Will the Xbox 360 Be Banned in America?

Master Chief is set to join the ranks of American unemployed.

It could be game over for Microsoft’s popular Xbox 360 video game console in the United States. Fresh off announcing 67 million consoles sold since its product launch seven years ago, Microsoft faces the prospect of a sales ban which could hit later this year.

The trouble began in April when Washington judge David Shaw ruled against Microsoft in a patent-infringement suit filed by Motorola Mobility. The complaint alleged that Microsoft was unjustly profiting from video decoding and Wi-Fi technology belonging to the plaintiff and utilized in the Xbox 360 console. The same judge recently recommended that the sale of Xbox 360 consoles be banned in the United States. The next stage is a ruling by the International Trade Commission expected in August. After that, the final decision to ban sales could rest with President Barack Obama.

The story is consequential on multiple fronts. There is the obvious potential to upend the American console market just in time for the holiday sales season. There is the political question of whether the president would risk upsetting one of his core constituencies, young people, by banning one of their favorite toys just prior to Election Day. More fundamentally, there is the moral issue of whether such a ban is proper.

In its defense, Microsoft argues that a sales ban in the U.S. would adversely affect consumers. IGN senior editor Daemon Hatfield quips:

Judge Shaw suggested Nintendo and Sony could handle any extra demand, so I’m not sure the good judge understands how video games work.

In fact, whether consumers would be inconvenienced by a sales ban is irrelevant to both the law and the moral principles which inform it. Protection of intellectual property rights through the enforcement of patent, trademark, and copyright is both just and demonstrably beneficial to individuals trading in a free market.

Despite assertions to the contrary by many academics and pundits claiming to be libertarian, intellectual property law is not a statist intrusion. As masterfully explained by George Mason University School of Law professor Adam Mossoff, in a lecture viewable here, the claim to intellectual property is the root of all property rights. As with tangible property, convenience is not an excuse for trespass.

Complimenting the morality of why patents are proper, the practical outcome of intellectual property law is better products and services for consumers who voluntarily trade with producers. Indeed, it is ironic that Microsoft would cite consumer convenience as an excuse for patent-infringement when they go to such lengths to protect their own intellectual property.

The Xbox 360, like so many products on the market, is an amalgam of patented technology. Some of those patents are owned by Microsoft. Many others are licensed from other patent holders. Those licenses are negotiated to maximize profit for each party involved in the console’s production. Without any one of them, the final product would not be possible in its given form. If Motorola’s intellectual property is part of the Xbox 360, then they are entitled to compensation for its commercial use.

That is one reason why a ban of Xbox 360 sales in America is unlikely to occur, because Motorola has an interest in profiting from a deal with Microsoft, and Microsoft has an interest in dealing to continue sales. A sales ban has already taken effect in Germany based on the same patent-infringement claim, putting pressure on Microsoft to concede the point and cut Motorola in for a piece of the action. That would be an appropriate outcome, assuming Motorola’s claim is legitimate.

Of course, the other prominent reason why a ban of Xbox 360 sales in the States is unlikely is political. An ITC ruling in August would place Obama in an uncomfortable position two months before the election. Which political impulse would prevail, and to what end? Obama’s anti-business sentiment could break either way, against Microsoft’s “greed” or Motorola’s. When you add in the likely response from young voters whose sense of right and wrong is governed by whether they get what they want, the good money is on Obama breaking against a ban.

All told, the episode demonstrates intellectual property theory, highlighting an issue of fundamental rights for a large and youthful segment of consumers. In an age of rampant media piracy through file sharing, intellectual property is under withering assault from those who ignore the role of the mind in production and focus only on scarcity. So the argument goes: if I take your bike, you no longer have it; but copying your idea deprives you of nothing. Only, it does. The idea is a value conceived and rightly owned by its producer. The idea would not otherwise exist, and its producer is entitled to control its disposal.

In practice, Microsoft acknowledges this with every sale, accepting money in trade for products which consist of more than circuits and discs. What an Xbox or game played upon one is, at root, is an idea. The material absent any mind applied to it would be worthless.