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Microsoft asks Immersion to pay up after Sony regains rumble rights

While Immersion may have closed its books on its legal battle with Sony over the patent rights to force feedback controllers, its chapters with Microsoft on the matter are about to be reopened. Microsoft said on Monday that has filed suit against Immersion for contract breach as a result of the Immersion-Sony settlement.

"We entered into a binding licensing agreement with Immersion and are seeking to have that agreement honored," Microsoft Associate General Counsel Steve Aeschbacher said to CNET in a statement. "Microsoft licenses technology both in and out and relies on these agreements to be honored and enforced. Our request to the court is that all companies and industry partners should play by the same rules and that the binding agreement we signed with Immersion be honored."

During 2002 to 2003, Immersion was in legal battles with Microsoft and Sony over its vibrating controllers. While Sony fought and eventually lost the case (and later came to an agreement), Microsoft negotiated a royalty payment program with Immersion. As part of Microsoft’s deal, Immersion will pay Microsoft should a settlement with Sony be reached.

The lawsuit (PDF), as noted by Seattle P-I’s Microsoft blog, details Immersion’s financial commitment:

"In particular, it provides that if Immersion settles the Sony Lawsuit ... for an amount up to $100,000,000, Immersion shall pay Microsoft the sum of $15,000,000. If Immersion settles the Sony Lawsuit for an amount between $100,000,000 and $150,000,000, Immersion shall pay Microsoft an additional amount equal to 25% of the amount of the settlement in excess of $100,000,000. If Immersion Settles the Sony Lawsuit for an amount in excess of $150,000,000, Immersion shall pay Microsoft an additional amount equal to 17.5% of the amount of the settlement in excess of $150,000,000."

Immersion acknowledges its agreement with Microsoft in its Form 10Q filing, but deflects any form of payment obligations:

"The Company has determined that the conclusion of its litigation with Sony Computer Entertainment does not trigger any payment obligations under its Microsoft agreements. However, in a letter sent to the Company dated May 1, 2007, Microsoft disputed the Company's position and stated that it believes the Company owes Microsoft at least $27.5 million. If Microsoft brings a lawsuit to further dispute the Company's position, the Company intends to oppose Microsoft's claims and vigorously defend the Company's position."

Immersion’s contract with Microsoft outlines a payment should a settlement be reached with Sony, which Immersion believes that it hasn’t as it terms the recent deal as a business agreement. In its annual report, Immersion did spell out to its shareholders that Microsoft could pursue legal action as a result of its agreement with Sony:

"The Company believes that it is not obligated under its agreements with Microsoft to make any payment to Microsoft relating to the conclusion of the patent litigation with Sony Computer Entertainment. However, it is uncertain that Microsoft will accept the Company's position or that the Company will ultimately prevail with its position... In the event that Microsoft were to prevail, the Company would be obligated to pay Microsoft a minimum of $15.0 million for any amounts received from Sony up to $100.0 million, plus 25% of any amounts over $100.0 million and up to $150.0 million and 17.5% of any amounts over $150.0 million."

Immersion has yet to publically respond to the Microsoft lawsuit.

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With Microsoft on this one
By FITCamaro on 6/19/2007 7:17:37 AM , Rating: 5
If Immersion signed the deal then they're obligated to pay up. Say that Microsoft is money hungry all you want but the Sony vs. Immersion case has been settled (for $97.2M in a quick search I found) so by the terms of the agreement, they owe Microsoft $15M.

Now why Microsoft says its $27M I don't know. But they definitely owe money to Microsoft. They even admit the contract exists. So why are they fighting it. They just got $97M dollars for doing nothing. They'll still have $82M afterwards. Plus the twenty something million they're getting as royalties for the next few years from Sony. Plus the money that Microsoft paid them.

In a side note, does Immersion actually make any products? Or are they just another company that managed to get some patents and sues anyone they can that develops something that uses it. Until this case I've never heard of them and force feedback has been around for years. Are they suing Logitech as well? Does Logitech pay royalties to them? How about Nintendo? The N64 had a rumble pack.

