$4 Billion ZeniMax v. Oculus Verdict Could Come as Early as Today, Here’s What You Need to Know

This week the eyes of the virtual reality industry are on a federal court in Dallas, Texas where ZeniMax (and child company id Software) and Facebook (and child company Oculus) have been engaged in legal battle over a dispute which could cost Facebook $4 billion. ZeniMax alleges that a former employee used VR code that it owned after being hired by Oculus, and further that Facebook should have known that the code was ZeniMax property. With jury deliberations now starting, a verdict could come as soon as today. Here’s what you need to know about the case.


brian-Sommer-HeadshotGuest Article by Brian Sommer, IME Law

Brian is an interactive media and entertainment attorney at IME Law, where he focuses his practice on the intersection of traditional entertainment and immersive media. He also serves as Co-Chair of the VRARA Licensing Committee. You can follow Brian on Twitter @arvrlaw, and @IME_Law.


For 13 days, attorneys in the Dallas federal court have been selling the jury very different stories. “One of the biggest technology heists ever” is how ZeniMax attorney Tony Sammi described to jurors Facebook’s acquisition of Oculus in opening statements. In Thursday’s closing arguments, Oculus attorney Beth Wilkinson told jurors ZeniMax and Id Software are “jealous, they’re angry and they’re embarrassed” over the success of Oculus and the acquisition by Facebook.

At first blush, this lawsuit appears to be a complicated mess involving two plaintiffs, five defendants, nine causes of action, over 900 court filings (many sealed from the public) and a demand for more than $4 billion in damages. Without having access to many of the critical motions filed in the case (due in part to the Court’s order sealing such filings), it is not possible to assess in exacting detail certain critical arguments made by each side. But, from arguments, publicly-available filings and reports that have been made available to the public, it appears that the essence of the lawsuit can be distilled down to this: this is a dispute about who owns the intellectual property (“IP”) that was vital in creating the Oculus Rift.

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Will the jury agree with ZeniMax that its proprietary computer code was a foundational component of Oculus’ success, or will the jury side with the defense’s argument that Oculus code was developed independently and based upon publicly known code and different solutions?

Starting today, jurors begin sorting through hundreds of facts and applying them to the issues contained in the jury instructions, weighing the credibility of witness testimony and evidence presented. Here are three key issues that could drive jury deliberations:

1. Did Palmer Luckey and Oculus Misappropriate IP That Zenimax Disclosed Through a Nondisclosure Agreement?

palmer luckey oculus rift price facebook
Palmer Luckey, Founder of Oculus

Defendant John Carmack is heralded as one of the most recognized and accomplished video game programmers and virtual reality engineers in the industry today. He co-founded Id Software (plaintiff), which was later acquired by ZeniMax (plaintiff). In April 2012, while employed as Id Software’s Technical Director, Carmack discovered through an Internet forum that Palmer Luckey (defendant)—who would go on to become the founder of Oculus—had developed a prototype virtual reality headset called the “Rift.” Carmack contacted Luckey, and Luckey sent Carmack a very early Rift prototype. Carmack is alleged to have immediately started to evaluate, analyze and modify the Rift prototype using research, software code and tools owned by id Software.

Carmack and Luckey’s friendship quickly turned business-like by May 2012 when Luckey in his personal capacity signed a nondisclosure agreement (“NDA”) with Id Software’s parent company ZeniMax, according to information from the case.

Companies use NDAs to ensure ideas or trade secrets disclosed to another party remain confidential. NDAs usually prohibit the recipient of confidential information from using or disclosing any information that they receive under the NDA, except for agreed purposes. Since an NDA is a contract, all of the legal principles surrounding contract law (e.g., elements needed to form a contract, defenses, etc.) are used to analyze an alleged breach of an NDA.

In June 2012, Luckey formed Oculus on the heels of successful demonstrations by Carmack (employed at the time by ZeniMax) and Luckey at the E3 Convention. ZeniMax alleges that through early 2013, and while bound by the NDA, Carmack and other Id Software employees collaborated with Oculus and Luckey to debug and refine the Rift.

