards

from the ruh-roh-microsoft dept

Fri, Apr 30th 2010 7:39pm — Mike Masnick

You may remember back in October of last year that Microsoft publicly warned Xbox users who were using 3rd party memory cards for their Xbox that it was about to break those cards, and that users should, instead, transfer data to Microsoft's own cards. Datel, a maker of third party cards apparently sued Microsoft, claiming antitrust violations in this move, and Eric Goldman points us to the news that a magistrate judge has rejected Microsoft's request to dismiss most parts of the lawsuit. Microsoft argued that there was no antitrust violation because Xbox buyers bought the box knowing they could only buy aftermarket parts from Microsoft. Datel responded by pointing out that the warranty that made that point was only presented to the buyer after they opened the box and "therefore, a consumer could not have knowingly and voluntarily accepted it prior to purchase." After looking at a few other factors, the judge refused to dismiss the claim, noting that "shopping for competing products in the Aftermarket is not clearly precluded by any contractual provision into which customers knowingly and voluntarily entered." Datel did lose on a separate complaint, though it can amend and refile. Either way, this is good news for the aftermarket business, and it seems likely that there will be a full trial that looks at this issue.

Oh, and we should note that Microsoft just recently decided to target the very same Datel in a patent infringement lawsuit. Gee, I wonder why they picked Datel... Must be part of Microsoft's belief in showing how "important [a] role IP plays in ensuring a healthy and vibrant IT ecosystem." That, or the belief in punishing companies who sue you for antitrust with more legal fees.

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Filed Under: 3rd party, antitrust, memory cards, xbox
Companies: datel, microsoft

55 Comments

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Anonymous Coward, 30 Apr 2010 @ 8:09pm

"Oh, and we should note that Microsoft just recently decided to target the very same Datel in a patent infringement lawsuit."

Wow, way to promote the progress. The founders of the constitution must be proud, their clause that IP should only be used to "promote the progress" is flawlessly being met.
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Haresh, 30 Apr 2010 @ 8:43pm

Yes! It's plainly simple. The lack of expressed desire by the consumers to agree to Microsoft's terms make the alleged legal obligation claimed by Microsoft void.
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- Any Mouse, 1 May 2010 @ 8:25pm
  
  Re:
  What the hell are you babbling about? Sheesh. Tell you what, go to a restaurant and purchase a meal. You've already started to eat when the bill is delivered that states that since you ate there, your box of Twinkies at home can no longer be eaten. Indeed, you go home and they've destroyed your Twinkies, and any time you try to buy more, they destroy those, too. You didn't know you were agreeing to that when you bought your dinner, but since you ate there, they now get to do this to you. It's your own fault.
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  - Mikael (profile), 2 May 2010 @ 1:08pm
    
    Re: Re:
    @Any Mouse,...That is the most fail example I've seen so far. Lets fix it shall we. They would have NO right to come to your home and do that if you had no prior knowledge of it and gave no consent. Now what you said would only be true if say, on the menu it said by eating the food served here you agree to forfeit said box of twinkies, and all future boxes thereafter. At that point all you would have to do is eat the food and they would be able to do what you stated.
    
    If it is not disclosed to the consumer prior to accepting goods/services, then they have no right to hold you to it as you did not agree to anything prior to purchase. Why do you think hospitals require all of their paperwork to be signed before they do anything? Consent/agreement must be given before hand. Had the Xbox360 box had something like "Only compatible with Microsoft branded memory cards", then that would be a different story. The thing here though is that the consumer does not know that until AFTER they have paid for the product and opened the box.
    
    Someone said you can just return it if you don't like the terms, but that's not entirely true. I have gone to some stores that will NOT let you return even the system if it has been opened.
    
    Regarding the comment someone made about Sony & the PS3, you gave permission to add/remove features when you agreed to the Playstation Network TOS. You can own the system and choose not to agree to the PSN TOS, but there is a lot you will end up not being able to do with your system. No free online gaming, system updates, game data updates, trophies, and anything else you have to use the PSN for. The part about removing the OtherOS function starting legal issues is because a lot of people bought the system just for that. It said right on the box that it was a feature of the system. I installed linux on it, but never really got it running right and just didn't feel like messing with it, so it wasn't a big deal to me.
    