RE: With Microsoft on this one
By CyborgTMT on 6/19/2007 7:46:33 AM , Rating: 2
Yes Immersion makes products. Their force feedback system is used in many things beyond gaming such as medical, industrial, and robotic industries. Immersion has been around since 1993 and has been working in the gaming segment since 1995.

RE: With Microsoft on this one
By AvidDailyTechie on 6/19/2007 9:28:04 PM , Rating: 1
Sorry, but I missed the page that listed Immersion products. I see they license things out, but as far as PC products go, I can't find a product.

Ok, so they license the tech. out... I guess that's a step above sitting on patents... isn't it?

RE: With Microsoft on this one
By Microsapper on 6/20/07, Rating: -1
RE: With Microsoft on this one
By ZeeStorm on 6/19/07, Rating: 0
RE: With Microsoft on this one
By GreenEnvt on 6/19/2007 8:28:07 AM , Rating: 3
Thats not the issue here, MS didn't lose a patent case, they settled/came to an agreement.

Immersion sued MS for patent infringment.
They came to an agreement where MS would pay royalties for the ability to use the technology. As part of the agreement, MS stated that if Immersion did also settle with Sony, then MS wanted money.

RE: With Microsoft on this one
By ZeeStorm on 6/19/2007 9:23:59 AM , Rating: 2
Ahh ok. That still sounds weird, that they would be required to pay MS money if they settled with Sony. Thanks for the clarification :) Just hope I wasn't the only one confused o.O

RE: With Microsoft on this one
By 9nails on 6/19/2007 10:13:06 AM , Rating: 2
It absolutly sounds weird and I'm also confused. My only speculation is that Immerson sued Sony for an amount less than what the full license fee would cost. I'm guessing the sued for a practical amount that could legally be argued and possibly win. Microsoft essentially is saying that if the court rules and Sony can pay less than a full license fee for the same technology then so should Mocrosoft also have that right, therefore should realize a rebate from Immerson.

That's just my opinion...

RE: With Microsoft on this one
By LogicallyGenius on 6/19/07, Rating: -1
RE: With Microsoft on this one
By mars777 on 6/20/2007 6:11:27 PM , Rating: 2
Every corporation wants this.

RE: With Microsoft on this one
By Proteusza on 6/19/2007 8:20:56 AM , Rating: 3
So why are they fighting it. They just got $97M dollars for doing nothing. They'll still have $82M afterwards.

Why? Because they are greedy, thats why. Its quite simply, they want to dodge their contract with Microsoft.

They want to keep the $27 million for themselves. However, I dont that is an option in this case, they owe MS the money, they must pay up.

Its not like MS really needs the money, but they negotiated that contract pretty well.

By psychobriggsy on 6/19/2007 8:27:19 AM , Rating: 5
But the lawsuit wasn't settled, the article says: "if Immersion settles the Sony Lawsuit"

Sony fought the lawsuit, lost, stopped using the technology, then came to a post-lawsuit agreement. Now it ain't black and white and it's worthwhile for Microsoft to explore whether they can redefine "settle the lawsuit" as "win the lawsuit, then later license separately", or claim that Immersion acted in bad faith because Sony didn't come to a settlement during the lawsuit but waited until afterwards.

Microsoft should have asked for a portion of revenue of future licensing fees relating to the technology - like Apple put into the agreement with Creative last year that they settled for $100m.

RE: With Microsoft on this one
By borismkv on 6/19/2007 2:45:46 PM , Rating: 3
There's an obvious problem here. How exactly does Immersion owe MS $27M, when the Sony deal resulted in less than $100M? Did the MS accounting team fail at math? The contract spells out a $15M payment for amounts up to $100M. Also, Immersion didn't get $97M for doing nothing. They patented a type of technology. The court determined that Sony infringed upon the terms of that patent, and MS settled out of court (Either knowing they had infringed or feeling that a payout was worth the trouble of lawsuit, but since Sony lost the original case they probably knew they'd screwed up), with the little caveat to try and keep Sony out of the vibrating controller market.

Now, the interesting thing is that Sony *lost* the original court case and were barred from using Immersion's technology in the future. In that case, Immersion received a $90.7M judgment for past infringement and a court ordered injunction preventing Sony from shipping any devices that broke the patent. From there, Sony went to the appeals stage of the game, trying to convince a higher court that they were in the right.

