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Facebook Ordered to Pay $500M in Oculus Lawsuit

259 points by _pius 10y ago

bbernard 10y ago
For those interested, the official court document can be accessed here: https://www.scribd.com/document/274211118/Judge-denies-Facebook-motion https://www.scribd.com/document/274211118/Judge-denies-Faceb... It describes in details what happened.
- e1ven 10y ago
  Isn't that about the initial motion to dismiss from 2015?
- abandonliberty 10y ago
  It describes in detail the ZeniMax allegations. > Though the Court uses definite language, the information is based on allegations only I highly recommend it. It provides much more perspective and appears to be a strong case. The decisions - both in their favor and against - appear reasonable based on publicly available information.
cptskippy 10y ago
The accusation that Palmer was incapable of creating the Rift without Carmack's help and that he had a barely functional prototype, if true, is pretty insulting to Carmack. Carmack is a smart guy and I every much doubt he'd have joined on at CTO if the prototype was as awful as ZeniMax says it was.
- dkonofalski 10y ago
  I don't think it was the prototype itself that was barely functioning, it was the software side that wasn't great. I remember when Palmer first showed off the device, it seemed to track just fine. When they introduced actual content, though, it became disorienting really quickly. I backed them on Kickstarter so I got to see the DevKit1, DK2, and the CV1. The difference between the early versions and the end versions really came down to the software that handled the tracking. Compensating for movement lag and predicting frames to ease the jerkiness are really what converted it from a prototype to a viable commercial product. That being said, it makes me laugh a little to see that Valve and the HTC Vive managed to outpace Oculus. Oculus had so much momentum and marketing buzz and they really dropped the ball on that one. Who knows how much of that was due to the FB purchase, but it definitely is weird seeing them lose their huge advantage.
  - cptskippy 10y ago
    Personally I have no interest in Oculus and it's equal parts Facebook and the vendor lock-in BS.
    - dkonofalski 10y ago
      Oh, don't get me wrong. I'm never buying an Oculus product again, I'm just saying that I completely understand the accusation that the Rift was nothing without Carmack.
  - pipio21 10y ago
    "That being said, it makes me laugh a little to see that Valve and the HTC Vive managed to outpace Oculus." It was the other way around. Valve had been working in VR for years before the first oculus prototype. Oculus contacted Steam and copied the tech they had. The Steam guys actually helped Luckey because it was the small guy doing the open source thing. They did not take into account the selloff to facebook of all this information.
    - dkonofalski 10y ago
      I don't know how much stock I put into this. If you're going based off of what Yates said in that Reddit interview, I'd take that with a grain of salt. Palmer was working on a 3D head mounted display back in 2010/2011 and Valve has only admitted to VR research since 2012/2013. That's not to say that they couldn't have worked on it before then, but Palmer wasn't involved at that point. He also was only working on a 3D headset and wasn't initially planning on a VR headset from what I understand. On top of that, Oculus definitely had more marketing/media buzz so they were ahead of Valve in the consumer mind. The end product might be closer to Valve's than to his original prototype, but he definitely had a small head start on them for the prototype and a huge head start from a marketing perspective. Valve all but shattered that. Here's Palmer's first announcement in like 2012: http://www.mtbs3d.com/phpBB/viewtopic.php?f=140&t=14777 http://www.mtbs3d.com/phpBB/viewtopic.php?f=140&t=14777
    - rasz_pl 10y ago
      This is simply not true. Valve had precisely ZERO VR research up until 2012. Thats when they finally decided to pursue hardware and hired Jeri Ellsworth to build hardware division.
- AdmiralAsshat 10y ago
  I don't think anyone is insulting Carmack. Quite the opposite, pretty much everyone knows that Carmack is an absolutely brilliant, world-class developer. You could easily make the argument that Carmack saw the prototype and was more excited by its potential than its present quality that drove him to sign on. Then, being Carmack, he alone had the technical chops to make it usable.
