2:21pm PT by Ashley Cullins, Natalie Jarvey
Facebook's Oculus Hit With $500 Million Jury Verdict
Facebook has to write a $500 million check to cover damages from its VR subsidiary Oculus, according to a Dallas federal jury.
ZeniMax Media sued Oculus in 2014, claiming its co-founder Palmer Luckey violated a non-disclosure agreement with the company and stole intellectual property including copyrighted computer code, trade secrets and "technical know-how." Luckey then used that information, ZeniMax claims, to create Oculus Rift and secure a $2 billion acquisition by Facebook.
The trial began Jan. 9 and ended with closing arguments last Thursday, during which ZeniMax attorney Anthony Sammi reportedly asked the jury to award $4 billion in compensation and damages.
Facebook CEO Mark Zuckerberg took the stand on Jan. 17, making a rare public appearance in a suit and tie instead of his trademark jeans. According to The New York Times, Zuckerberg told the jury "the idea that Oculus products are based on someone else's technology is just wrong."
After two full days of deliberation, the jury came back recommending just a fraction of that — though still a nine-figure award. It found neither Oculus nor any of the individual defendants misappropriated trade secrets and that the company did not engage in unfair competition.
Oculus alone was found to have directly infringed on ZeniMax's copyrights. While the jury found Luckey and former Oculus CEO Brendan Iribe vicariously infringed on the copyrights, it also found the damages claims against them were barred by affirmative defenses. It found Oculus and both men liable for false designation. (The full verdict form is below.)
The jury found ZeniMax suffered $50 million in actual damages because of Oculus' infringement, $200 million from Oculus' violation of the NDA, $50 million each from Oculus and Luckey's false designation and $150 million from Iribe's false designation. The jury awarded no exemplary damages, finding the harm done to ZeniMax was not the result of malice, fraud or gross negligence.
Facebook acquired Oculus in 2014, and Zuckerberg has since made the company's virtual reality headsets and platform a cornerstone of his long-term vision for Facebook. He has often said that he sees virtual reality as the next communications platform.
In December, Iribe stepped down from his post as Oculus CEO to oversee a newly created PC VR division. He was replaced by tech veteran Hugo Barra, who will lead the Oculus team as Facebook's vp virtual reality.
Facebook COO Sheryl Sandberg on Wednesday told CNBC, "The verdict is non-material to our business."
An Oculus spokeswoman also issued a statement Wednesday afternoon: “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.”
Meanwhile, ZeniMax indicated in a press release that it will consider seeking an injunction to restrain Oculus and Facebook from using the computer code that the jury found infringed its copyrights. In the same statement, ZeniMax CEO Robert Altman 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.”