The big problem is that the contract doesn't state what it means by "Settle." Yes, this is very important. Can you settle a lawsuit when a court has already determined that one party is already in the wrong? Or does a settlement involve the defendant ever giving money voluntarily? That's a pretty big distinction that should have been spelled out in the contract. The fact of the matter is that since it apparently wasn't spelled out the way it should have been, both sides can argue that they are right and then it's up to the court to decide based on precedent or good judgment. Ultimately, this is a *failure* for either Microsoft's or Immersions contract lawyers.

RE: With Microsoft on this one
By Murst on 6/20/2007 5:16:49 PM , Rating: 2
Microsoft will most likely argue that the settlement was not only the 97.5 million, but it also included license fees which were an additional sum. So, in fact, the settlement will be above the 100 million mark. (Actually, pretty close to the sum MS is requesting).

RE: With Microsoft on this one
By Mitch101 on 6/19/2007 1:07:42 PM , Rating: 2
You know a lawyer somewhere is saying we can get Microsoft to settle for half the amount and someone is buying into it otherwise they would most likely settle. This looks pretty cut and dry to me.

This is just another case of lawyers telling clients they can do whatever they want especially where there is money to be made whether they win or lose. Lawyers still get paid.

In the real world I would like to see cases be brought against law firms and judges pass some sort of a frivilous lawsuit act of some sort that basically says if you start enough frivilous lawsuits you lose your liscense. Since attorneys have nothing to really lose its a free ride to filing more lawsuits that are un-necessary clogging up the court systems on real issues.

I know I am a bit off track now but I hope Microsoft makes an example out of this company and attorneys involved who is obviously in the greed zone.

By Cunthor666 on 6/19/2007 7:06:02 AM , Rating: 1
Another day, and another patient case...

RE: Ahhh...
By Cunthor666 on 6/19/2007 7:09:26 AM , Rating: 1
And yes, it's meant to say "patent" case... No edit button...

RE: Ahhh...
By Master Kenobi on 6/19/2007 7:12:27 AM , Rating: 2
This isn't a patent case.

This case is about Immersion signing a deal with Microsoft and Microsoft kindly adding into that agreement that they can't settle with Sony (basically denying Sony the ability to use force feedback controllers) or face a breach of contract. I think at the time Immersion did not believe Sony would come off their tower and settle. Immersion was just trying to get the money they knew they could get from Microsoft and that was enough. But of course Sony did ink a deal with Immersion and now Microsoft is whipping out their deal and saying hey, that's not what was agreed to, pay up or else.

In reality, Microsoft has this one hook line and sinker. Immersion signed the papers with Microsoft, and they know it. Microsoft can take them to court and get a nice chunk of change.

RE: Ahhh...
By FITCamaro on 6/19/2007 7:23:04 AM , Rating: 3
Thats not what the article says at all. It just says that if they do settle, Immersion has to pay Microsoft a sum of money. It says nothing about Microsoft trying to stop a settlement with Sony.

The only way your statement is correct is if by it you mean that the money Immersion would have to pay is reason for them not to settle with Sony.

Microsoft isn't saying that isn't what we agreed. They're saying "Hey, you settled. As per our agreement, you owe us this."

If theres missing information in the article, you need to add it.

RE: Ahhh...
By A5 on 6/19/2007 8:15:42 AM , Rating: 2
The only way your statement is correct is if by it you mean that the money Immersion would have to pay is reason for them not to settle with Sony.

Well, $20+ million is good motivation to not sign a deal. That said, Immersion still makes a ton of money from the Sony deal, even when you subtract the $27 million. I'm guessing they knew this when they made the deal, but they decided to try to weasel out of it to see if MS would really make them pay.

RE: Ahhh...
By PrinceGaz on 6/19/2007 9:38:50 AM , Rating: 2
Well if they thought they had any chance MS would forget about/ignore it and not go after the money, they're either foolish or naive.

RE: Ahhh...
By dubldwn on 6/19/2007 12:19:41 PM , Rating: 2
Thats not what the article says at all.

You have to read between the lines. If an agreement is reached with Sony, rumble on the 360 becomes less valuable, and for that Microsoft wants consideration. What do you think the point of the agreement was?

