Oculus Vows Appeal of $500 Million Verdict, ZeniMax Threatens Injunction

by Upload • February 1st, 2017

The legal battle between ZeniMax Media and Oculus VR has a verdict from the jury. In the first of many questions put to the jury, they decided Oculus did not misappropriate trade secrets.

The jury, however, also decided that Oculus co-founder Palmer Luckey failed to comply with a non-disclosure agreement he signed, as did Oculus by extension. Oculus and its co-founders Luckey and Iribe were found to owe ZeniMax $500 million as a result of copyright infringement and “false designation.” We’ve uploaded the full 90-page document the jury filled out here.

Oculus released a statement vowing an appeal:

The heart of this case was about whether Oculus stole ZeniMax’s trade secrets, and the jury found decisively in our favor. We’re obviously disappointed by a few other aspects of today’s verdict, but we are undeterred. Oculus products are built with Oculus technology. Our commitment to the long-term success of VR remains the same, and the entire team will continue the work they’ve done since day one – developing VR technology that will transform the way people interact and communicate.  We look forward to filing our appeal and eventually putting this litigation behind us.

ZeniMax released a statement as well threatening an injunction:

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.

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.

ZeniMax CEO Robert A. Altman also released a statement:

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.

ZeniMax first accused Oculus of theft of its technology shortly after the announcement that Facebook was to acquire the startup back in 2014 for $2 billion (now thought to be $3 billion). It claimed that the Oculus Rift VR headset was built using its own technology and that John Carmack, the legendary game developer formerly of ZeniMax-owned id Software, had used its resources to offer essential help in developing the Rift.

Carmack does have ties to the Rift dating back to 2012, when creator Palmer Luckey sent him an early prototype that Carmack would demonstrate at that year’s E3 running id-made Doom 3: BFG Edition. The help Carmack offered Oculus during this time and the dispute of what code was made available to Oculus made up much of the trial.

The verdict comes after a trial that saw figureheads at Facebook, Oculus, and ZeniMax take the stand. Most notably, Mark Zuckerberg, CEO of Facebook, answered questions. He stated that “Oculus products are based on Oculus technology.”

We also saw the emergence of Luckey, around four months after he fell off the radar following the revelation he had helped fund a political propaganda campaign. Luckey was insistent that he had built the Rift on his own, despite claims from ZeniMax that he lacked the knowledge to do so. Former Oculus CEO Brendan Iribe also gave his account of the origins of the company, and Carmack himself took to the stand to defend himself.

Garrett Glass is a freelance writer based in Texas. He spent the last few weeks following the case for UploadVR.

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  • Mourz

    $500 million. Seems fair. Good decision.

    • Get Schwifty!

      AFAIK it’s never been revealed if Luckey’s role would change at Oculus, I suspect it was due to this pending…. be very interesting if his role change is revealed in the days or weeks to come… must be hard being down to what, 650 Million on paper?

      • Mourz

        If they appeal I suspect they will wait until after the appeal to drop him. He adds no value to the company. Congrats to the kid tho. He hit the lotto lol. I am not hating on him, he just does not have any skills that Facebook can use. Once the trial is done I don’t see what use he will be. I think we will see him starting another startup in a few years and raising money.

        • Frogacuda

          He was a good front man, a guy with a lot of vision and a great ability to get others excited about what Oculus was doing. His heel turn is unfortunate, but you’re right that I don’t see him having a lot of value “behind the scenes.”

  • Graham J ⭐️

    1/4 of Oculus’ sale price for breaking an NDA? There’s got to be more to that sum than that…

    • Mourz

      Uhh $3 billion * .25 = $750 million

      • Graham J ⭐️

        It was originally reported as $2bn; the other amounts were for “bonuses and other incentives”.

        Whatever, a big fraction and a big pile of cash.

        • Mourz

          Yah, I was nitpicking. Even there it is a big fraction and I think Facebook over paid in the first place. Brings the price of occulus to like $3.5 billion… crazy. People thought the price was crazy enough when we thought it was $2 billion. Plus occulus had the first mover disadvantage. (disadvantage of launching a tech product first)

  • Sami Tito

    Nothing serious for Facebook that will continue to develop the VR. (good news)

    Facebook is now free to do what it wants about this technology.(good news)

    Strange, zenimax bought studio ESCALATION. (good news)

    Zenimax new actor in he vr industry. (good news)

    Finally this bad news about this case gives birth to good news for the vr.