MitchellKnight 10y ago
> However, the jury also found Wednesday that Oculus didn’t violate any trade secrets. Instead, it ruled that Luckey, who was working as a contractor for Zenimax before starting the Kickstarter for the Oculus Rift headset, violated his non-disclosure agreement, according to a Polygon report. I don't understand how this works. Why does Facebook have to pay $500M over an NDA violation between an individual and his previous company? It seems like ZeniMax should only have a case against Palmer Luckey.
- GauntletWizard 10y ago
  Because Oculus (now part of Facebook) was built on the NDA breach. (It is the court's opinion that) Luckey misappropriated trade secrets, formed that misappropriation into Oculus, and then sold that to FB. IANAL, but I suspect it's a 'receipt of stolen goods' argument - FB should have known through it's due diligence that what they were buying was stolen property.
  - deleted 10y ago
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- toyg 10y ago
  TechCrunch says "Oculus pays $200M for NDA [breach of contract], $50M for false des[ignation], $50M for copyright [infringement], Luckey pays $50M false des, Iribe pays $150M false des" [1] So it's more like FB/Oculus pay 300m, Luckey 50m, Iribe (former CEO) 150m. It looks like the judgement is against Oculus and their execs, which misrepresented what was sold to FB. It seems like they were found innocent of theft, which would have been more the more damaging charge going forward IMHO. As it is, it's a big cash penalty and that's it; which could mean FB might choose to cut their losses and just pay, rather than risk going through an appeal. [1] https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-million-in-oculus-vr-lawsuit/ https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-mi...
- taneq 10y ago
  If Alice hires Bob, and Bob sells Alice's information to Charlie, and Charlie makes $2bn out of it, then it seems fair to hold Charlie responsible as well. Otherwise all you're doing is creating a market for sacrificial goats to take the fall while the company making the money gets away clean.
bmm01 10y ago
The TechCrunch article describes ZeniMax's allegations at more length: https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-million-in-oculus-vr-lawsuit/ https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-mi...
tabeth 10y ago
Facebook bought Oculus for $3B [1] 16% of the purchase price for infringing on an NDA is pretty damaging. I believe that'll be a good deterrent in the future. [1] http://uk.businessinsider.com/facebook-actually-paid-3-billion-for-oculus-vr-2017-1 http://uk.businessinsider.com/facebook-actually-paid-3-billi... (thanks for the correction, Cozumuel)
- MikusR 10y ago
  Zenimax wanted 15% of company. 16% one time payment is cheaper.
  - hkmurakami 10y ago
    Nice to have a tax write-off too for FB. (Settlement sums can be offset against profits iirc)
    - kgwgk 10y ago
      Paying X will reduce profits by that amount and taxes by a much lower amount. I'm not sure FB will consider the whole thing nice. I mean, having to pay twice as much would't be twice as nice.
- modeless 10y ago
  A deterrent for what? What's the lesson here? If you're a student don't sign an NDA on the off chance you'll later found a company and get acquired by Facebook for $2B? The real takeaway here is, if you have world-class tech guys working for you then don't support them, just tie them up in contracts, and when they leave and become successful you can sue them to get 25% of whatever they made, at zero risk to you.
  - EugeneOZ 10y ago
    World-class tech guys should also respect contracts they sign. I respect his works and achievements, but I think his actions in this case were unfair. I only hope I don't know all details and my opinion is based on not all facts. I'd like to know my opinion is wrong.
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corysama 10y ago
> 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 Iribe has to pay $150 million for the same, final count. http://www.polygon.com/2017/2/1/14474198/oculus-lawsuit-verdict http://www.polygon.com/2017/2/1/14474198/oculus-lawsuit-verd...
kafkaesq 10y ago
Facebook's Sheryl Sandberg told CNBC's Julia Boorstin that she was "disappointed in certain elements of the decision." Sandberg added she was "considering our options to appeal," and the verdict was "not material to our financials." Sure, FB has a lot of money. But still -- $500M is "not material" to their finances?
