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Sorry I Haven’t been around lately. With my home computer constantly malfunctioning I haven’t been able to check in with all of you. Hopefully I’ll have a chance to update you guys on all latest.

Back to the news…

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in late September, when Sony was ordered to pay $82 million in damages and license fees to Immersion Corporation. At that point, Sony had 60-90 days to appeal the decision.

It appears the appeal process has finished it's first round, and the new ruling actually will end up costing Sony more than the initial ruling of $82 million. The new ruling forces Sony to pay 1.37% of revenues, per quarter, from sales of the PlayStation and PlayStation 2 consoles that shipped with Dual Shocks and Dual Shock 2 controllers; and the same 1.37% on revenues from at least 40 PSOne/PS2 games named in the suit. Although the information was not readily available, it is safe to assume that Sony will most likely be paying the same 1.37% on revenues from sales of the Dual Shock and Dual Shock 2 controllers for the PSOne and PS2 respectively, especially since the patent was about the rumble feature in the Dual Shock and Dual Shock 2 controllers.

The license is to be paid backdated to July 1, 2004; and will continue to be paid each quarter henceforth according to the ruling. This is expected to cost Sony around $27 million per year. If sales of the PS2 go as strong as sales of the PSOne did after the launch of the PS3, then Sony will be paying this for quite a while.

We do not know if this has caused Sony to rethink their controller design for the PlayStation 3 or not, or if they will just continue to use the technology and pay the 1.37% licese fee on every PS3 sold.

Microsoft was initially named in the suit as well, but settled out of court. Microsoft also ended up becoming a 10% owner of Immersion Corporation from the deal.
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[September]

Yesterday a jury found Sony guilty of violating 16 patent claims of Immersion Corporation, and awarded the company $82 million in damages.

The lawsuit, which was filed on on February 11, 2002, originally had named both Sony and Microsoft as defendants. However, Microsoft settled out of court for a "$26 million payment for licensing rights and an equity investment, as well as a $9 million convertible debenture from Immersion with 48 months draw down rights." In the end, the additional money makes Microsoft now own 10% of Immersion Corporation.

Sony, of course, plans to appeal the decision. The jury reached its verdict, but final judgment has yet to be given in the case.

Assuming the judgment is eventually rendered in favor of Immersion, Sony would not only be forced to pay the $82 million in damages, but they also would have to pay whatever is required to become one of Immersion's many licensees. More than 20 gaming companies are currently licensees, including Logitech, MadCatz, Saitek, Nyko, Intec, Thrustmaster, Apple Computer and more. Since 1996, when Immersion first introduced force feedback to consumer gaming, hundreds of titles have incorporated "vibrotactile effects." Indeed, force feedback has become a standard feature in most games today.

Of course, it strikes some people as rather odd, or characteristic depending on who you ask, that Microsoft is now a partial owner of the company that just won a jury verdict in a patent suit against Sony over an integal part of the PlayStation 2. Namely, its controller.

When asked about Microsoft's involvment in Immersion, however, Victor Viegas, Immersion President, CEO and CFO had this to say:

"Microsoft is a shareholder and they're shareholding at 10%; they're not a majority owner in our company...but I think it is true to say it is a bit ironic that Microsoft's taking a position in Immersion [that] benefits from revenue that Immersion generates and if we sign a license with Sony, then they would definitely benefit with that license."

He then added, "Sony can stall and they can take legal maneuvers but at the end I think they're going to ultimately need to take a license or they'll have to stop shipping these infringing products."

As to what's next, Viegas said, "Right now the jury reached a verdict and there will be a number of motions by Sony and Immersion relative to that verdict. The judge has roughly 60-90 days to hear those motions...[Sony] will do everything they can to try to get the verdict overturned. So the judge has 60-90 days to listen to these arguments and then at that point enter the verdict as a judgment. At that point, Sony then could appeal; Immersion could ask and we will ask immediately for an injunction for them to stop shipping products...but it really will come down to what the judge will allow."

One such motion that I'm sure hasn't escaped Sony's legal team might involve the fact that Microsoft, a direct competitor of Sony in the video game market, owns 10% of Immersion. In essence, should Sony have to pay anything to Immersion in damages and/or licensing fees, Microsoft will make money off of their competition. An argument could also be made by Sony that Microsoft stands to benefit greatly if Immersion successfully gets an injunction against Sony that would force them to recall all PS2 consoles on store shelves with the Dual Shock 2 controller, as well as all extra Dual Shock 2 controllers for sale.

Should Sony have to recall those units, especially before the holiday season, Microsoft will then be without the market leader in the home video game console market, allowing them to reap benefits far beyond any monetary sums. In essence, it would be giving Microsoft an easy out in ridding themselves of competition-- which we all know Microsoft hates, being an illegal monopoly and all (and yes, the verdict that Microsoft is an illegal monoply has withstood numerous appeals by MS)-- and allowing them to gain market share they would not have otherwise gained if the market leader was in competition.

Oddly enough, Nintendo was never named in the suit, even though they have rumble technology in their GameCube controllers, and are not openly named as a licensee of Immersion's patents. This could stem to some agreement between Nintendo and Immersion, because Nintendo had patented the Rumble Pack for the Nintendo 64 a year before Immersion was granted their patent. One theory is that should Immersion try to sue Nintendo on the issue, Nintendo could pull their trump card of a previous patent against Immersion and force Immersion to lose their patent. Either that, or somehow Nintendo's GameCube controller uses their own technology that stems from their Rumble Pack patent, and thus would not infringe upon Immersion's patents.

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The Hunter
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Welcome back :)

Interesting news as well, this will cost Sony a lot. oO
 

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Sony really dropped the ball on this one. While Microsoft ended up cutting a deal that could actually make them money on this, Sony is losing profits on every PS2 sold. Nintendo really should have tried to take advantage of this a little more themselves. They can't afford to miss anything if they want to last much longer against the financial recources of $ony and Micro$oft.
 
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