  • Sami Tito

    finaly Palmer has to pay 50 millions and Brendan Iribe 150 millions

    Oculus, just 300 millions

  • C Stargazer

    Remember folks, ZeniMax invented VR, therefor they should make a claim that HTC, OSVR and Sony also used leaked ZeniMax secrets. They could claim the evidence is on a certain email server that got erased. Then there’s all the DIY kits.

    • Mourz

      That is not how this works.

      • C Stargazer

        Of course not. Still as ridiculous as early claims that they owned Carmack’s “skill and know how”.

        • NooYawker

          They owned the code that he wrote while he was being paid by Zenimax.

          • C Stargazer

            And Oculus’ original code was open sourced. Had there been identifiable code, this case would be different right now.

            I don’t doubt he thought up several methods and implementations while working under Zenimax, likewise they also can’t prove that he didn’t create any of these methods prior to working under Zenimax.

            Simple fact of the matter is, there are multiple ways to implement code that achieves the same outcome. They would have needed to patent every method being used in broad terms. I.E. The patent on Marching Cubes could be circumvented because it wasn’t expansive enough.

            Artists in the industry improve their skills and move on to new companies all the time without their former employers telling them “You can’t use the skills you learned while working for us, you need to make crappy artwork that reflects your old skill level or we’ll sue your new employer for stealing”.

          • ErikFossum

            Carmack admitted to the court to stealing thousands of documents, the entire source code to RAGE and Id Engine 5 and using those on Oculus computers. He also wiped his harddrive. This is more than enough to topple him in court.

        • Mourz

          You have clearly not been employed in product development…

        • David Melton

          That is how it works when you are under contract. Its called intellectual property.

    • Robbie Cartwright

      XD

    • NooYawker

      The way the patent office works today they could actually make that claim. The patent process needs to be overhauled.

    • Get Schwifty!

      The sad part is Zenimax with their supposed acumen sat on their hands, letting the opportunity build up to make a cash grab at the right time which is just profiteering at that point. If they truly had all this information and concerns why wait till now? One would think that would have been a mitigating factor in the damages settlement. I would also predict even with their “know how and technology” we won’t see a single product from them… So in short they weren’t willing to invest in VR or promote, it but by gosh they were all too happy to profit from it….

    • delrael_death

      This is bollocks. They not invented VR. VR was invented back in 20th century.

      What Zenimax made – they develop tech to make VR headset that was stolen and put in Oculus headset.

      HTC, OSVR and Sony developed own tech solutions independently.

      Stop making false statements to advocate Oculus theft in eyes of unexperienced peoples.

      • pontifexa

        What are you talking about? The verdict was that there was no theft of trade secrets.

    • MR Not Dux OSAR
    • Frogacuda

      But all these claims got tossed out. The only thing they got them on was Carmack taking files from his computer when he left, Oculus using id Software games to promote the Rift, and violation of Luckey’s NDA. That’s it. It might be a lot of money, but there aren’t really any implications beyond the fines, because all of this is in the past.

  • NooYawker

    Did not expect them to get that much. I figured 100 mill would have been generous, which is what they’ll probably end up with after many more appeals.

    • Get Schwifty!

      I think you are correct, unless their legal advice flat out tells them no hope in the appeals process, you can be sure they will appeal… then an out-of-court settlement for less… be very surprised if they don’t appeal.

  • Ugur

    They shouldn’t have gotten anything. This is a shameless scam attempt at trying to cash in on the success of others.
    This money would have been way better spent at Oculus for pushing VR further or investing into more game projects.
    No matter if one likes Oculus/FB or not, this is not a hit against Oculus, it’s a hit against the whole VR industry.

    • Erisi

      Yes, because you clearly know more than the Jury who oversaw the case for the last 3 weeks and saw a MOUNTAIN of evidence from both sides that you’ll never hear about.

      • Ugur

        Yes, it is very likely most in the industry know more about the topic than the Jury.