- hkmurakami 10y ago
  Related: I believe you can take offset such a settlement from profits to reduce taxes. Never really understood the rationale for this. Seems pretty arbitrary and another example of how corporations are often favored over humans.
  - deleted 10y ago
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  - advisedwang 10y ago
    Imagine if you earned $1000 from activity X, paying $200 tax on it. Later X is found to be illegitimate and you have to pay $1000 damages and $500 punitive damages. Except because of the tax you have net lost $700 rather than the $500 punitive damages. Put in another term, it would be like paying tax on money you never had.
  - kgwgk 10y ago
    What's to understand? When a company pays your salary or the rent for your office that also means less profit and therefore less taxes. But probably the company would be glad to pay less in salaries and rents even if that meant paying higher taxes.
- TAForObvReasons 10y ago
  The company may have already reserved 500M for a potential resolution and took the hit in a previous quarter. This is typical of many companies, which is why you sometimes see stock prices rise after a legal settlement that comes in much lower than anticipated. For example, suppose they set aside 1B legal reserve for this case. That hit was already taken. Now they would reclaim 500M of that, which would be accretive.
foota 10y ago
This wasn't something I knew, but it appears that Carmack used to indirectly work for Zenimax, who became the parent company of id.
- dkonofalski 10y ago
  It wasn't indirect, by any means. Carmack was working on a VR version of Doom 3 (the BFG Edition) while working at id/ZeniMax before he jumped ship to go work at Facebook. There's still tons of remnant news stories about the Doom 3 BFG VR Edition that was supposed to launch with the CV1 Rift.
dvdcxn 10y ago
>John Carmack, Oculus chief technology officer and founder of a company owned by ZeniMax, improved on the device using his knowledge from his previous work as a ZeniMax employee. That's a scary precedent...
- deleted 10y ago
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- xadhominemx 10y ago
  Fortunately, juries do not create precedent.
  - DannyBee 10y ago
    Unfortunately, every piece of caselaw in the united states is the same, and has found the same. IE This has been the law in every state forever. Even the most liberal of states here, like california, find the same way, because they let employers claim things that "relate, at the time of conception or development, to the employers business, or the employers actual or demonstrable anticipated research or development". Most engineers like to cut it off before the or, and like to believe their employer's business is very narrow. Courts read both very broadly.
- psyc 10y ago
  It's also an outrageous insinuation that John Carmack, the father of the FPS, needed "knowledge gained from Zenimax" in order to make Oculus happen.
  - ojr 10y ago
    I think you are undervaluing the codebase, if he used a codebase that was touched by 10 engineers with an average pay of 100k, the codebase cost 1 million to make in just one year, it would be hard for any engineer no matter how good to match the man hours of 10 engineers, Zenimax owned that knowledge and paid a high price for the value
    - 10y ago
modeless 10y ago
Good to hear that the jury made the right decision on the ridiculous charges against Carmack. Sad to hear that they think a bunch of litigious assholes deserve $500 million for getting a signature on an NDA.
- dvt 10y ago
  Litigious or not, that's how intellectual property works. It's pretty clear that ZeniMax tried to reach some kind of agreement and no common ground was found.
  - modeless 10y ago
    It's clear there were negotiations. It's not clear how hard ZeniMax was trying. Based on how much support they gave Carmack it seems that they really wanted nothing to do with VR and that didn't change until they started smelling 2 billion Facebook dollars.
- psyc 10y ago
  Zenimax, an investment vehicle for Providence Equity Partners, is literally run by actual lawyers. In the early days of Oculus, Carmack tried to get them interested in VR, and they wanted nothing to do with it. Now all of a sudden Oculus is a result of their tech. They wouldn't even have the slimy case that they have, if not for the fact that Carmack and others used to work there. People can debate the legal technicalities all they want, but the plain, everyday explanation of what happened is that some lawyers figured out how to retroactively create and profit massively from a virtual non-compete that never existed.
