Oculus Cleared of Theft, But ZeniMax Awarded Due to NDA Breach

Although it decided that Oculus did not steal tech or secrets, the jury also ruled that Palmer Luckey did not uphold his NDA.

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Drawing to a close weeks of heated testimonies and allegations, the jury assigned to the ZeniMax v. Oculus legal case ruled that Oculus VR did not misappropriate trade secrets or technology to build its Rift headset (via Upload VR).

However, the jury also reached a consensus that Oculus founder and Rift designer Palmer Luckey violated terms of a non-disclosure agreement—which means Oculus violated the NDA by extension.

The jury awarded ZeniMax $500 million as a result of the NDA violation. The money will be collected from different sources. Per Polygon, Oculus will pay $200 million for violating its NDA and another $50 million for copyright infringement; both Oculus and Palmer Luckey will pay $50 million each for false designation; and ex-Oculus CEO Brendan Iribe will pay $150 million for false designation.

Oculus plans to file an appeal, but for now the company's management is satisfied with what they view as the most important part of the jury's verdict. "The heart of this case was about whether Oculus stole ZeniMax's trade secrets, and the jury found decisively in our favor," said an Oculus spokesperson in a comment made to Polygon.

"We're obviously disappointed by a few other aspects of today's verdict, but we are undeterred," the spokesperson continued. "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."

Various representatives from ZeniMax have issued statements as well. "Technology is the foundation of our business and we consider the theft of our intellectual property to be a serious matter," said CEO Robert A. Altman. "We appreciate the jury’s finding against the defendants, and the award of half a billion dollars in damages for those serious violations."

A spokesperson for ZeniMax spelled out the company's next steps. "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."

In a lengthy statement, the spokesperson reiterated the company's assertion that, in effect, John Carmack made breakthroughs in VR tech while still at the ZeniMax-owned id Software;, and that a paper trail shows communications centered on that technology going from ZeniMax to Oculus before Carmack left. The full statement can be found below.

"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."

[Sources: Upload VR, Polygon]

Contributing Editor

From The Chatty

  • reply
    February 1, 2017 12:17 PM

    David Craddock posted a new article, Jury rules in favor of Oculus in the legal battle between the VR company and ZeniMax

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      February 1, 2017 12:18 PM

      This is one I'm kinda glad ZeniMax lost, they were grasping at straws there.

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        February 1, 2017 12:34 PM

        I'm really glad they lost. Some of their claims were obvious BS if you've been following Oculus development over the years.

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      February 1, 2017 12:20 PM

      Fantastic news.

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      February 1, 2017 12:21 PM

      polygon saying they awarded 500 mil to zenimax?

      http://www.polygon.com/2017/2/1/14474198/oculus-lawsuit-verdict

      i guess thats way less than what was asked but...damn

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        February 1, 2017 12:23 PM

        #fakenews

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        February 1, 2017 12:25 PM

        1/8th of the asking, apparently there was some breach of contract somewhere but nothing to do with the stolen code claims or any issues with Carmack so it was way less. Also the jury literally called out Zenimax for being dicks according to that article. Still it kinda sucks they were awarded as much as they were.

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        February 1, 2017 12:25 PM

        Wow, that's still a lot of money for contributing nothing. So I guess that's worth filing the suit.

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        February 1, 2017 12:29 PM

        Why would they get 500 million for that, exactly?

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          February 1, 2017 12:32 PM

          Like, did Palmer Lucky work for Zenimax at some point? What non-disclosure agreement did he sign that had anything to do with them?

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            February 1, 2017 12:35 PM

            I don't get that part either, if anything I'd expect Carmack to sign one with Oculus.

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            February 1, 2017 12:36 PM

            Uh no, but John Carmack did...

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            February 1, 2017 12:39 PM

            In May 2012, a month before the Rift debuted at E3 2012, Id and Oculus signed a nondisclosure agreement governing how Carmack’s work on virtual reality as an Id employee could be shared between the companies.

            A copy of the NDA obtained by Re/code says, in part, that Oculus “shall not acquire hereunder any right whatsoever to any proprietary information … nothing in this agreement is intended or shall be construed as a transfer, grant, license, release or waiver of any intellectual property rights in any proprietary information.”

            The NDA notes that both parties were under “no commitment” to invest in one another or “enter into any other business arrangements of any nature whatsoever.” ZeniMax said in a statement that it discussed taking equity in Oculus but that talks between the two companies fell through.

            Id legal EVP J. Griffin Lesher signed the NDA, as did Luckey. Carmack is not named, nor did he sign the document, but the contention is that all his work — not just code he wrote — as a ZeniMax employee was owned by the company, which expected compensation if that work ever made it into a money-making product. A source familiar with the dispute said Carmack had negotiated an exception to his ZeniMax contract for his aerospace startup, Armadillo Aerospace, but that no such exception was negotiated for virtual reality.


            Source: http://www.recode.net/2014/5/1/11626364/heres-the-agreement-oculus-allegedly-broke-according-to-zenimax

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              February 1, 2017 12:41 PM

              Ah, I see. So ZeniMax definitely could be said to have won the decision. This is exactly what they were looking for, aside from the size of the payout.

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                February 1, 2017 12:47 PM

                It's not what they were looking for. Oculus wasn't found to be using any of their tech or property.

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                  February 1, 2017 12:49 PM

                  That's a pretty extreme judgement, then.

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                    February 1, 2017 12:53 PM

                    I'm no lawyer, but I agree. I'm curious if that award will stand given the rest.

