In an recent juridish document, it seems like Microsoft really knew about the problems for the Xbox 360 launch in 2005.
"The Xbox 360 is defectively designed because when an Xbox 360 is tilted or swiveled -- even slightly -- while a game disc is in the ODD [Optical Disc Drive], ODD components can contact the game disc, creating a distinctive circular "gouge" on the underside of the disc, rendering it permanently unplayable... Microsoft discovered this scratch-inducing design defect prior to launching the Xbox 360, but refused and continues to refuse to remedy the problem."
