ZeniMax Software Wants $1 Billion From Facebook

February 27, 2016
By David Lee

DALLAS (CN) – Emboldened by a $500 million judgment against Facebook’s Oculus VR subsidiary, software publisher ZeniMax asked a federal judge for $1 billion in damages and a halt to sales of Oculus Rift virtual reality headsets that use its code.

The maneuver puts more pressure on Facebook to enter into a licensing agreement with Rockville, Md.-based ZeniMax to keep selling Rift.

ZeniMax asked for $4 billion in damages at trial in January. A federal jury concluded that Oculus did not steal trade secrets, but awarded $500 million for breach of contract and trademark and copyright infringement.

ZeniMax and subsidiary id Software, of Richardson, Texas, sued Oculus and co-founders Palmer Lucky and Brendan Iribe in May 2013, two months after Facebook purchased Oculus for $2 billion. ZeniMax claims Oculus violated a nondisclosure agreement to create Rift and that Luckey relied on the help of id Software employees during Rift’s development.

ZeniMax wants an additional $100 million from Oculus, $100 million from Luckey and $300 million from Iribe in enhanced damages for false designation of origin, according to its proposed final judgment and permanent injunction.

Luckey faced intense criticism during direct examination, with ZeniMax’s attorneys suggesting he was just a hobbyist tinkering in his garage who lacked the technical ability to develop Rift on his own.

Luckey testified that when he demonstrated his headset to investors in 2014, he executed the plaintiffs’ code through the headset but did not take the source code itself.

ZeniMax said its request for a permanent injunction blocking sales of Rift was “expressly authorized by defendants in the NDA [nondisclosure agreement] that Luckey signed.” and which they violated, according to a 31-page memorandum of law in support of the motion for a permanent injunction.

ZeniMax said that while the jury award is “substantial,” it is not enough incentive for the defendants to stop infringing. It added that Facebook COO Sheryl Sandberg said the $500 million verdict is “not material” to the company’s finances.

ZeniMax argues in the alternative that if the court does not grant a permanent injunction, it should grant it an “ongoing royalty” for the defendants’ continuing use of its intellectual property.

“The only alternative would be for ZeniMax to file a new action each time defendants renew their infringing behavior going forward, which would be an inefficient use of the parties’ and the court’s resources,” the memorandum states. “The court would be free to determine an appropriate royalty rate and period based on equitable principles, with or without input from the parties.”

Oculus spokeswoman Tera Randall told Reuters on Thursday that the company is planning to ask the judge to set aside the “legally flawed and factually unwarranted” verdict.

During the three-week trial, Facebook CEO Mark Zuckerberg testified that the purchase price for Oculus was closer to $3 billion due to additional payments to keep workers, and that the owners valued the company at $4 billion.

From Courthouse News.

Jury Orders Facebook to Pay $500 Million for VR Headset

February 2, 2017
By David Lee

DALLAS (CN) — A federal jury Wednesday concluded that Facebook’s Oculus VR subsidiary did not steal trade secrets from ZeniMax for its Rift virtual reality headset, but still ordered Oculus to pay $500 million for breach of contract and trademark and copyright infringements.

ZeniMax, of Rockville, Md., asked for $4 billion in damages during closing arguments last week. ZeniMax and its subsidiary id Software, of Richardson, Texas, sued Oculus and its founder Palmer Luckey in May 2013, two months after Oculus was purchased by Facebook for $2 billion.

ZeniMax claims Oculus and Luckey violated a nondisclosure agreement for creation of the Rift headset and that Luckey relied on the help of id Software employees during Rift’s development.

The jury found insufficient evidence that the defendants misappropriated trade secrets. But it also found that Oculus did “directly infringe” the plaintiffs’ copyrights and that Luckey violated a nondisclosure agreement.

ZeniMax said it was “pleased” by the jury award.

“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 said in a statement.

Oculus said it looks forward to appealing, “and eventually putting this litigation behind us.”

“The heart of this case was about whether Oculus stole ZeniMax’s trade secrets, and the jury found decisively in our favor,” Oculus said in a statement Wednesday.

“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.”

During the three-week trial, Facebook CEO Mark Zuckerberg testified that the purchase price was closer to $3 billion due to additional payments to keep workers, and that the owners valued the company at $4 billion.

Luckey was under fire on direct examination, hit with suggestions that he was just a hobbyist tinkering in his garage and lacked the ability to develop Rift on his own.