RE: Ahhh...
By OxBow on 6/19/2007 2:50:14 PM , Rating: 4
I don't think Sony and Immerson settled the lawsuit. Sony lost the lawsuit. For Sony to ink a new contract shouldn't affect any ongoing litigation, the whole "ex post facto" thing applies.

This isn't uncommon. Many companies that do business with each other go to court over one thing while still remaining in cohoots on other things. Microsoft said they'd settle and pay the fees as long as Immerson agreed not to settle with Sony. Immerson didn't settle, they went to court, won and now have to get Sony to pay, but that's separate from any new contracts. Microsoft didn't sign an exclusive liscense, so...

Business can make for strange bedfellows. Look at the next gen console and format war. It's ironic that Sony and Toshiba are at each others throats for BlueRay vs HDDVD while still partnering with them on the Cell, along with IBM. If Microsoft isn't putting some heavy pressure on Toshiba over the defects in the 360 media drives, I'd be suprised, in spite of the fact their close partners on HDDVD.

RE: Ahhh...
By Microsapper on 6/20/2007 3:00:45 AM , Rating: 2
The problem with the DVD drives Toshiba supplied to Microsoft, is not that they are defective or bad drives. If they are used in the way they were designated for they're fine. Which is in a horizontal configuration in a computer. The scratching comes only if the the Xbox 360 is sitting Vertical. The reason is that Microsoft put out a parts list and still even for the Elite, that has a cost requirement for the cheaper DVD player.

Consequently these DVD players are lacking the padded craddle that surrounds the Laser. Thus they can get scratched. M$ just equals CheapCr*p!

Goes for everything they make. Vista? IBM says no way and is using Linux. Plus they dropped their Licensing of any Windows products. Dell, HP, and Intel say "Just Say NO, to Vista" for their own offices!

Hyped sales numbers are inflated with OEM Key Sales. What's the true install base that actually keep it installed? Too Few for M$ to get on top of it's own Windows XP ever!

RE: Ahhh...
By Auriacan on 6/20/2007 3:31:15 PM , Rating: 2
I'm actually with Immerson on this one. The contract with Microsoft specifically indicated settling the lawsuit with Sony, which did not happen. Entering in a business deal with a company afterwards is completely separate from that suit.

And for the reason I replied here, please use the OS before you bash it. I'm not talking about installing it for an afternoon and fiddling either. Actually USE the OS for a month or so. Businesses choosing not to use Vista has nothing to do with how good the OS actually is. It's a cost VS gain scenario, and it's not worth upgrading all the workstations and software to run Vista. Just like I tell people who ask to if they should upgrade to Vista. Don't pay for the upgrade, wait till you get a new system and make sure Vista is on it.

It hinges on the definition of "settlement"
By psychobriggsy on 6/19/2007 8:18:55 AM , Rating: 2
Seems this contact dispute will be about the terms of "settlement".

I imagine that Microsoft will have to use a good faith argument as they assumed that a settlement would be any form of agreement with Sony.

Whereas this business agreement is post-lawsuit, and they'll argue that it doesn't meet the terms for a "settlement" (a one off payment to stop legal action and license the technology?) because legal action concluded and Sony stopped using the technology and thus they're past the time it could have been termed a "settlement".

By psychobriggsy on 6/19/2007 8:21:53 AM , Rating: 1
Yes. Immersion will win this one because the language clearly says "settle the lawsuit" ... the lawsuit wasn't settled.

RE: It hinges on the definition of "settlement"
By zombiexl on 6/19/2007 9:30:52 AM , Rating: 3
Did you bother to read the filing? It clearly points out how it is a settlement and how Sony and Immeresion both classified it as such when making announcemnets of the "settlement".

Sony was still under the injunction and in the middle of an appeal so the case was still open. Both which were ended as terms of the agreement. Sounds like a settlement to me.

Maybe Immersion shouldnt have agreed to such term, but they did and now they are bound to stick to those terms.

You never know what a Judge will do, but it seems pretty cut and dry.

