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:

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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.