(Update) Jury awards ZeniMax $500 million in lawsuit with Oculus

An appeal is surely next

After almost three days of deliberation, a Dallas jury has reached a decision based on three weeks of testimony. The jury awarded ZeniMax half a billion dollars because it concluded that Oculus co-founder Palmer Luckey violated a non-disclosure agreement that he was bound to.

As reported by Polygon, the North Texas jury’s verdict is in favor of the plaintiff, but interestingly enough, not because of the crux of the lawsuit. ZeniMax originally filed a complaint alleging that Oculus misappropriated trade secrets in developing its Rift virtual reality headset. The jury did not find this to be true.

While it was awarded $500 million, ZeniMax asked jurors to consider a $4 billion verdict — $2 billion in compensation for misappropriated trade secrets and an additional $2 billion in punitive damages. The jury obviously didn’t find the need to excessively punish for intentional wrongdoing. (However, there is a case to made based on the fact that the judge granted the motion to ask for punitives in the first place.)

What immediate effect this has on both companies is relatively unclear at the moment. As Polygon notes, Oculus parent company Facebook is set to announce its quarter four earnings after the market closes today. Facebook obviously has a lot of money, but $500 million is still a substantial hit.

This probably isn’t the end of the Oculus and ZeniMax drama. Oculus is almost certainly considering an appeal. If that happens, Oculus will be likely be forced to post a substantial bond upon appeal — a guarantee of sorts that the money will be there for the plaintiff in the event that the appeal also goes ZeniMax’s way. Or, as we saw in the Gawker and Hulk Hogan matter, there’s a significant chance that they settle first, thus mitigating the risk for both parties and cutting down on the cost of continued litigation.

Oculus lawsuit ends with half billion dollar judgment awarded to ZeniMax [Polygon]

(Update: ZeniMax sent us a statement about the verdict. Here’s the statement in full:

“We are pleased that the jury in our case in the U.S. District Court in Dallas has awarded ZeniMax $500,000,000 for Defendants’ unlawful infringement of our copyrights and trademarks, and for the violation of our non-disclosure agreement with Oculus pursuant to which we shared breakthrough VR technology that we had developed and that we exclusively own.  In addition, 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. 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.

 Asked to comment on the decision, Robert Altman, ZeniMax’s Chairman and CEO, said: “Technology is the foundation of our business and we consider the theft of our intellectual property to be a serious matter.  We appreciate the jury’s finding against the defendants, and the award of half a billion dollars in damages for those serious violations.”

The liability of Defendants was established by uncontradicted evidence presented by ZeniMax, including (i) the breakthrough in VR technology occurred in March 2012 at id Software through the research efforts of our former employee John Carmack (work that ZeniMax owns) before we ever had contact with the other defendants; (ii) we shared this VR technology with the defendants under a non-disclosure agreement that expressly stated all the technology was owned by ZeniMax; (iii) the four founders of Oculus had no expertise or even backgrounds in VR — other than Palmer Luckey who could not code the software that was the key to solving the issues of VR; (iv) there was a documented stream of computer code and other technical assistance flowing from ZeniMax to Oculus over the next 6 months; (v) Oculus in writing acknowledged getting critical source code from ZeniMax; (vi) Carmack intentionally destroyed data on his computer after he got notice of this litigation and right after he researched on Google how to wipe a hard drive — and data on other Oculus computers and USB storage devices were similarly deleted (as determined by a court-appointed, independent expert in computer forensics);  (vii) when he quit id Software, Carmack admitted he secretly downloaded and stole over 10,000 documents from ZeniMax on a USB storage device, as well as the entire source code to RAGE  and the id tech® 5 engine — which Carmack uploaded to his Oculus computer; (viii) Carmack filed an affidavit which the court’s expert said was false in denying the destruction of evidence; and (ix) Facebook’s lawyers made representations to the court about those same Oculus computers which the court’s expert said were inaccurate. Oculus’ response in this case that it didn’t use any code or other assistance it received from ZeniMax was not credible, and is contradicted by the testimony of Oculus programmers (who admitted cutting and pasting ZeniMax code into the Oculus SDK), as well as by expert testimony.

We will consider what further steps we need to take to ensure there will be no ongoing use of our misappropriated technology, including by seeking an injunction to restrain Oculus and Facebook from their ongoing use of computer code that the jury found infringed ZeniMax’s copyrights.)

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Brett Makedonski
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