It seems that Microsoft employees knew about a disc-damaging manufacturing fault in Xbox 360 consoles, before the machines were put on the market.

A document from the ongoing lawsuit in the States suggests that Microsoft knew that machines manufactured in December 2006 had a design flaw which caused the machine to damage discs when it was tilted.

The lawsuit has been going on since July 2007, and this document has only just come to light. The Seattle Post-Intelligencer says it contains a declaration from Microsoft's program manager Hiroo Umeno suggesting that the company knew that the machines were faulty.

"This is ... information that we as a team, optical disc drive team, knew about", said Umeno. "When we first discovered the problem in September or October (2005), when we got a first report of disc movement, we knew this is what's causing the problem".

Even worse, apparently three different solutions were put forward and rejected by Umeno's team. This included slowing down the disc drive, which would have resulted in lengthy load times, and adding bumpers to the disc drive, which was considered too costly at 25p a console.

As of April this year, there have been 55,000 complaints about scratched discs. The case continues - we'll bring you any updates we get.