In 2002, Immersion Corporation sued Microsoft and Sony for infringement of its "haptic or force feedback" tactile response technology patents. The 2003 settlement reached between Immersion and Microsoft included the acquisition of licensed rights to use Immersion's technology for $26 million and a stake in Immersion. The case with Sony had not settled at the time the Microsoft suit was settled.
In the complaint filed by Microsoft yesterday (June 18, 2007) for breach of contract, Microsoft claims that Immersion has not lived up to certain terms under the settlement arrangement, specifically, for not paying Microsoft a "refund" payment if Immersion were to settle its case with Sony. In the settlement agreement with Microsoft it was stated 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..."
Under the settlement agreement between Sony and Immersion, Immersion provided to Sony a "worldwide, non-transferable, non-exclusive, license under the Immersion Patents" for which Sony agreed to pay Immersion $22.5 million. Additionally, Sony further provided for an "additional option", which if exercised by Sony, would give Sony a further license in respect of non-PlayStation games with a payment to Immersion and a royalty fee for each game sold. This, on top of the over $90 million paid to Immersion in March 2007 by Sony as a result of the 2004 ruling against Sony.
According to Immersion, "[t]he Company has determined that the conclusion of its litigation with Sony Computer Entertainment does not trigger any payment obligations under its Microsoft agreements". According to Microsoft associate general counsel Steve Aeschbacher however,"Microsoft licenses technology both in and out and relies on these agreements to be honored and enforced. Our request to the court is that ... the binding agreement we signed with Immersion be honored".
Coverage at: Todd Bishop's Microsoft Blog and GameSpot