  - whyileft 10y ago
    Bingo. First person I found in this entire thread that knows what actually happened.
  - manquer 10y ago
    Hmm.. they still paid 100m to get carmack's previous company partly for his and others talent .. they had explicit NDA signed with oculus. carmack was working on their resources and IP(doom) on company time. Carmack was critical to success of occulus. The suit also predates Fb acquisition It is not their problem that Fb didn't do due diligence.
doctorpangloss 10y ago
Large fines like these, even if the facts are clear, do not support competition and seem anti-consumer and anti-innovation. Either the fines should be smaller or the laws changed to better balance what concretely happened: a poaching of a key employee that led to the development of a big product. That being said, Facebook doesn't really seem to have its R&D figured out. It's poisoned by bad leadership. Palmer Luckey managed to disgrace himself in public opinion in a way that seems hostile to recruiting the kind of progressive, free-thinking talent that makes up most R&D teams. John Carmack, besides his political leanings, speaks derisively of "Hollywood people" (Oculus users) and came out of this lawsuit looking like a real jerk chasing a huge check at any cost. At the end of the day, he betrayed a video game company. Mark Zuckerberg has a lot of leadership faults disguised behind an amateurish ownership structure that puts him outside of public accountability. Despite its huge head start, Oculus is seriously threatened by HTC, Sony, Google and Samsung. Paper and Facebook payments didn't really go anywhere. Though Instagram and WhatsApp seem to be good acquisitions, even at their extraordinary prices, a broken clock can still be right twice a day. And it doesn't really take leadership to spend huge amounts of money on acquisitions—that's the easy way out. Outside of Facebook, his New Jersey schools efforts were not well regarded. Will his $3 billion commitment to a SF Biohub be marred by similar issues? I'm just nervous is all. I think market sentiment will catch up with this ruling. Eventually someone's going to ask if he's the right guy to be in charge of Facebook. The public investor may never actually have the power to do something about it.
- AmirS2 10y ago
  > what concretely happened: a poaching of a key employee Not quite the reason for the fine according to TFA: > Instead, it ruled that Luckey, who was working as a contractor for Zenimax before starting the Kickstarter for the Oculus Rift headset, violated his non-disclosure agreement,
  - doctorpangloss 10y ago
    In my personal opinion, whether or not Luckey violated the NDA is a little academic. Clearly, the $3 billion acquisition occurred on the reputation of John Carmack, who was poached. I don't think you should charge $500 million for a poaching. That's the crux of my anticompetitiveness argument. Nonetheless, you definitely shouldn't charge $500 million for merely violating an NDA, even if that's what the jury found.
gshulegaard 10y ago
This whole situation leaves me with a bad taste in my mouth regarding Zenimax. So their biggest claim, surrounding Oculus being built on trade secrets, is found false but they get a half-billion dollar payout anyway? Considering the purported fines could be traced back all the way to practically the original Kickstarter...I wonder if Zenimax would have gotten such a sum had Oculus not been bought by FB for $3B[1]... ...or am I misunderstanding something? [1] http://www.businessinsider.com/facebook-actually-paid-3-billion-for-oculus-vr-2017-1?r=UK&IR=T http://www.businessinsider.com/facebook-actually-paid-3-bill...
- LandoCalrissian 10y ago
  It's the NDA that killed them.
  - gshulegaard 10y ago
    Yeah...but that breach was originally made during the original Kickstarter in 2012. Aren't most statute of limitations for NDA breaches 3-4 years from original breach? But even if it's still within the statute of limitations I can't help but get the feeling Zenimax is just trying to cash in on the unlikely success of Oculus.
    - elastic_church 10y ago
      They sued in 2014 so the clock stops there.
