Microsoft Starts Rumble with Immersion

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Microsoft has filed a lawsuit against haptics developer Immersion Corporation, claiming Immersion has violated terms of a 2003 licensing agreement which granted Microsoft money in the event Immersion settled with Sony over the use of patent “rumble” technology in its Dual Shock Playstation controllers. The details and history of the lawsuit are complicated, and seem to hedge on making fine distinctions between what constitutes a “settlement” and what constitutes a “business agreement.”

Back in 2002, Immersion filed a patent infringement suit against both Microsoft and Sony, alleging the companies were infringing on its biofeedback technology patents. Microsoft settled with Immersion for $26 million. However, Immersion continued legal action against Sony, with a jury finding in 2004 Sony had violated two Immersion patents, and a judge issued an injunction against Sony selling rumble-enabled products. That injunction was put on hold while Sony appealed, and in early 2007 Sony and Immersion agreed to settle their dispute and work together to put vibration technology—a.k.a. “Rumble”—back into PlayStation products. Sony paid Immersion $97.2 million in damages and interest, plus an additional $22.5 million to license Immersion’s technology through 2009.

Now, Microsoft has come back to Immersion. It seems the terms of the companies’ 2003 settlement agreement included payment to Microsoft in the event of a settlement with Sony. Under the settlement, Immersion would pay Microsoft a minimum of $15 million for any amount received from Sony up to $100 million, along with 25 percent of any amounts between 100 and 150 million, and 17.5 percent of any amount over $150 million.

In its suit, Microsoft apparently believes the $22.5 million Sony paid to Immersion to license the company’s technology through 2009 should be counted as fruits of the settlement—and, since that would bring the total to over $100 million, Microsoft would essentially be entitled to 25 percent of that money. Furthermore, according to text of the suit published by Todd Bishop at the Seattle Post-Intelligencer, Microsoft believes it would be entitled to a slice of an additional $10 million-plus-royalties option for use of the technology in non-PlayStation products.

Microsoft claims Immersion owes it at least $27.5 million.

Immersion and Sony don’t describe the $22.5 million (and $10 million-plus-a-royalty option) as part of a settlement; instead, they categorize the arrangement as a “business agreement” separate from the lawsuit settlement. Immersion says it intends to vigorously defend itself against Microsoft’s suit, saying in a statement, “Immersion believes that it is not obligated under the sub-license agreement with Microsoft to make any payment to Microsoft relating to the conclusion of its litigation with Sony Computer Entertainment.”

Industry watchers are expressing some surprise at the terms of Microsoft’s settlement with Immersion. Essentially, if Immersion managed to extract $144 million from Sony in a settlement, Immersion would have to pay Microsoft back the full amount of its $26 million settlement with the company. If Immersion managed to extract more than $144 million from Sony, Immersion would effectively be paying Microsoft to use its technology—the same patented technology Immersion accused Microsoft of using without license back in 2002.