Facebook Ordered To Pay $500 Million In Oculus Lawsuit


By Kathleen Chaykowski

Facebook lost a major lawsuit by video game company ZeniMax on Wednesday, according to reports.

A jury in Dallas, Texas ordered Facebook to pay video maker ZeniMax $500 million after concluding that Oculus founder Palmer Luckey violated a non-disclosure agreement, according to published reports. The same jury rejected claims by ZeniMax that Oculus had misappropriated its intellectual property.

While the award, which is likely to be appealed, is sizable, it is less than the $2 billion in damages ZeniMax sought, and it isn’t likely to significantly affect Facebook, which has more than $29 billion on its balance sheet. Facebook shares, which were up on Wednesday, barely budged following reports of the judgement. They shot up more than 2% in after hours trading after Facebook reported financial results.

The case hinged on alleged violation of a non-disclosure agreement and claims that intellectual property stolen from ZeniMax were crucial to Rift’s success. The jury ultimately ordered Oculus to pay $200 for violating a non-disclosure agreement, $50 million for copyright infringement and $50 million for the misuse of ZeniMax trademarks. Oculus cofounders Palmer Luckey and Brendan Iribe were also ordered to pay $50 million and $150 million, respectively, for improper trademark use.


“The heart of this case was about whether Oculus stole ZeniMax‘s trade secrets, and the jury found decisively in our favor,” an Oculus spokesperson said in an email. “We’re obviously disappointed by a few other aspects of today’s verdict, but we are undeterred. Oculus products are built with Oculus technology.”

Earlier in January, Facebook CEO Mark Zuckerberg appeared in a Dallas federal court to testify and called ZeniMax’s claims “false.” In court documents, ZeniMax said Facebook purchased Oculus with “full awareness” that some of its core intellectual property, namely the software and hardware for Oculus’ virtual reality goggles, was stolen from ZeniMax by a “singularly experienced” employee, John Carmack, who left the video game company to join Oculus in 2013. Facebook and Oculus executives included in the lawsuit denied wrongdoing and said ZeniMax’s story is false.

ZeniMax, which is based in Rockville, Maryland and has designed video games such as Doom and Quake, said Carmack began communicating with Luckey in 2012, who at the time, was working on a virtual reality headset called Rift. In its lawsuit, ZeniMax called Luckey’s headset “a crude prototype that lacked a head mount, virtual-reality specific software, integrated motion sensors and other critical features and capabilities.” ZeniMax also claimed that throughout 2012, Oculus and Luckey lacked the required expertise to create a “viable virtual reality headset.” The company said in filings that the technical know-how of Carmack, who allegedly copied thousands of documents from his ZeniMax computer, and other ZeniMax employees, provided hardware components and software that were key to Rift’s development.

ZeniMax also accused Luckey of broadly sharing a false story with the press that Luckey invented the Rift technology in his parent’s garage. (FORBES reported in a 2015 cover story that Luckey’s work on Oculus began in his family’s garage. The story notes that Oculus denied claims by ZeniMax alleging that Carmack brought over proprietary information.)

“The jury upheld our complaint regarding the theft by John Carmack of RAGE source code and thousands of electronic files on a USB storage device which contained ZeniMax VR technology,” a ZeniMax spokesperson said in a statement. “While we regret we had to litigate in order to vindicate our rights, it was necessary to take a stand against companies that engage in illegal activity in their desire to get control of new, valuable technology.”

ZeniMax first filed for damages against Oculus and Luckey in May 2014. The case is ZeniMax Media Inc. v. Oculus VR Inc., 14-cv-01849, U.S. District Court, Northern District of Texas (Dallas).

Oculus has been central to virtual reality efforts at Facebook, which has become a leader in the space, competing with the likes of Alphabet ’s Google GOOGL +1.17%, Microsoft and Sony.

And virtual reality, one of Zuckerberg’s passions, could become a major revenue stream for Facebook in years to come. Facebook started shipping its $599 Rift headsets in March and started shipping its $199 touch controllers in December.

ZMI v Oculus Complaint by Syndicated News SNN.BZ on Scribd

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