      - cpncrunch 10y ago
        It looks like they sued in May 2014, and the acquisition closed in July 2014, so it looks like facebook just didn't do adequate due diligence.
        gshulegaard 10y ago
        Having filed suit before the FB acquisition, I am a lot less perturbed. But a lot of the negative posturing from ZeniMax during the case still rubs me the wrong way.
6stringmerc 10y ago
Very interesting result and shows the value of contracts. A lot of times people want to say, "Oh, that's just paperwork" and after years and years of Alphabet Soup Regulatory Agencies hovering over my RFP and business proposal work for clients, I have the utmost respect for signed documents and what they are there to enforce. This isn't just finger-pointing accusations any more, this is a multi-hundred-million dollar verdict about a significant future market. Anybody who might consider pulling a similar stunt - and didn't learn from the public shitshow that was Cruise Automation's dirty laundry hung out in public - should be wise to study this case. Disruption is fine and dandy overall, it's just that the Ends will also be measured by the Means in time.
aresant 10y ago
If the original complaint is to be believed(1) - which Juror's found credible -the course of events, tldr was something like this: - Zenimax bought ID software for >$100m(1) on June 24, 2009. - Carmack signed up with Zenimax for an earn-out / golden-handcuffs agreement that ended in June of 2013. - Carmack was enthralled with VR. - Carmack found Palmer via an internet forum, reached out to get a rift to try. - Carmack tinkered with the Rift, adding sensors, building calibration, etc. while on the clock / using hardware from zenimax. - Carmack brought a prototype of the Rift working on Doom 3 to E3 with him providing Oculus with their early press. - Zenimax realized the extent to which Carmack was enabling Oculus and worked to negotiate equity with Brendan Iribe. - Oculus sent Zenimax a proposal to discuss a partnership Sept 21, 2012 but never followed up / followed through. - Carmack quit Zenimax the day his contract was up in June 2013, joined Oculus as CTO a few months later and took his 5 best guys with him. - FB bought Oculus March 2014, Zenmix got pissed and sued. Clearly it's Carmack's genius that made this viable. It's Carmack's video that lent credibility to the campaign. And it's Carmack's original IP (Doom) that made the demos compelling. It may be a weird system that Zenimax is entitled to $500m but since Carmack was an employee, under contract with Zenimax - who had paid >$100m to buy him / his IP - it sounds like this was a fair verdict. (1) https://www.scribd.com/document/274211118/Judge-denies-Facebook-motion https://www.scribd.com/document/274211118/Judge-denies-Faceb... (2) http://www.gamespot.com/articles/zenimax-raised-105-million-to-buy-id/1100-6213068/ http://www.gamespot.com/articles/zenimax-raised-105-million-...
- drzaiusapelord 10y ago
  Seems fair to me as well. There's already postings dismissing any IP settlement as "unfair" here but that's fairly unrealistic in the real world. If IP can't be defended then that chills investor confidence. Why should I invest in company x if employees can leave with all the IP and go start company y? Note this wasn't some submarine patent troll out of nowhere. This was a Zenimax employee working on another company's product on their time. This was also about NDA violations and a boatload of shady dealings by Facebook who famously bought Oculus over the weekend and left no time for a proper discovery of liabilities. There's little controversial about this. Carmack and Luckey were simply wrong and Oculus should have worked things out better with Zenimax. FB needs to do better due diligence. A lot of bad players were punished today. The VR industry is too young and fragile to have these shenanigans become the norm. Signaling to investors that VR IP is protected is a good for everyone.
abandonliberty 10y ago
Can anyone find a copy of the NDA that was violated?
- rasz_pl 10y ago
  its under NDA
  - abandonliberty 10y ago
    I honestly don't know if you are joking. I would appreciate seeing a source for that.
    - koko775 10y ago
      NDAs are under NDA more often than not
    - josephpmay 10y ago
      I think he probably meant that as a joke, and I would imagine that the contents of the NDA were part of the trial's discovery, however most NDA's I've been signing recently have included a clause that the NDA itself is confidential.
