I'm pretty sure monopolies are illegalized so they can't legally lock out ALL accessories, seeing as a memory device is just ONE accessories out of the hundreds, there's no arguing.
either through the watermark or; They take the console ID's of the people they give the update to on a white list.If you do this update, when you access LIVE, you give the servers your IP and MAC adress and Serial ID, kernal #, dash version among other stuff (ie, if you are on an older version, when you attempt to update, thats how it knows you need to update). It stores all this data on server. For the serial ID's that AREN'T on the whitelist, they become blacklisted. This blacklist's punishment is generally a console ban. There (generally) is a yearly console banning wave in or around novemeber-december so the kids get a new one for x-mas.