    For the most part I will buy 3rd party accessories over 1st party since they tend to cost less and offer more. That sort of thing is what should drive Microsoft to make what they have better so people would WANT to buy their stuff instead of 3rd party. Forcing them to do so only makes them look worse than they already do.
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BearGriz72 (profile), 30 Apr 2010 @ 9:40pm

Sony & PS3 Next?
I Hope...
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- NixleRep (profile), 1 May 2010 @ 12:23pm
  
  Re: Sony & PS3 Next?
  Why Sony and Ps3??
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- Spectere (profile), 1 May 2010 @ 1:09pm
  
  Re: Sony & PS3 Next?
  Why? The PS3 doesn't use proprietary storage media and memory formats, unlike the Xbox 360 (unless you use a USB memory stick as a memory card, you must use overpriced Microsoft memory cards and hard drives if you don't want to get locked out of them) and the Wii (you cannot upgrade the tiny internal storage at all, though you can use standard SD cards to store some things).
  
  The PS3 also allows you to use standard Bluetooth and USB headsets, something that the Xbox 360 and the Wii don't allow. Their controllers are also standard Bluetooth devices
  
  If you're referring to a lawsuit related to the removal of the Other OS option, that's already on the books.
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bob, 30 Apr 2010 @ 10:10pm

The Constitution and The Founding Fathers
To anon cowards and the rest of the USA.

Our founding fathers would not be pleased with any of the things that have been done with regard to the role of the federal government in the daily affairs of us all.

Read The Declaration of Independence, The US Constitution, and The Federalist Papers.
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- tracker1 (profile), 1 May 2010 @ 7:04am
  
  Re: The Constitution and The Founding Fathers
  For that matter, read the Articles of Confederation... Which had most of what was in the Bill of Rights already, and gives a lot of insight into the original intentions of the founding fathers by looking at the Constitution and AoC in comparison. Both of which are far closer to each other than modern interpretations of law.
  [ link to this | view in chronology ]
- Rekrul, 1 May 2010 @ 9:16am
  
  Re: The Constitution and The Founding Fathers
  To anon cowards and the rest of the USA.
  
  Our founding fathers would not be pleased with any of the things that have been done with regard to the role of the federal government in the daily affairs of us all.
  
  Perhaps you should read this page;
  
  http://en.wikipedia.org/wiki/Sarcasm
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fuzzmanmatt (profile), 30 Apr 2010 @ 10:42pm

Magnuson-Moss
Wouldn't this kind of thing already be covered under the Magnuson-Moss Warranty Act?
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- Niall (profile), 3 May 2010 @ 4:54am
  
  Re: Magnuson-Moss
  Quoting Wikipedia:
  
  "Warrantors cannot require that only branded parts be used with the product in order to retain the warranty.[2] This is commonly referred to as the "tie-in sales" provisions[3], and is frequently mentioned in the context of third-party computer parts, such as memory and hard drives."
  
  Although that is for warranty purposes, rather than some sort of condition of sale/use. So I'm not sure if that law would cover this issue specifically. If it doesn't, there are bound to be ones that do though.
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Sam Kearns (profile), 30 Apr 2010 @ 10:43pm

The way that this is playing out, with MS counter suing over an IP claim when sued by Datel for monopolist behaviour, is an excellant example of how heavily-protectionist IP laws can make criminals of everyone when they are just trying to get on with life/business.

IP law is an easy way for big IP stakeholders to turn ordinary people and businesses into a criminals so they can be easily silenced and intimidated.
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Michael Lockyear, 1 May 2010 @ 12:40am

Unless the consumer is prepared to stop buying products from companies that mess them around, this sort of thing will continue to happen. The courts and the law are not the solution.
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- Anonymous Coward, 1 May 2010 @ 2:27am
  
  Re:
  I think massive aggressive protests are the solution. Everyone should protest their state capital.
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  - Anonymous Coward, 1 May 2010 @ 12:08pm
    
    Re: Re:
    I can't tell if you are joking about the protests.
    
    Seriously, if you talk to 10 very politically minded people, how many of them can you even get mildly upset at patent/copyright law?
    
