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Microsoft Sues Immersion for Contract Breach Following Sony Deal

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.