Luckey testified that when he demonstrated his headset to investors in 2014, he executed the plaintiffs’ code through the headset but did not take the source code itself.

From Courthouse News.

Damages Sought in Oculus Fight Doubles to $4B

January 30, 2017
By David Lee

DALLAS (CN) – Attorneys for video game publisher ZeniMax asked a Dallas federal jury to give it $4 billion during closing arguments Thursday in its case claiming Facebook’s virtual reality subsidiary stole its headset technology.

The request doubles the $2 billion the Rockville, Md.-based company originally asked for. ZeniMax and subsidiary id Software, of Richardson, Texas, sued Oculus VR and founder Palmer Luckey in May 2013, two months after Facebook bought Oculus for $2 billion.

ZeniMax claims Oculus and Luckey violated a nondisclosure agreement in the creation of the Oculus Rift virtual-reality headset and that Luckey relied on the help of id Software employees during Rift’s development.

Facebook CEO Mark Zuckerberg testified last week the final purchase price for Oculus was $3 billion, as additional payments were made to keep key employees and for performance bonuses. Oculus’ owners were reluctant to sell at first, having valued the company at $4 billion, Zuckerberg said.

ZeniMax’s attorney Tony Sammi, with Skadden Arps in New York, told jurors that Luckey was only a hobbyist and not a software expert. He said id Software co-founder John Carmack, who conversed with Luckey during development, was vital to what makes Rift a desirable virtual reality experience, Polygon.com reported.

Carmack is best known as lead programmer of id Software’s hit first-person shooter games Wolfenstein 3D, Doom and Quake. In 2013, he became chief technology officer at Oculus.

Sammi told jurors the final functionality of Oculus’ code came from Carmack and ZeniMax’s Rage VR testbed and Doom 3 BFG Edition, in violation of Luckey’s nondisclosure agreement. He asked for $2 billion in compensatory damages and $2 million in punitive damages, citing Facebook’s high net worth.

Defense attorney Beth Wilkinson, with Wilkinson Walsh in Washington, told jurors ZeniMax and id Software are jealous, angry and embarrassed. She said this is a case of “sour grapes.”

Wilkinson cited testimony by a forensics expert that there was no evidence of copying in Oculus’ code, as well as testimony by Carmack that Oculus never received actual source code for either the Rage VR testbed or Doom 3 BFG Edition.

During a combative direct examination last week, Luckey testified that he did not violate the nondisclosure agreement. He said that when he demonstrated his headset to investors in 2014, he executed the plaintiffs’ code through the headset but did not take the source code itself.

The jury is expected to deliberate for several days.

From Courthouse News.

Testy Arguments in $2 Billion Virtual Reality Case

January 19, 2017
By David Lee

DALLAS (CN) – The young founder of Facebook’s virtual reality subsidiary denied in federal court Wednesday that he violated a nondisclosure agreement at the heart of a $2 billion lawsuit over the creation of the Oculus Rift headset.

Palmer Luckey, 24, endured a combative direct examination by plaintiffs’ attorney Phillip Philbin before U.S. District Judge Ed Kinkeade.

The men talked over each other several times as Philbin read aloud sections of the 2014 agreement and related email messages, as a flustered Luckey complained about hearing excerpts instead of the broader conversation within several messages.

“I want to make sure I am accurately describing the content of my replies so they are not taken as something they do not mean,” Luckey told Philbin, a partner with Haynes Boone in Dallas.

ZeniMax Media, of Rockville, Md., and its subsidiary id Software, of Richardson, Texas, sued Oculus and Luckey in May 2014, two months after Facebook bought Oculus for more than $2 billion. They seek $2 billion for breach of contract, copyright infringement and unfair competition.

ZeniMax claims id co-founder John Carmack and other employees added physical hardware components and specialized software to Rift and that Luckey never obtained a license to use ZeniMax’s intellectual property. Rift appeared on store shelves in March 2016 for $599.

Carmack is best known as lead programmer of id’s hit first-person shooter games Wolfenstein 3D, Doom and Quake. In 2013, he became chief technology officer at Oculus.

Oculus attorneys told the court Wednesday that the software at issue had entered public knowledge, and so was not subject to the agreement.

Luckey testified that when he demonstrated his headset to investors in 2014, he executed the plaintiffs’ code through the headset but did not take the source code itself.

Facebook’s purchase made Luckey wealthy overnight. Forbes estimates his net worth is $730 million.