By CyborgTMT on 6/19/2007 6:04:20 PM , Rating: 2
The problem you and others are having is the difference between the legal definition of settlement and it's common usage. In US courts a settlement is overseen by a judge and it's stipulations defined in an order of the court. This is done to ensure both parties fulfill their end of the agreement. When you hear of cases being settled out of court these are not legally binding settlements and the case before the court is dropped. In this case Immersion drops the lawsuit against Sony and everything on the litigation side ends. This means there was no settlement or decision on the case from the courts. For that matter it's as if the lawsuit was never filed to begin with.

By mahax on 6/19/2007 9:31:19 AM , Rating: 3
Doesn't anyone find it questionable how Immersion sat on it's patent for years and allowed 100M+ Playstations, Nintendos, xboxes etc. be sold using it's tech. And now, once the industry is completely dependent on the technology, they start asking for money?

Alot of patent cases seem to have similar features.. Think Rambus...

RE: Dubious
By FITCamaro on 6/19/2007 11:11:30 AM , Rating: 1
It's always questionable and I hope eventually the government will make these types of cases like those for things like employment disputes.

Companies should only be allowed 6 months to a year to file charges about a patent infringement. They shouldn't be allowed to sue for patent infringement when the infringing product has been on the market for years. Otherwise cases like this happen where a company clearly knows that their patents are being infringed on but they do nothing for years because they know that they'll be able to get more money in the long run by waiting until the product is in use and millions have been sold. And if they weren't aware of it, thats their problem. They should pay more attention.

RE: Dubious
By Lonyo on 6/19/2007 11:44:29 AM , Rating: 2
Read up on the whole thing.
THEN reply to the story.

RE: Dubious
By andrep74 on 6/19/2007 12:53:31 PM , Rating: 2
Uhh...I have a Logitech iFeel mouse that uses Immersion technology, and have had it since about 1998 or so. Logitech paid Immersion for the use of the technology.

For those of you who just don't get it, think "exclusive rights" without coming out and saying that. Microsoft knew that Sony was in a bit of a mess with Immersion, and used its stance as a major competitor to sour any deal Immersion might make with Sony. Now Immersion is trying to act in bad faith to get out of their deal with Microsoft.

As far as patent law is concerned, it's the responsibility of the _creating_ company to determine if patents are being violated. After all, there are fewer patents than there are products , so it should be easier to search for patents than for products violating a patent. (In reality the opposite is often true). The time that a company has to _file_ a lawsuit is related to the length of the patent, not some "6 months" or other silly length of time. If you had a patent and you knew of 100 different violations, you'd probably wait to file a lawsuit until one product became more significant than the others. That makes sense and it is your right, especially if you've warned the violating company and they refuse to comply with licensing. In this case the only player in rumble/force-feedback technology has been Immersion and everyone knew it.

Wow!!! Weird deal...
By oTAL on 6/19/2007 10:38:52 AM , Rating: 3
an additional amount equal to 17.5%

I believe this is in addition to the afore mentioned 25% which would make it 37.5% for amounts over 150M.
How did they get this deal??? Were the people in Immersion that desperate for a settlement with MS or underconfident in a victory over Sony? I'd like to know the rest of the details on that settlement? How much did MS pay Immersion? Who paid the legal fees on both disputes?

RE: Wow!!! Weird deal...
By zombiexl on 6/19/2007 11:12:29 AM , Rating: 2
Its not in addition to, the money is paid at a tier'd rate.

Its a multi-tier deal. Think of it somewhat like the US federal tax system except reversed because the percentage travels downward, rather than upwards.

so for 300Mil total the 150mil over the initial 150M would be paid at 17.5% + the money fromt he lower tiers of the deal.

RE: Wow!!! Weird deal...
By PrimarchLion on 6/20/2007 2:56:08 AM , Rating: 2
I'm not so sure that it is tiered. It looks like Microsoft gets 25% of everything over 100 million and then an additional 17.5% of everything over 150 million, making it 42.5% of everything over 150 million. Thats just what it looks like to me when I read the terms carefully.

Doesn't this seem...
By Goty on 6/19/2007 12:31:12 PM , Rating: 1
Doesn't this seem a little anti-competitive to anyone else? There's no basis for this kind of clause in an agreement other than to try and force Immersion to not settle with Sony in order to prevent Sony from ever using the same kind of rumble technology again. It should be interesting to see where this goes legally.

