They were selling their own with huge memory advantages over Microsoft's own. Datel is "gratified" the US court dismissed Microsoft's appeal.
Microsoft moved to have the case thrown out of court but the US justice system is having none of it and gives Datel the green light to proceed.
"We're gratified that the case will proceed and Datel looks forward to re-establishing the benefits of competition in the accessory market for all Xbox 360 users," said Daniel Asimow, a litigation director on Datel's behalf.
The Xbox 360 now supports USB devices being attached thanks to another dashboard update, but you can only have two connected and there's an artificial limit of 16GB imposed on each. Datel's Max Memory line for 360 offered much better value for money than Microsoft's own scandalously price Memory Units - which have ceased production.
Microsoft are suing Datel in a separate piece of courtroom drama over patent infringements for its Xbox 360 controller. Will the legal war never end for the industry?