Another Update on ZeniMax v. Oculus

As reported here earlier, the two year-old legal battle over the Oculus Rift between ZeniMax  Media and Oculus VR continues to rage on in a federal court in Texas, with trial set for January 9, 2017.  Less than two weeks ago, the court granted ZeniMax’s motion to unseal its Second Amended Complaint, which raises new allegations against Oculus and Palmer Luckey, and now adds Brendan Iribe and John Carmack as defendants.

ZeniMax’s pleading remains substantially the same as its previous complaint, but adds some interesting new allegations.  For example, the new complaintZvO - SAC images alleges that Luckey “lacked the expertise, knowledge, training or resources” to develop VR technology and did not have the “expertise or knowledge to create a viable SDK for the Rift.”  ZeniMax also alleges that Carmack admitted that “without ZeniMax, Oculus ‘wouldn’t exist as a funded company.'”  (an admission most likely obtained during deposition.)

The most relevant new allegations, however, may have to do with the Non-Disclosure Agreement signed between Luckey and ZeniMax in May 2012.  As reported earlier, the NDA allegedly prohibited Luckey from using or disclosing ZeniMax’s Proprietary Information (including its trade secrets), as shown below:

ZvO - SAC images-2

According to the new complaint, Luckey “informed Iribe and others about the NDA he had signed which … confirmed that ZeniMax alone owned the critical VR technology being used by Oculus.”  Despite this, “Iribe privately directed Luckey and other Oculus employees to continue to obtain ZeniMax’s hardware and software technology from Carmack, and Iribe directed Oculus’s employees to use that technology to create the Oculus SDK and to develop, modify, and tune the Oculus Rift hardware.”  Further, the complaint alleges that throughout several rounds of financing and continuing through Facebook’s acquisition of Oculus, Luckey and Iribe “concealed from potential investors and business partners the existence of the NDA that Luckey had executed.”

ZvO - SAC images-3ZeniMax’s complaint also levels some new allegations at Carmack, who was previously employed by iD Software (a ZeniMax sub) before becoming the Chief Technology Officer at Oculus in August 2013.  Allegedly, “before leaving ZeniMax, Carmack secretly and illegally copied thousands of documents containing ZeniMax’s intellectual property from his computer at ZeniMax to a USB storage device which he wrongfully took with him to Oculus.  After he had joined Oculus, Carmack returned to ZeniMax’s premises and took without permission a customized tool that Carmack and other ZeniMax personnel had developed for work on virtual reality.”  According to ZeniMax, “Carmack has refused to return the tool to ZeniMax, and he has used this tool for developing virtual reality technology for Oculus.”

Oculus recently issued a response stating that the “complaint filed by ZeniMax is one-sided and conveys only ZeniMax’s interpretation of the story. We continue to believe this case has no merit, and we will address all of ZeniMax’s allegations in court.”

With the trial less than six months away, the parties continue to engage in a pitched legal battle, with recent filings including motions to exclude expert reports, motions for sanctions and motions to compel the production of documents (all of which are sealed).  According to the court’s scheduling order, motions for summary judgment are due in one week on September 2, 2016, and pre-trial filings due on December 2, 2016.

Finally, the court has ordered the parties to hold a face-to-face meeting to discuss settlement in mid-December.  Will the parties eventually settle?  If the recent failed mediation is any indication, the answer may be ‘no.’  However, the cost of trial (and subsequent appeals) could play a large factor.  Perhaps the only sure take-away from this story is that there will be some unhappy associates working over Thanksgiving this year.

SUPER SMASH BROS VR EDITION: An Update on ZeniMax v. Oculus

zenimax v. oculus title

The legal battle between two heavyweights over the Oculus Rift continues between ZeniMax Media and id Software, in one corner, and Oculus and Facebook, in the other.  In a court filing this week, the two sides reportedly failed to reach a resolution in a recent court-ordered mediation.

The lawsuit also made headlines in December 2015 when Facebook’s CEO, Mark Zuckerberg, was ordered to sit for a deposition in the case.

If you’ve been living under a rock for the past two years, I’ve provided a summary below.  (I also recommend reading the complaint, a lengthy, but fascinating read for those interested in the VR industry.)

In May 2014, ZeniMax Media, parent company of id Software and Bethesda Softworks, filed suit in a federal court in Texas, asserting claims of trade secret misappropriation, copyright infringement, breach of contract, unfair competition, unjust enrichment, trademark infringement and false designation against Oculus and Palmer Luckey.  (Zenimax has since amended its complaint to add Facebook and John Carmack as defendants.)

In its complaint, ZeniMax alleged that, in 2012, Luckey approached John Carmack (then, an iD software employee) about a Rift prototype, which Carmack offered to help improve.  Subsequently, Carmack and other ZeniMax employees allegedly “transformed” the Rift prototype by adding positional tracking, reducing latency and making other significant improvements.  (According to Facebook, the improvements to the Rift amounted to “hot-gluing” a motion sensor previously purchased from Hillcrest, “placing tape on the outside edges of the lenses, attaching a strap, and plugging the headset into an external power source.”)

Before revealing the improved Rift prototype — and at ZeniMax’s request — Luckey executed an NDA, which stated that ZeniMax would retain exclusive ownership of the IP disclosed under the agreement.  (Facebook has since denied that the NDA is valid or enforceable.)  Carmack later demonstrated the enhanced Rift prototype at E3 in 2012, which resulted in significant attention and acclaim regarding the HMD.

carmack

After a successful E3, Luckey and Oculus allegedly continued to seek out Carmack’s expertise, but ignored ZeniMax’s overtures regarding compensation for its IP. Moreover, Oculus and Luckey allegedly demonstrated the Rift prototype using ZeniMax’s properties (Doom 3: BFG Edition and RAGE) against ZeniMax’s wishes.  In addition, Oculus later solicited and hired away several ZeniMax employees, including Carmack, who became CTO of Oculus.  According to ZeniMax, Oculus has never paid a dime to Zenimax.

In March 2014, Facebook announced that it would acquire Oculus for $2 billion in cash and stock.  Two months later, Zenimax filed its lawsuit.

Perhaps on a related note, earlier this year at E3, Bethesda, ZeniMax’s subsidiary, announced that it was developing virtual reality versions of its blockbuster AAA titles, Fallout 4 and Doom, which, unsurprisingly, would be released on the HTC Vive.

The jury trial in the ZeniMax v. Oculus case is scheduled to begin on Monday, January 9, 2017.