The antitrust case claims that by locking out Datel's Max Memory Card with a firmware update, Microsoft used its status as the platform holder to unlawfully prevent competition. In Microsoft's motion to dismiss, it claimed that language in the "Additional Terms and Conditions" clause in the Xbox 360 product warranty barred the use of unauthorized peripherals. The company back upped its case by citing Apple's successful defense of its right to limit use of OS X to its own hardware.
The court rejected Microsoft's motion, however, finding the language in the "Additional Terms and Conditions" vague and too wide-reaching. For example, if Microsoft's interpretation of the terms was accepted, it could prevent the use of certain televisions with the console.
Since Datel's suit was first filed, of course, Microsoft has enabled the use any USB drive as a memory unit for the Xbox 360, which means that even if Datel is able to continue to sell the device, there likely won't be much demand for it. Meanwhile, Microsoft recently filed its own suit against Datel over claims that one of Datel's controllers is too similar in design to the official Xbox 360 gamepad.
Source – Order Granting in Part and Denying in Part Defendant's Motion to Dismiss [PDF]