rounce 10y ago
> ZeniMax isn’t a household name with most consumers, but the company’s subsidiaries have produced video games like “Quake,” “Fallout,” and “Wolfenstein. So read the complaint in full, and it's a fair bit different to how it's reported in the OP. Article frames the situation in a pretty odd manner, almost implying ZeniMax by association had a hand in those titles. Also completely misses out the depth of prior association between Carmack and ZeniMax.
Yuioup 10y ago
John Carmack has to pay $150M. I know he's a very successful person but that has to be a lot of money for him. Is facebook going to pay that cash?
akhilcacharya 10y ago
So when's the movie coming out?
antoniuschan99 10y ago
So fb will pay 300 mil and luckey and crew 200 mil. I think its good for fb and bad for the others. If fb had to pay all then that would've been bad for them. How many units is occulus selling now?
timhj 10y ago
300m + 150m + 150m (Payout structure stated in the article) = 600m, not $500m.
jayjay71 10y ago
I wonder if this decision will be final, or if either party will appeal. Facebook has stated they will appeal, but Zenimax has threatened an injunction. While an injunction seems unlikely to achieve fruition, just the chance that it might (which would completely halt VR for Facebook) seems enough of a risk to just move on. http://uploadvr.com/verdict-zenimax-oculus/ http://uploadvr.com/verdict-zenimax-oculus/ Then again, what do I know about giant corporations suing each other. I've always found it comical how much money Samsung and Apple spent suing each other, but they seem to make money just fine.
soheil 10y ago
> with Carmack having to pay another $150 million His net worth seems to be only $40 million. What happens to him now?
- Keyframe 10y ago
  Serve time at Zenimax. Or maybe it's not final decision.
Jerry2 10y ago
This is a very interesting part: [0] >The liability of Defendants was established by uncontradicted evidence presented by ZeniMax, including (i) the breakthrough in VR technology occurred in March 2012 at id Software through the research efforts of our former employee John Carmack (work that ZeniMax owns) before we ever had contact with the other defendants; (ii) we shared this VR technology with the defendants under a non-disclosure agreement that expressly stated all the technology was owned by ZeniMax; (iii) the four founders of Oculus had no expertise or even backgrounds in VR—other than Palmer Luckey who could not code the software that was the key to solving the issues of VR; (iv) there was a documented stream of computer code and other technical assistance flowing from ZeniMax to Oculus over the next 6 months; (v) Oculus in writing acknowledged getting critical source code from ZeniMax; (vi) Carmack intentionally destroyed data on his computer after he got notice of this litigation and right after he researched on Google how to wipe a hard drive—and data on other Oculus computers and USB storage devices were similarly deleted (as determined by a court-appointed, independent expert in computer forensics); (vii) when he quit id Software, Carmack admitted he secretly downloaded and stole over 10,000 documents from ZeniMax on a USB storage device, as well as the entire source code to RAGE and the id tech® 5 engine —which Carmack uploaded to his Oculus computer; (viii) Carmack filed an affidavit which the court's expert said was false in denying the destruction of evidence; and (ix) Facebook's lawyers made representations to the court about those same Oculus computers which the court's expert said were inaccurate. Oculus’ response in this case that it didn’t use any code or other assistance it received from ZeniMax was not credible, and is contradicted by the testimony of Oculus programmers (who admitted cutting and pasting ZeniMax code into the Oculus SDK), as well as by expert testimony. [0] http://www.polygon.com/2017/2/1/14478258/zenimax-oculus-injunction http://www.polygon.com/2017/2/1/14478258/zenimax-oculus-inju...
- zaroth 10y ago
  Wow... Very damn compelling and puts the $500m in perspective. I always wonder when they are able to show someone made a particular Google search months after the fact, where are they pulling that data from? Surely the browser history is long gone...
  - 10y ago
seesomesense 10y ago
Good to see that unethical behaviour has costs.
Kiro 10y ago
> Luckey having to pay $150 million What's the reasoning behind that?