    I'm talking about people who go to protests. Protests aren't the answer. We just need a way to stop lobbyists from getting Congress to block progress for profit.
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    - Anonymous Coward, 1 May 2010 @ 2:59pm
      
      Re: Re: Re:
      Well, then think of a way to do that that doesn't involve protests. The USTR basically ignores the public and does what it wants. Votes seem meaningless. What else should we do? Any ideas?
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    - Michael Lockyear, 2 May 2010 @ 1:59am
      
      Re: Re: Re:
      Vote with your wallet. If someone sells you a product that is defective by design, return it. If someone sells you a product and then yanks functionality with a firmware "upgrade", return it.
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      - Dan (profile), 2 May 2010 @ 8:13am
        
        Re: Re: Re: Re:
        That's why there's a no return policy on software. Everyone would. The policy will spread to hardware I'll bet. But, I do agree with you. These products won't change unless they are ignored.
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- bigpicture, 1 May 2010 @ 8:17am
  
  Re: Solution?
  The courts and the law is the ONLY solution when properly applied. The founding fathers were well aware of this issue when they set up the checks and balances. They knew about "Power corrupts, absolute power corrupts absolutely" a 2000 year old quote. That principle applies to Governments and Businesses. Control of information as well as trickery and deception is all part of power. It would be nice if we could TRUST big business, but we can't, because business is never about the customer it is always about profit and greed. Example: the bank fiasco.
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  - Anonymous Coward, 1 May 2010 @ 9:14am
    
    Re: Re: Solution?
    "The courts and the law is the ONLY solution ... They knew about "Power corrupts, absolute power corrupts absolutely"
    
    Yet a judge practically gets absolute power to make whatever decision s/he wishes to make with no accountability to the people whatsoever.
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    - Anonymous Coward, 3 May 2010 @ 5:40am
      
      Re: Re: Re: Solution?
      Jury trial.
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- senshikaze (profile), 2 May 2010 @ 11:23am
  
  Re:
  i agree.
  now get people to do that.
  not easy, huh?
  Most people A): don't care, or B): do care, already switched, and are treated like pariah's in normal society, which doesn't encourage anyone else to switch.
  
  fun huh?
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ITrush, 1 May 2010 @ 4:04am

Hmm, I don't they can stop these things from happening..
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- Anonymous Coward, 1 May 2010 @ 5:09am
  
  Re:
  Huge fines for attempting to abuse our legal system would put a stop to it. Treble damages.
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- Anonymous Coward, 1 May 2010 @ 10:45am
  
  Re:
  You accidentally a word.
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  - slander (profile), 1 May 2010 @ 1:34pm
    
    Re: Re:
    No he didn't -- it's all there. ACs don't recognize when they see it, or even have any idea about the concept of ing for themselves.
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    - nasch (profile), 3 May 2010 @ 12:42pm
      
      Re: Re: Re:
      I don't they can stop these things from happening.
      
      That sentence no verb. Your brain probably filled it in for you, or maybe changed "don't" to "doubt".
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      - slander (profile), 5 May 2010 @ 2:26pm
        
        Re: Re: Re: Re:
        Whoosh...
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        nasch (profile), 5 May 2010 @ 3:50pm
        
        Re: Re: Re: Re: Re:
        Yep, too subtle for me. :-)
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rebrad (profile), 1 May 2010 @ 5:24am

Apple???
How does Apple get away with this crap. I'm sure there are more iPads and iWhatevers out there and the owners have very little personal control content manipulation. So tell me where Microsoft has done anything different than what Apple does everyday?
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- Dan (profile), 1 May 2010 @ 7:31am
  
  Re: Apple???
  The difference is that Microsoft (and Sony) are removing capabilities that were already there. There is going to be major consumer backlash over that kind of crap.
  
  I'm not an Apple customer. If they are giving features and taking them away with a software update, let us know.
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abc gum, 1 May 2010 @ 5:46am

Cue the Apologist Coward with some inane retort about the lack of facts and that there must be more to this story.
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x00x (profile), 1 May 2010 @ 6:51am

It is sad, frightening to see how nothing at all has changed
in Redmond.
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PRM, 1 May 2010 @ 8:08am

Fuck em..
We are the consumers we will get what we want eventually... like me !

I dont play microshafts games.. I will not Pay 200+ dollars for windows 7 (Thank you pirate bay!) I will download my Xbox Games, I have hacked my xbox and several of my friends boxes so we can torrent games watch burnt divx movies etc... Like i said I got what i want... and dont forget several years ago Microsoft pissed off the live community on the regular xbox so here comes XBOX Connect! Keep fucking around microsoft a couple changes to my HOSTS file and Xbox360 connect is right around the corner assclowns.
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- senshikaze (profile), 2 May 2010 @ 11:26am
  