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ZeniMax alleges Luckey breached the NDA by taking ZeniMax-owned proprietary information and then using it without permission and disclosing it to Facebook. Oculus and Luckey contend the NDA is unenforceable for a number of reasons, including because the NDA was signed by Luckey in his personal capacity before Oculus was founded, a key material term was never defined, and for other legally nuanced reasons. In response, plaintiffs assert that Oculus is bound by the NDA because Oculus is a mere continuation of Luckey’s prior work. The jury’s outcome may hinge on the many factual findings related to the NDA.

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Jury Still Deciding ZeniMax v. Oculus Case (UPDATE)

Jury Decides ZeniMax v. Oculus On Monday

Update Jan. 31. Still no verdict. The jury returns for additional deliberations on Wednesday, Feb. 1.

Update Jan. 30: The jury did not make a decision today in a Texas case brought by ZeniMax against Oculus. They will return for additional deliberations on Tuesday, Jan. 31.

Original story published Jan. 27:

Although Mark Zuckerberg already left the Earle Cabell Federal Court building last Monday, UploadVR continued to attend and take notes throughout the rest of the trial. Each side has now delivered its closing arguments, and a jury is likely to decide on Monday whether or not Oculus delivered a convincing defense from allegations the company misappropriated technology from ZeniMax.

“Facebook knew,” ZeniMax lawyer Tony Sammi said in his closing argument. “Zuckerberg may have never heard about it, but his lawyers knew.”

Both the plaintiff (ZeniMax) and defendant (Oculus VR, represented by Beth Wilkinson) have called more witnesses and experts to the stand over the last week. Wilkinson made her final argument to the jury on Jan. 26. She addressed ZeniMax’s allegations that Palmer Luckey’s origin story is a fabrication, and the Oculus Rift was built using its source code and trade secrets. She argued that Oculus’ founders all shared a vision.

“They want to bring this technology to life,” said Wilkinson.

She argued ZeniMax had the opportunity to make a deal with Oculus but didn’t because it didn’t want to work with a bunch of “clowns” and that VR technology was, according to CEO Robert A. Altman, “unproven technology that has failed again and again.” Wilkinson also claimed Altman refused to answer one of her questions 16 times, and failed to stick to his story.

ZeniMax argued an NDA Palmer Luckey signed was meant to protect its trade secrets.

“The reason for the NDA was to demo the game and get people excited about the headset,” explained Wilkinson.

Wilkinson characterized ZeniMax as being “jealous, angry, very embarrassed,” and said ZeniMax had several opportunities to contact them if they were concerned about Oculus using its technology, such as when Oculus launched its Kickstarter video.

“[Altman] saw it, and he didn’t do a thing about it,” said Wilkinson. “He didn’t do anything about it because he knew it was to their benefit.”

What did John Carmack contribute to Oculus?

Altman, CEO of ZeniMax, was the first to answer questions this week. During his testimony, he disclosed his working relationship with John Carmack and how “disappointed” he was when he found out he was leaving id Software to work for Oculus.

Altman said, “our technology is the foundation of their business. They wouldn’t have a business without us.”

Oculus believes the ZeniMax litigation is an “attempt to take credit for technology that it did not have the vision, expertise, or patience to build,” so former Oculus engineer Steven LaValle and software engineer Nirav Patel discussed their work during their testimonies. Patel said he focused on designing better sensors while LaValle said he independently developed predictive tracking.

John Carmack complimented Patel for his work, writing to him in an email, “that is exactly what I hoped to see on the latency graphs. It looks like you’re doing it right.” When asked if he found Carmack’s advice to be useful, Patel replied, “No, not particularly,” and gave Carmack some advice of his own. Sammi fired back, asking Patel if Carmack’s opinions could classify as “technical feedback.”

Additionally, Sammi asks about a “heated exchange” LaValle remembers hearing in which former Oculus CEO Brendan Iribe told co-founder Jack McCauley, “don’t interact with John Carmack’.” Sammi brought up portions of several emails throughout the trial in an attempt to paint Carmack as instrumental to the company’s success. ZeniMax also called Tim Willits, creative director at id Software, who testified that ZeniMax was a great fit culturally with Oculus.

“We felt that they were on the same page as us – not just with business but also culture,” he said.

Are supposed trade secrets actually in the public domain?

ZeniMax alleges it was key in developing the following “trade secrets”: distortion correction, chromatic aberration, gravity orientation and sensor drift, head and neck model, predictive tracking, HMD view bypass, and time warp.