Luckey, who was home-schooled, created his first virtual reality headset, the PR1, in his parents’ Southern California garage when he was 17.

Philbin went after Luckey’s lack of a college degree, asking if he had a law or engineering degree.

“You don’t have a degree at all?” Philbin asked.

“No,” Luckey replied.

On cross examination, Oculus’ attorneys defended their client’s technical ability by asking about his early interest in electronics as a child. Luckey said his subscription to hobby magazine Nuts and Volts got him interested in virtual reality he created the PR1.

On Monday, Facebook CEO Mark Zuckerberg testified that he had no knowledge of whether Luckey had signed a nondisclosure agreement before Facebook bought Oculus.

Zuckerberg revealed that the final purchase price was $3 billion, as additional payments were made to keep key employees and pay performance bonuses.

Several tech billionaires never completed a college degree, including Apple co-founder Steve Jobs, Microsoft founder Bill Gates and Zuckerberg.

From Courthouse News.

Mark Zuckerberg Goes on the Record in Lawsuit

January 28, 2017
By David Lee

DALLAS (CN) — Facebook CEO Mark Zuckerberg on Tuesday testified in a courtroom for the first time ever, defending his company’s virtual reality subsidiary Oculus VR against claims its headset technology was stolen from a Dallas-area software developer.

Ditching his usual gray T-shirt and blue jeans, Zuckerberg wore a dark suit and tie as he testified for more than five hours before U.S. District Judge Ed Kinkeade.

“We are highly confident that Oculus products are built on Oculus technology,” the nation’s fourth-wealthiest man testified. Fortune estimates his net worth as $55.5 billion.

“The idea that Oculus products are based on someone else’s technology is wrong,” Zuckerberg said.

Video game publisher ZeniMax Media, of Rockville, Md., and its subsidiary id Software, of Richardson, Texas, sued Oculus and its founder Palmer Luckey in May 2014, two months after Facebook bought Oculus for more than $2 billion.

ZeniMax claims Oculus and Luckey violated a nondisclosure agreement, infringed on copyrights and competed unfairly.

“Defendants now stand to realize billions of dollars in value from ZeniMax’s intellectual property,” the May 21, 2014 complaint states. “Defendants never obtained a license for the use of ZeniMax’s property, nor any right to sell or transfer it to third parties.”

ZeniMax claims id Software co-founder John Carmack and other employees shared improvements to Oculus’ Rift headset “by adding physical hardware components and developing specialized software.”

Rift appeared on store shelves in March 2014, retailing for $599.

Carmack is best known as lead programmer of id’s hit first-person shooter games Wolfenstein 3D, Doom and Quake. In 2013, he became chief technology officer at Oculus.

Zuckerberg said he had never heard of ZeniMax before the lawsuit, and that after large acquisitions are announced, “all kinds of people come out of the woodwork to claim they own” intellectual property or other rights.

“I am aware of the claims,” he testified. “I am here because I believe they are false and I believe it is important to testify to that.”

Zuckerberg downplayed questions from ZeniMax attorney Tony Sammi, with Skadden Arps in New York, during a testy direct examination, in which Sammi said that Facebook’s due diligence for the purchase was rushed during a single weekend.

Zuckerberg said “we were not certain” about the deal until the end, and that $2 billion “is a lot of money” that caused a “big and contentious discussion” within Facebook.

He noted that Oculus was far smaller, with fewer employees in 2014, than WhatsApp and Instagram, two other companies Facebook has purchased.

Zuckerberg said he had no knowledge of whether Luckey had signed a nondisclosure agreement with ZeniMax. He denied that Carmack or any alleged concerns about being sued held up the deal.

“If you steal my bike, paint it and put a bell on it, does that make it your bike?” Zenni asked.

“No,” Zuckerberg replied.

Zuckerberg revealed that the final purchase price for Oculus was $3 billion, as additional payments were made to keep key employees and for performance bonuses. He said Oculus’ owners were originally reluctant to sell, having valued the company at $4 billion. He said they changed their minds when they became convinced the deal “would be really good for virtual reality and not just a good deal” for them.

Oculus said in a statement Tuesday that it is “eager to present our case in court.”

“Oculus and its founders have invested a wealth of time and money in VR because we believe it can fundamentally transform the way people interact and communicate,” the company said. “We’re disappointed that another company is using wasteful litigation to attempt to take credit for technology that it did not have the vision, expertise, or patience to build.”

From Courthouse News.