  Re: Fuck em..
  wait, you won't buy their products, but you will pirate them? doesn't just accomplish the same thing? your $200 bucks is useless to them. your usage stat, on the other hand, is worth something. if you really want to be a rebel, why not use something that doesn't make it look like Ms has you by the ballsack?
  
  besides, wasn't it bill gates that said he would rather people pirate windows than buy the competition?
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Corporate lobbyist, 1 May 2010 @ 8:16am

"In an economic study commissioned for eSay, the research of Frontier Economics similarly concluded that buyers in the UK, Germany and France can obtain savings of approximatelr 17% for a range of new products by purchasing on eSay rather than in an omine store."

http://www.whitehouse.gov/omb/IPEC/frn_comments/ebay.pdf

Dear U.S. Government. This is not acceptable. I want my monopoly rents!!!! I will lose money if competitors are allowed to compete!!! Stop letting others compete with me.
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- Anonymous Coward, 1 May 2010 @ 8:19am
  
  Re:
  Sorry, wrong thread.
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Anonymous Coward, 1 May 2010 @ 11:57am

Doesn't every console manufacturer require a license for games and peripherals to maintain quality? The only difference is Microsoft making sure that only certified memory cards work. Apple does the same with the iPhone. Nothing new and I would suspect this has already been played out in the courts
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- Anonymous Coward, 2 May 2010 @ 1:21am
  
  Re:
  Actually, Nintendo allows for third party storage by way of sd cards for wii/Dsi and so does Sony with the ps3 line(among other forms of storage the ps3 allows)
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  - Chronno S. Trigger (profile), 3 May 2010 @ 9:04am
    
    Re: Re:
    Actually, The Xbox 360 allows for third party USB drives to be used. Which begs the question; why are they suing?
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- nasch (profile), 3 May 2010 @ 12:46pm
  
  Re:
  The only difference is Microsoft making sure that only certified memory cards work.
  
  They're making sure that only Microsoft memory cards work, or at least that's my understanding. Either one is extracting monopoly rents, but they're not the same.
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NAMELESS.ONE, 1 May 2010 @ 2:03pm

the big question then becomes
if the ipad and ipod were in a bax and you ant see the warranty upfront then by the way things look thats void as well so you can legally jailbreak it and you can legally make apps for them without and should not get any penalty either as otherwise that too wold be an anti trust violation , at least in the opinion of this company suing MS.

AND if your founding fathers were soooo smart then why they set u all up to be such slaves to corporations?

haha me thinks the booze was in , on tha day and for a laugh they decided how they could best fuck the next gen form gaining too much power cause this system is also doomed to fail.

3 trillion debt and counting GO USA
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- senshikaze (profile), 2 May 2010 @ 11:29am
  
  Re: the big question then becomes
  isn't the us debt closer to 13 trillion?
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- NixleRep, 2 May 2010 @ 12:22pm
  
  Re: the big question then becomes
  Founding fathers didn't set America up to be slaves. They give the printing power of our currency to Congress and provided three branches of government to balance power. The historical struggle of this country is focused squarely on the attempts made by patriots to protect these constitutional provisions. The founding fathers didn't create The Federal Reserve nor did they invent the Executive Order.
  
  Our debt is at 13 trillion and will reach 100% of our GDP by 2020, which is the definition of bankruptcy.
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  - nasch (profile), 3 May 2010 @ 12:50pm
    
    Re: Re: the big question then becomes
    Our debt is at 13 trillion and will reach 100% of our GDP by 2020, which is the definition of bankruptcy.
    
    "Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors," not debts being greater than annual income. I'm not sure there's any court where the US could declare bankruptcy; they would just unilaterally default on loans if they were unable to pay.
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Anonymous Coward, 2 May 2010 @ 6:16am

Vote with your wallet?

So someone disables functionality of a product you've owned way past the life of the warranty and you're just supposed to return it? All the games? All the accessories?