        • Erisi

          That was far too stupid a comment for me to even comprehend…This jury has spent a month listening to testimony and looking at documents/emails/messages that “most in the industry” won’t ever get to see.

          • Erroll

            There is a reason it went to that Texas court. It has a reputation of favoring plaintiffs. Awarding plaintiffs money is big business for that little town. They may not know much about software but they know a lot about hosting intellectual property suits.

          • Ugur

            On one day Carmack had to explain what a shader is, that says a lot how well informed the people there are about the topics in general.
            It is one thing when people follow the VR industry and general software industry for ages if not decades and in many cases actually worked at one of the involved companies, and another thing when one is part of a Jury who gets briefed on things for 3 weeks.
            Besides that a lot of the court documents were made public, too.

          • random_name

            I believe what he’s trying to say is that a jury isn’t usually made up of technical know how people. They need to be explained what all the technology talk that is being spoken defined. This is a natural problem with juries who don’t have the slightest clue of how everything works. Either way, the jury still came up with a verdict.

          • Erisi

            I understand what he meant, but if that Jury saw an email that said “Hey I’m gonna steal stuff”…that’s an email the public won’t ever see. Many parts of this case didn’t have anything to do with technical know-how.

        • user

          sure. the amazing “industry”. i wonder why it wasnt you who came up with the tech if you know so much about it.

      • Darrell Markie

        what a douche

    • Superkev

      ZeniMax chose the most famous patent troll court in the world for a reason. That said Carmack scrubbing the drives just after notification of the litigation is clearly what triggered the judgement. IMHO Zenimax would never have commercialized any of the technology and like baking a cake there are a lot of ingredients. At best Zenimax only had a small portion of the ingredients.

      • Ugur

        Regarding Carmack scrubbing the drives, well, i feel like he was in a tough spot there because keeping the data would give them a case of hey, he had our data and likely used it, so we should get all the results of Oculus work.
        Deleting the data, well, now they can say hey, he deleted it, must have been for a reason!!
        I watched some videos on the topic again the other day which are from around those days and it’s fascinating how he talks about reducing the latency by using things they came up with from their space endeavor work etc, that likely had much bigger impact than most other things.
        I see it pretty much like you, At the moment Carmack and the others who later left for Oculus still worked at Zenimax, a very large part of what we got with the first consumer headsets was not done yet, so at that point they only had a small portion of the actual headset and tracking etc ingredients.
        The most valuable ingredients was the mind force of Carmack and the others who left for Oculus but the best ingredients and cooks in a bakery are no use when the company policy rules don’t allow the cooks to strive and do their best most passionate projects.
        Carmack and the others saw they couldn’t realize their passion there so they left.
        Zenimax first acted like they were all cool with the Id/Zenimax Oculus Coop and let that all happen, but then turned around and acted like it was all stolen when the people left (because Zenimax didn’t let them strive onwards there) and then Oculus was sold for a lot of money and Zenimax didn’t get any of that. Comes off super double faced by Zenimax to me.

        In business terms one can argue forth and back how much Zenimax is granted or not and we will see whether Oculus/FB continues the legal battle or accepts paying hem for shutting them up and not have to waste more time on this nonsense but regarding ethics/morals/karma, yeah, for sure none of that for Zenimax in this case, won’t get any of that for treating your best minds who brought you millions over the years like not allowing them to strive and realize their dreams and at the same time like a company property chair that is wholly owned by you and do it in that double faced way like first you act all friendly and cool and let’s do it together and then when you shut off their dreams and hence they leave suddenly you want huge sums because you heard they somehow made lots of money with the thing you didn’t want to take further and not let them take it further the way they did.

  • ok i’m confused. didn’t the jury say that Oculus HADN’T stolen anything but then the Zenimax statement goes against all that saying stuff was stolen??? what’s the difference between what the jury decided and what Zenimax is banging on about?

    • Get Schwifty!

      Apparently they did in fact feel they did…. hence copyright infringement, etc…. still, being the VR trailblazer they are I can’t wait for that “Zenimax VR HMD” they have been secretly working on to appear…LOL…

      • Jim Cherry

        zenimax had several claims that could be loosely translated to theft the one that stuck was contract violation of nda.