259 points by _pius 10y ago

For those interested, the official court document can be accessed here: https://www.scribd.com/document/274211118/Judge-denies-Facebook-motion https://www.scribd.com/document/274211118/Judge-denies-Faceb... It describes in details what happened.

e1ven 10y ago
Isn't that about the initial motion to dismiss from 2015?
abandonliberty 10y ago
It describes in detail the ZeniMax allegations. > Though the Court uses definite language, the information is based on allegations only I highly recommend it. It provides much more perspective and appears to be a strong case. The decisions - both in their favor and against - appear reasonable based on publicly available information.

cptskippy 10y ago

The accusation that Palmer was incapable of creating the Rift without Carmack's help and that he had a barely functional prototype, if true, is pretty insulting to Carmack. Carmack is a smart guy and I every much doubt he'd have joined on at CTO if the prototype was as awful as ZeniMax says it was.

dkonofalski 10y ago
I don't think it was the prototype itself that was barely functioning, it was the software side that wasn't great. I remember when Palmer first showed off the device, it seemed to track just fine. When they introduced actual content, though, it became disorienting really quickly. I backed them on Kickstarter so I got to see the DevKit1, DK2, and the CV1. The difference between the early versions and the end versions really came down to the software that handled the tracking. Compensating for movement lag and predicting frames to ease the jerkiness are really what converted it from a prototype to a viable commercial product. That being said, it makes me laugh a little to see that Valve and the HTC Vive managed to outpace Oculus. Oculus had so much momentum and marketing buzz and they really dropped the ball on that one. Who knows how much of that was due to the FB purchase, but it definitely is weird seeing them lose their huge advantage.
- cptskippy 10y ago
  Personally I have no interest in Oculus and it's equal parts Facebook and the vendor lock-in BS.
  - dkonofalski 10y ago
    Oh, don't get me wrong. I'm never buying an Oculus product again, I'm just saying that I completely understand the accusation that the Rift was nothing without Carmack.
- pipio21 10y ago
  "That being said, it makes me laugh a little to see that Valve and the HTC Vive managed to outpace Oculus." It was the other way around. Valve had been working in VR for years before the first oculus prototype. Oculus contacted Steam and copied the tech they had. The Steam guys actually helped Luckey because it was the small guy doing the open source thing. They did not take into account the selloff to facebook of all this information.
  - dkonofalski 10y ago
    I don't know how much stock I put into this. If you're going based off of what Yates said in that Reddit interview, I'd take that with a grain of salt. Palmer was working on a 3D head mounted display back in 2010/2011 and Valve has only admitted to VR research since 2012/2013. That's not to say that they couldn't have worked on it before then, but Palmer wasn't involved at that point. He also was only working on a 3D headset and wasn't initially planning on a VR headset from what I understand. On top of that, Oculus definitely had more marketing/media buzz so they were ahead of Valve in the consumer mind. The end product might be closer to Valve's than to his original prototype, but he definitely had a small head start on them for the prototype and a huge head start from a marketing perspective. Valve all but shattered that. Here's Palmer's first announcement in like 2012: http://www.mtbs3d.com/phpBB/viewtopic.php?f=140&t=14777 http://www.mtbs3d.com/phpBB/viewtopic.php?f=140&t=14777
  - rasz_pl 10y ago
    This is simply not true. Valve had precisely ZERO VR research up until 2012. Thats when they finally decided to pursue hardware and hired Jeri Ellsworth to build hardware division.
AdmiralAsshat 10y ago
I don't think anyone is insulting Carmack. Quite the opposite, pretty much everyone knows that Carmack is an absolutely brilliant, world-class developer. You could easily make the argument that Carmack saw the prototype and was more excited by its potential than its present quality that drove him to sign on. Then, being Carmack, he alone had the technical chops to make it usable.

MitchellKnight 10y ago

> However, the jury also found Wednesday that Oculus didn’t violate any trade secrets. Instead, it ruled that Luckey, who was working as a contractor for Zenimax before starting the Kickstarter for the Oculus Rift headset, violated his non-disclosure agreement, according to a Polygon report. I don't understand how this works. Why does Facebook have to pay $500M over an NDA violation between an individual and his previous company? It seems like ZeniMax should only have a case against Palmer Luckey.