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        February 1, 2017 1:17 PM

        Testimony included Iribe testifying how talks between ZeniMax and Oculus broke down. At one point, Iribe said under oath, Bethesda Softworks’ president called the Oculus team “kids” and threatened to stop Carmack from working on anything else VR-related if Oculus didn’t sign a partnership deal. The deal would have granted ZeniMax a 15 percent equity interest in Oculus.

        lol these guys are dicks. I like id, Machinegames, and Arkane products though.

    • reply
      February 1, 2017 12:22 PM

      Of course they did! Zenimax is just pissed off that they manhandled a genius programmer and then lost him to a company that was smart enough not to.

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      February 1, 2017 12:24 PM

      Good for Oculus, so can Palmer be punished in the same trial or would it require a separate suit?

      • reply
        February 1, 2017 12:26 PM

        Separate entities, the punishment that's been awarded was against Palmer's actions though not punishing Palmer directly.

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      February 1, 2017 12:29 PM

      well this is the first time I heard about the NDA so I still feel like I was right in saying Oculus was innocent (from all the details given at the time)

      damn how can a nda be worth 500 million?!

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        February 1, 2017 12:30 PM

        That's a very good question. Especially if apparently nothing it covered was actually used.

    • reply
      February 1, 2017 12:30 PM

      Oh snaps

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      February 1, 2017 12:34 PM

      Whew! Awesome! I was worried about that one. I wasn't sure how well Oculus would have come out of that one.

      They seemed EXTREMELY greedy with what they were demanding from Oculus. I'd rather see Oculus thrive than Zenimax add another wing to their empire.

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      February 1, 2017 12:37 PM

      Yeah that's what I was expecting, guilty of doing what they did, not guilty of really harming zenimax, money, but not 4 billion.

      Still 500 million bucks lol. Nothing to facebook, huge for Zenimax. So huge as to be meaningless to any normal person.

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        February 1, 2017 12:39 PM

        I'm guessing that's what ZeniMax was really after, but they went "fuck it, fire everything, see what sticks".

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          February 1, 2017 12:48 PM

          Isn't that how these things usually go? And you always ask for far more than is realistic, too.

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            February 1, 2017 12:51 PM

            Yup. Psychology something something relative scale something.

    • reply
      February 1, 2017 12:37 PM

      I read the exact opposite.

    • reply
      February 1, 2017 12:38 PM

      Yeah so which way did it go since Polygon is reporting Zenimax won,

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        February 1, 2017 12:39 PM

        Yeah David you have it the opposite. Your link even confirms

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          February 1, 2017 12:49 PM

          Jury ruled that Oculus did not misappropriate trade secrets from Zenimax. But ruled that Palmer Luckey did break an NDA with Zenimax. They won on that point and that was the award.

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            February 1, 2017 12:51 PM

            Correct. Updates are still trickling in, so we'll see what else transpires.

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      February 1, 2017 12:47 PM

      Facebook's MO right? Do some sketchy shit then just break out the check book a few years later when it's too late to change anything.

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      February 1, 2017 12:51 PM

      Sorry for crossed wires, Chatty! A quick explanation of how I landed on that headline.

      The verdict just came out, and updates are coming in drips and drabs because the jury is still talking in the courtroom. The first update everybody got was, to paraphrase, "Oculus didn't steal trade secrets from ZeniMax." That was it, so that's how I framed the story and left "Developing..." at the bottom to indicate more info was incoming.

      The next update was, "... buuuuuuut Palmer Luckey did violate NDA, and so ZeniMax will be awarded money." I realized that my headline was incorrect, but as of right now it's not as simple saying that ZeniMax actually won. It seems to be a little from column A, a little from column B.

      I'm going to continue updating the story, but I wanted to clarify the headline. It's certainly never been my intention to be misleading or incorrectly report information. Sorry for any confusion.

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        February 1, 2017 12:52 PM

        I personally think it's a win for Occulus to have such a shitty company off of their back for a fraction of what they were asking for. Zenimax only "wins" if they got the full payout and all the claims they filed were true.

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          February 1, 2017 12:55 PM

          Eh, like I said above, I doubt Zenimax actually expected to win most of claims, or all the money. I expect Zenimax got what they were looking for, more or less.

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        February 1, 2017 12:53 PM

        OMG, journalistic integrity! Get him!!!

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      February 1, 2017 1:10 PM

      UPDATES:

      - Oculus the company and management past and present will have to pay out the $500 million.
      - Oculus plans to appeal, but is satisfied that the jury ruled against ZeniMax's allegation of former employees absconding to Oculus with trade secrets.

      • reply
        February 1, 2017 1:22 PM

        That's exactly what I expected. $500 million seems excessive given the other findings.

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      February 1, 2017 2:01 PM

      500 million is a quarter of what they sold to FB for, right? That seems pretty crazy. Or maybe not. Maybe that's exactly the type of fines that should be handed out to stop this kind of crap.

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        February 1, 2017 2:02 PM

        Yup, they wanted 2billion (the sales price to FB) + another 2billion for something else. It was an obscene number.

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      February 1, 2017 2:02 PM

      Good. Zenimax can go fuck itself in its litigious ass.

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      February 1, 2017 2:07 PM

      Looks like Palmer is on the hook for $50 million. Couldn't happen to a nicer person. Of course this will all get reduced on appeal. But it still seems like some righteous justice was served.

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      February 2, 2017 6:46 AM

      Well thats a pretty good payout for Zenimax no? Probably as much as releasing 2 elder scrolls with no development cost