    • unreal_ed

      So, if you look at page 18 of the 90 page document linked here, there’s clearly spelled out questions with the jury’s answer. Question 1 says “Did ZeniMax prove, by a preponderance of the evidence, that any Defendant misappropriated the trade secrets claimed by ZeniMax and id Software?”, to which they answer No for each of the defendants.

      HOWEVER, they then say Yes to questions about “Defendants [..] infring[ing] upon any of ZeniMax or id Software’s copyrights”. I wrote […] because it changes depending on the defendants listed. They found that Oculus infringed DIRECTLY, that Luckey and Iribe infringed VICARIOUSLY, that Luckey, Iribe and Carmack infringed CONTRIBUTORILY. So take that to mean…… whatever it means without getting into a lot more detail.

      For the record, the text is very easy to read. If you want to know exactly what the defendants (there’s 5 in this trial: Oculus, Facebook, Luckey, Iribe, Carmack) are found guilty of, just check the questions which are very specifically and simply worded. There’s 58 questions in total but a fair number of them do not apply as the jury wrote no for previous questions.

      • Arv

        I would imagine that the copyright issues are to do with Doom 3 BFG being used. The trade secret thing is probably related to headset tracking worked on by Carmack while he was employed at id/Zenimax and the jury were convinced that the code for the tracking was completely different. I’m surprised that Zenimax only had one expert witness to Oculus/Facebook’s two tbh.

    • Dave

      ZeniMax is trying to keep up the appearance of deserving the $500 million. They still have an appeal to deal with, and plus they want to sound vindicated in their initial arguments – which the jury found to be unfounded.

  • W00t! I imagined that they could get less money (like some milions)… 500M$ is a great amount of money!

  • MikeVR

    Facebook just paid the bill for Escalation Studios? Can we have Rage VR now?

  • jimrp

    FB is going to drain ZeniMax pockets. 😂

    • Jim Cherry

      1 lawyer at a time.

  • purdy44

    Regardless of the outcome, I think we can all agree on one thing: fuck Palmer Luckey.

    • Regardless of your comment, I think we can all agree on one thing: purdy44 needs to grow up.

      • purdy44

        Not going to happen. But hey, at least I don’t use my power and influence to spread right wing propaganda and rare Pepe memes.

        • Get Schwifty!

          Ah yes the ever tolerant Left…. up until the point someone disagrees… then its’ “fuck ’em”. It just feels so good to wag that finger in everyone’s face doesn’t it? It must be very easy navigating a black and white world….

          • purdy44

            Lololol

  • jimrp

    Yeah found not guilty on stealing tech. So conjunction should not stick.

  • Arv

    I’m expecting a lengthy appeals process but I’d LOVE all those that need to fork out the cash to pay in pennies. It would be hilarious and happens quite frequently with these sort of lawsuits. Are there even that many pennies in the US..? Or will the US Treasury have to make more of them..? lmfao

  • Norbertas GL

    Facebook was stolen, Oculus was stolen whats next Mark?

    • Get Schwifty!

      The worst crooks don’t carry guns….

  • Roarke Clinton

    Legal battles can get pretty ugly, don’t ya say…

  • Petr Legkov

    Here it goes, the first big VR law battle. I wish companies would fight with innovation not by the court … Not judging the law perspective. But instead of fighting, one should have competed with each other.

    • Get Schwifty!

      Well, since they apparently are guilty in a court of law of doing something wrong, nothing wrong with some form of damages. My issue still is that it appears on the surface that Zenimax waited longer than necessary to maximize their profit off of it… if the principle was “hey that’s ours dont use it” why wait until recently to bring it up… I’m guessing this has been an issue in motion for awhile, just surprised we didn’t get wind of it in the public until it went to trial.

  • Frogacuda

    While the violations ruled by the jury here seem sound, the last paragraph of Zenimax’s statement is a major distortion of the ruling. The jury ruled that Oculus employees unlawfully copied files not belonging to them, but it did NOT rule that those files were used in the creation of the Rift, nor were misappropriated trade secrets, so the idea that an injunction is needed to stop the sale of the Rift is completely absurd. There is no Zenimax IP to remove from the Rift or its software. The ruling is clear on that matter.