Who do you return it to? Are the stores going to accept 2 year old games back for a full refund? Are you just going to toss it all in a box and ship it back to Microsoft?
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peace sells but whose buyin, 2 May 2010 @ 8:59am

@33
i am beginning to think morons like you are so lazy thats all you can come up wiht and that attitude fails cause OW what else will we buy think ISP offerings to see how MORONIC that ide abecame as hollywood bought up allied with or had laws made tha screwed your ability for that forever

the ONLY SOLUTION IS BECOMING VIOLENT
NO ONE IS LISTENING

the first step will be protests and buy looks a that
( congressmen got arrested yesterday for siting in front of the white house peacefully )

peace wont work
we gave peace a chance
IT HAS FAILED

time shall tell how bad it gets how bad things do go and if bad enough watch as reservists are forced like th 60's to again step up and shoot at there own citizens and again i say
what is the difference between obama , bush and NIXON
i'll tell you since Nixon they have changed the laws enough that what nixon did isn't even illegal

IMAGINE THAT
better revert to some for a democracy and start fraking listening to people
and its also the first time ive seen the church in years in the USA do anything meaningful
( a cardinal was in the march - imagine if he got arrested the shit that would start )
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- nasch (profile), 3 May 2010 @ 12:51pm
  
  Re: @33
  NO ONE IS LISTENING
  
  What a surprise.
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Freedom, 2 May 2010 @ 10:06am

Wrong focus...
This is a bit sad for me. I really like Microsoft, but seeing lawsuits like this indicates that they are focusing on the wrong things.

All their energy right now should be focused on winning back the phone market and the new tablet market, becoming a major online presence, and keeping their server side products as kick a** as possible (because despite the cloud movement, there will always be those that want to keep data on closed servers that they fully control).

Wasting time over a memory card maker - I frankly just don't get. Maybe there is a bigger picture here, but on the surface it just seems like busy work for the legal department. Or put another way, they are wasting time/money on a small cut and ignoring the real cancer that will surely kill them.
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Captain Merrill Stubing, 2 May 2010 @ 2:11pm

The problem is that the lawyers run the cruises with the vendors now, and the admission price is higher.

http://www.techdirt.com/articles/20100127/2056137950.shtml
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jilocasin (profile), 3 May 2010 @ 9:17am

Why are computers and electronics so special?
Perhaps I'm just getting old, but I don't get it.

Why are computer/software/electronics firms allowed to get away with things that people would never stand for in another sector?

To use the woefully overused automobile comparison;

If Ford required that you could only use Ford authorized auto parts, Ford gasoline, Ford air fresheners, in your Ford car, no one would be surprised at the lawsuits flying fast and free. Most everyone would expect Ford to loose and loose big.

If Apple does it with iPods and iPads, and iPhones people come out of the woodwork to defend Apple. When Microsoft does it (such is the subject of this thread), we hear the same sort of mush mouth responses.

Consumers are told that if they don't like it they should stop buying products from that company. That the Company has the God given right to lock anyone out of their walled garden that they want.

Autos vs. Electronics
Forced to use dealer parts? No Yes
Forced to use dealer store? No Yes
Have existing features removed? No Yes
Break existing compatibility? No Yes

There is nothing magical about computers or electronics that we should be allowing companies to engage in such heinous behavior. Just because it's easier to do with computers and electronics is no reason that consumers should be forced to put up with it.

Just as it would be silly for someone to tell you the solution to Ford not allowing you to use a non Ford tire on your car is to stop buying Fords, it's equally unhelpful to say that the solution to Microsoft not allowing you to use non Microsoft memory cards in your XBox360 is to not buy an XBox360.

Perhaps I'm just getting old, but why does this piece of seeming 'common sense' just seem terribly uncommon?
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hegemon13, 3 May 2010 @ 12:19pm

And this differs from Apple how?
I agree with the judge 100%. This seems to be a clear example of anti-competitive behavior, and I hope MS gets hit hard for it.

What I don't understand is why Apple is allowed to follow this exact same business model without a second glance. In fact, fanboys will line up screaming to defend Apple for "protecting the customer experience" for doing EXACTLY what MS is being sued for.

At least the DOJ and FTC are waking up with their latest, flaunting, blatant, look-at-us-while-we-screw-the-competition, anti-competitive developer license agreement. Let's hope the probe amounts to something.
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- nasch (profile), 3 May 2010 @ 12:56pm
  
  Re: And this differs from Apple how?
  Are they, though? They're pretty tyrannical about software all right, but I don't recall any stories about Apple forbidding third-party accessories. As far as memory specifically, my understanding is their portable products just aren't expandable at all, so there's no issue there.
  
  Is there a warranty clause that says your warranty is voided if you use non-Apple stuff with your Apple stuff? Note that I'm not including voiding your warranty by opening something up *in order to* install an accessory - just the opening voids the warranty and that's a separate issue.
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Anonymous Coward, 8 Sep 2010 @ 5:01pm

Microsoft is an evil,corrupt company.

Download Linux Mint - its a better Operating System than Vista and its free.
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