RE: Doesn't this seem...
By namechamps on 6/19/2007 9:31:20 PM , Rating: 2
I don't think so.

Maybe it worked like this. Microsoft is looking for an edge over Sony and Immersion is looking for top dollar.

Immersion goes to Microsoft and offers them a deal. Microsoft lowballs them say $20 million. Immersion wants more money so Microsoft says how about an exclusive contract. Immersion isn't willing to commit but they agree to a "de facto" exclusive since Sony is prohibited from using Immersion technology and say $50 million. If Immersion settles with Sony then Sony can use Immersion technology in future products. If Sony starts using Immersion tech then Microsoft will have wanted to pay the lower price. They write the deal to cover both options. Larger money upfront and a "rebate" is Sony gets Immersion technology.

It really is a win win for both sides.

If Sony never settles with Immersion then Immersion gets more $$$ and Microsoft has a "tech" that Sony doesn't have.

If Sony does settle then Microsoft's deal with Immersion isn't worth the price they paid so at least they get some money back. Immersion knows they will lose some revenue but they gain the money from the settlement plus future revenue from Sony.

What it looks like happened is Immersion wants both sides of the deal. They want the high priced deal with Microsoft. They want to license tech to both sides and they don't want to pay the penalty. Essentially they want a free ride to the bank. Guess they figure they have a shot at winning in court. Worst case scenario they have to pay Microsoft which is what they had to do if they didn't dodge the deal.

RE: Doesn't this seem...
By Goty on 6/20/2007 10:25:11 PM , Rating: 2

Maybe a slightly more logical way of looking at it.

RE: Doesn't this seem...
By CyborgTMT on 6/21/07, Rating: 0
immersion is the bad guy
By kevinkreiser on 6/20/2007 1:10:39 PM , Rating: 4
vote me down i dont care, this is just my opinion in dealing with them.

i worked for a small surgical software developement company based out of PA, and i have directly delt with immersion before. you don't have to take my word for it, but immersion is one of the most slippery backhanded organizations i can think of. their products are way over priced from whats in them, they have patents on everything from the wheel to rubbing two sticks together to make fire. they won't work with anyone unless you pay them an exuberant amount of money or you hold some patent they want to get their hands on. they have horrible support and their devices are shoddy. its like they own so many patents that if anyone even tries to be innovative and improve upon one of "their" ideas, they sue the pants off off of you. ridiculous.

the end cost?
By Jerricho24 on 6/23/2007 11:55:30 AM , Rating: 2
will be past on to the end user, that being you and me.

Its all in the fine print
By richfox305 on 6/23/2007 5:17:19 PM , Rating: 2
I don't believe any company would agree to pay out 15m for a 5m settlement so I would guess that they believe any settlement with Sony for under 100m they would owe zip to MS. Yes even when lawyers agree on an agreement they still don't agree on what it says.

Careful MS....
By Funksultan on 6/19/07, Rating: -1
RE: Careful MS....
By omnicronx on 6/19/2007 10:37:17 AM , Rating: 2
this has nothing to do with antitrust, companies pay other companies for exclusive rights to things all the time, i dont see how this is any different except they didnt even get exclusive rights, and they prolly paid more money than sony too. by your logic sony in the past exclusively having rockstar gta games on ps2 or at&t exclusively having the iphone would be against antitrust laws.. but that just isnt so.

microsoft prolly just wanted to protect themselves from this exact situation.. paynig a shitload more for forcefeeback than sony, then later on having sony get the same thing for way less.

RE: Careful MS....
By CyborgTMT on 6/20/07, Rating: 0
RE: Careful MS....
By Funksultan on 6/20/07, Rating: 0
RE: Careful MS....
By mars777 on 6/20/2007 6:30:25 PM , Rating: 3
Microsoft (and Sony) are Corporations.
When doing a psycho-analysis of the Corporation as a live person, they are all paranoid, greedy, psychopathic, and generally insane.

So it is likely for Microsoft to cry foul, as is for any corporation.

"I mean, if you wanna break down someone's door, why don't you start with AT&T, for God sakes? They make your amazing phone unusable as a phone!" -- Jon Stewart on Apple and the iPhone
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