ZeniMax, the parent company of id, the former employer of Oculus Chief Technology Officer, John Carmack, is currently engaged in an ongoing lawsuit against Oculus and the company’s co-founder, Palmer Luckey. The suit was filed shortly after Facebook announced its $2 billion acquisition of the VR company in 2014. The complaint was amended recently to include Carmack and Oculus CEO, Brendan Iribe, in the case.
ZeniMax is the parent company behind a number of well-loved gaming franchises including The Elder Scrolls, Fallout, DOOM, QUAKE and Wolfenstein. An amended complaint (PDF) alleges that “throughout 2012, Oculus and Luckey lacked the necessary expertise and technical know-how to create a viable virtual reality headset.” Without the help of Zenimax employees, the complaint alleges, “there would not have been a viable Rift product.” Zenimax is seeking a trial by jury and a judgment against Oculus for everything from damages to attorneys fees.
“Facebook denies that Plaintiffs are entitled to any relief,” reads an earlier response by Facebook in the case.
The case appears to hinge on a non-disclosure agreement Luckey signed in May 2012 and an employment agreement with Carmack that expired before he was named CTO at Oculus in August 2013. Only parts of both agreements are included in the complaint and it doesn’t appear Facebook has had a chance to respond to the more recent allegations in the case involving Carmack or Iribe. A response by Facebook to an earlier version of the complaint admits Luckey signed the NDA “in his individual capacity and before Oculus was formed as a company…but Facebook denies that the document is a valid and enforceable agreement.”
We went digging deep into the court documents and found a lengthy paragraph filed by Facebook in the case last August (PDF) that sheds some light on the tech giant’s position in the case:
ZeniMax has engaged in misleading conduct based upon which Facebook reasonably inferred that ZeniMax was making no claim to Defendants’ technology or otherwise asserting any intellectual property rights. Further, to the extent ZeniMax believed that it owned Defendants’ technology or that Defendants were infringing ZeniMax’s intellectual property rights, ZeniMax has known of those claims and engaged in conduct inconsistent with those rights and/or inexcusably delayed asserting such rights to the prejudice of Facebook, with such prejudice including among other things the significant investment Facebook has made in Oculus’s technology, brand and associated goodwill. Lastly, ZeniMax’s conduct has been misleading, unconscientious, unjust, and marked by a want of good faith. Permitting ZeniMax to pursue its claims would cause significant harm to Facebook.
Interestingly, Oculus appears to have entertained an equity stake by ZeniMax at one point in late 2012. Allegedly, Oculus floated the idea of offering 2 percent for “sharing code” and for Carmack to work as a technical advisor to Oculus. An additional 3 percent was allegedly offered if ZeniMax invested $1.2 million in the startup. ZeniMax countered with an offer Oculus considered “so far out of the ballpark, we’re left wondering if there’s any hope.” According to the ZeniMax framing of events, further discussions were even less favorable to the gaming company.
Though ZeniMax claims the original offer was subject to dilution, for a frame of reference, a five percent stake in Oculus would’ve been worth roughly $100 million by the time Oculus sold the company to Facebook.
“This complaint filed by ZeniMax is one-sided and conveys only ZeniMax’s interpretation of the story,” a statement from Oculus reads. “We continue to believe this case has no merit, and we will address all of ZeniMax’s allegations in court.”
We’ll keep following this case as it develops.