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Oculus lawsuit ends with half billion dollar judgment awarded to ZeniMax

Luckey pays $50M, Iribe pays $150M

Jeff Ramos/Polygon

A Dallas, Texas jury today awarded half a billion dollars to ZeniMax after finding that Oculus co-founder Palmer Luckey, and by extension Oculus, failed to comply with a non-disclosure agreement he signed.

In awarding ZeniMax $500 million, the jury also said that Oculus did not misappropriate trade secrets as contended by ZeniMax.

Of the $500 million, Oculus is paying out $200 million for breaking the NDA and $50 million for copyright infringement. Oculus and Luckey each have to pay $50 million for false designation. And former Oculus CEO Brendan Iribe has to pay $150 million for the same, final count.

Reached for comment shortly after the verdict, Oculus said they will be appealing, but that they look forward to eventually putting the case behind them.

“The heart of this case was about whether Oculus stole ZeniMax's trade secrets, and the jury found decisively in our favor,” an Oculus spokesperson told Polygon. “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. “

ZeniMax tells Polygon that in light of the decision, it may seek an injunction to stop the sale of Oculus Rift headsets, at least temporarily.

Robert Altman, ZeniMax’s Chairman and CEO, added that “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.”

The decision came back Wednesday afternoon following two and a half days of deliberation in the case being tried in a United States District court in the North District of Texas.

Both Carmack and Luckey were in the courtroom when the verdict was read.

It seemed as if the defense had high hopes as they settled in Wednesday morning. Luckey and Iribe sat with Carmack, chatting and smiling while the courtroom waited for the jury to arrive with their verdict. The plaintiff’s side was silent by comparison.

Later, as the verdict was read, there was no shock or fits of indignation. District Judge Ed Kinkeade went through the jury questionnaire item by item, announcing and amassing damages by the millions as each side sat in stoic silence.

Once the reading concluded, there was little reaction as parties discussed the outcome. Carmack began reading the verdict himself while Iribe and Luckey talked with their attorneys in hushed whispers. The jury walked out as ZeniMax attorneys went about discussing their next steps.

The defense stated their intent to further discuss the verdict regarding trademark infringement and false designation with Judge Kinkeade and ZeniMax attorneys. The plaintiffs said they would come together to talk over some sort of injunctive relief.

During closing arguments last week, ZeniMax attorney Anthony Sammi called the incident a heist and argued that ZeniMax should be awarded $2 billion in compensation and another $4 billion in punitive damages. Oculus attorney Beth Wilkinson argued that the multibillion-dollar lawsuit was driven by ZeniMax’s embarrassment, jealousy and anger, not facts.

It remains unclear what sort of impact this will have on the daily retail sale of the Oculus Rift headsets. Facebook is expected to announced its fourth-quarter earnings after the market closes today.

We’ve reached out to both Facebook and ZeniMax and will update this story when they respond.

The Zenimax versus Facebook trial kicked off in January with testimony from a number of experts and those involved directly in the case including id Software co-founder John Carmack, Facebook CEO Mark Zuckerberg and Oculus co-founders Iribe and Palmer Luckey.

Testimony included Iribe testifying how talks between ZeniMax and Oculus broke down. At one point, Iribe said under oath, Bethesda Softworks’ president called the Oculus team “kids” and threatened to stop Carmack from working on anything else VR-related if Oculus didn’t sign a partnership deal. The deal would have granted ZeniMax a 15 percent equity interest in Oculus.

Palmer Luckey was called in to essentially rebut allegations that he wasn’t capable of creating the Oculus Rift on his own, without the help of Carmack.

During his day in court, Zuckerberg was grilled about his company’s seemingly rushed acquisition of Oculus for $2 billion. And during the first week of the trial, Carmack was questioned about his decision to copy some code from id Software computers before leaving the company to work at Facebook with Luckey.

Rockville, Maryland-based ZeniMax sued Oculus in May 2014, alleging that the VR startup misappropriated trade secrets in the development of the Oculus Rift headset. The lawsuit was filed weeks after ZeniMax publicly accused Carmack of providing technology to Oculus. Oculus has said it will disprove those claims.

According to ZeniMax’s complaint, Oculus co-founder and Rift inventor Palmer Luckey — along with a half a dozen ex-ZeniMax employees who are now working at Oculus — are building the Rift based on years and millions of dollars’ worth of ZeniMax’s research and copyrighted code.

Oculus, which is now owned by Facebook, denies the allegations, saying the lawsuit came to a head after Facebook purchased the company and as a “chance for a quick payout.”

The history of Luckey, the Oculus Rift, Carmack and ZeniMax-owned id Software is a complicated and entwined one. You can read more about it in our previous coverage of the ongoing suit.

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