Both ZeniMax and Oculus called on several independent experts to determine whether there was infringement and plagiarism of code. Last week, we reported Professor David Dobkin said he found evidence of ZeniMax techniques used by Oculus. Wilkinson argued on behalf of Oculus that there are multiple ways to achieve the same solution, but Dobkin nevertheless stated he is “absolutely certain Oculus copied from ZeniMax code.”

This week, Oculus called a pair of independent VR experts to analyze Dobkins’ report. They suggested Oculus used different methodology in developing its approach and questioned whether ZeniMax publicly disclosed its trade secrets.

So what’s the verdict?

Yesterday, just before letting everyone go home, the judge announced there will be no more testimony. The jury has today and the weekend to consider its verdict and whether any money is owed.

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‘Doom’ & ‘Fallout 4′ Devs are Collaborating to Make Titles Work in VR

Doom VR Executive Producer Marty Stratton sheds light on Doom VR, how Bethesda are approaching the project, what VR hardware they’re targeting and whether it’ll ever see a full release.

After thrusting a glimpse of a modern VR technology into the public realm 4 years ago at E3 2012 there’s a certain irony in Bethesda’s flurry of VR activity at this year’s show. 4 years ago, John Carmack exhibited a modified Doom 3 BFG running on a prototype headset that would eventually evolve to become the Oculus Rift. At E3 2016 however, after what felt like a 4 year embargo on anything VR, Bethesda brought it’s big guns to the show to convince everyone they were “all in” on virtual reality.

Ignoring any alleged legal strife between Carmack (now Oculus CTO) and his former employers, it was good to see not only a VR version of seminal shooter Doom front and centre, but Fallout 4 too! It was clear that both virtual reality experiences were very early prototypes, but as E3 2016 closed, it wasn’t entirely clear where id was going with Doom VR. Was it a PR exercise? Would the demo be released? Will there ever be a full virtual reality version of Doom we can buy?

John Carmack at E3 2012, now Oculus VR CTO
John Carmack at E3 2012, now Oculus VR CTO

In an interview with Shacknews, speaking at Quakecon 2016, Game Director and Executive Producer at id Software Marty Stratton has shed a little light on some of these questions and more.

When questioned about fellow stablemates Bethesda and whether the Doom VR and Fallout 4 VR teams ever shared ideas on the projects, Stratton replies “Absolutely, there is a ton of collaboration. I can’t really go into the specifics of it, but it definitely is and has been a Bethesda initiative for a while now,” and finally “A lot of collaboration between the teams with the Fallout stuff and the Doom stuff. It’s been really nice.”

On the question of whether Doom VR would ever see the light of day as a fully-fledged product, Stratton is open about the project’s current status: “It is a kind of a public R&D project for us to an extent. To have VR, to take it to shows, show people the possibilities and the capabilities and get feedback to understand how they’re reacting to it. We made a lot of changes in what we did just between E3 and this,” clearly the development teams are iterating rapidly on the project – which is certainly a good sign.

doom-vr-bethesda-vr-e3-2016

As to whether that iteration would eventually lead to a final, purchasable product, Stratton was optimistic yet non-committal: “There is, I’m sure, a Doom product in there and we are kind of molding the clay right now as to what that becomes. I think the important thing is that we just don’t think of it as a Doom port to VR. That’s not the right way to go about it. It is about creating a Doom experience within VR that is made for VR.”

Hands-on: ‘Fallout 4′ on Vive Offers a Peek at the Future of ‘AAA’ VR
Hands-on: ‘Fallout 4′ on Vive Offers a Peek at the Future of ‘AAA’ VR

Finally, as both Doom VR and Fallout 4 VR were shown exclusively on the HTC Vive, what is id’s stance on VR platforms right now? “The way the technology is set up, we are fairly (platform) agnostic. We’ve been using the HTC Vive headsets for E3 and here, but we’re not really tied to anything in particular and I’m sure we will continue to look at all the possibilities as we move forward.”

I think it’s quite positive that Bethesda are finally publicly demonstrating their commitment to VR as a platform, but even better that, both the Doom and Fallout teams are seemingly approaching the R&D process collaboratively and openly gathering feedback wherever they can.

You can check out the full interview video above or checkout the full transcript over at Shacknews here, but here are some of the highlights.

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