GauntletWizard 10y ago
Because Oculus (now part of Facebook) was built on the NDA breach. (It is the court's opinion that) Luckey misappropriated trade secrets, formed that misappropriation into Oculus, and then sold that to FB. IANAL, but I suspect it's a 'receipt of stolen goods' argument - FB should have known through it's due diligence that what they were buying was stolen property.
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toyg 10y ago
TechCrunch says "Oculus pays $200M for NDA [breach of contract], $50M for false des[ignation], $50M for copyright [infringement], Luckey pays $50M false des, Iribe pays $150M false des" [1] So it's more like FB/Oculus pay 300m, Luckey 50m, Iribe (former CEO) 150m. It looks like the judgement is against Oculus and their execs, which misrepresented what was sold to FB. It seems like they were found innocent of theft, which would have been more the more damaging charge going forward IMHO. As it is, it's a big cash penalty and that's it; which could mean FB might choose to cut their losses and just pay, rather than risk going through an appeal. [1] https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-million-in-oculus-vr-lawsuit/ https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-mi...
taneq 10y ago
If Alice hires Bob, and Bob sells Alice's information to Charlie, and Charlie makes $2bn out of it, then it seems fair to hold Charlie responsible as well. Otherwise all you're doing is creating a market for sacrificial goats to take the fall while the company making the money gets away clean.

bmm01 10y ago

The TechCrunch article describes ZeniMax's allegations at more length: https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-million-in-oculus-vr-lawsuit/ https://techcrunch.com/2017/02/01/jury-awards-zenimax-500-mi...

tabeth 10y ago

Facebook bought Oculus for $3B [1] 16% of the purchase price for infringing on an NDA is pretty damaging. I believe that'll be a good deterrent in the future. [1] http://uk.businessinsider.com/facebook-actually-paid-3-billion-for-oculus-vr-2017-1 http://uk.businessinsider.com/facebook-actually-paid-3-billi... (thanks for the correction, Cozumuel)

MikusR 10y ago
Zenimax wanted 15% of company. 16% one time payment is cheaper.
- hkmurakami 10y ago
  Nice to have a tax write-off too for FB. (Settlement sums can be offset against profits iirc)
  - kgwgk 10y ago
    Paying X will reduce profits by that amount and taxes by a much lower amount. I'm not sure FB will consider the whole thing nice. I mean, having to pay twice as much would't be twice as nice.
modeless 10y ago
A deterrent for what? What's the lesson here? If you're a student don't sign an NDA on the off chance you'll later found a company and get acquired by Facebook for $2B? The real takeaway here is, if you have world-class tech guys working for you then don't support them, just tie them up in contracts, and when they leave and become successful you can sue them to get 25% of whatever they made, at zero risk to you.
- EugeneOZ 10y ago
  World-class tech guys should also respect contracts they sign. I respect his works and achievements, but I think his actions in this case were unfair. I only hope I don't know all details and my opinion is based on not all facts. I'd like to know my opinion is wrong.

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corysama 10y ago

> 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 Iribe has to pay $150 million for the same, final count. http://www.polygon.com/2017/2/1/14474198/oculus-lawsuit-verdict http://www.polygon.com/2017/2/1/14474198/oculus-lawsuit-verd...

kafkaesq 10y ago

Facebook's Sheryl Sandberg told CNBC's Julia Boorstin that she was "disappointed in certain elements of the decision." Sandberg added she was "considering our options to appeal," and the verdict was "not material to our financials." Sure, FB has a lot of money. But still -- $500M is "not material" to their finances?

hkmurakami 10y ago
Related: I believe you can take offset such a settlement from profits to reduce taxes. Never really understood the rationale for this. Seems pretty arbitrary and another example of how corporations are often favored over humans.
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- advisedwang 10y ago
  Imagine if you earned $1000 from activity X, paying $200 tax on it. Later X is found to be illegitimate and you have to pay $1000 damages and $500 punitive damages. Except because of the tax you have net lost $700 rather than the $500 punitive damages. Put in another term, it would be like paying tax on money you never had.
- kgwgk 10y ago
  What's to understand? When a company pays your salary or the rent for your office that also means less profit and therefore less taxes. But probably the company would be glad to pay less in salaries and rents even if that meant paying higher taxes.
TAForObvReasons 10y ago
The company may have already reserved 500M for a potential resolution and took the hit in a previous quarter. This is typical of many companies, which is why you sometimes see stock prices rise after a legal settlement that comes in much lower than anticipated. For example, suppose they set aside 1B legal reserve for this case. That hit was already taken. Now they would reclaim 500M of that, which would be accretive.

foota 10y ago

This wasn't something I knew, but it appears that Carmack used to indirectly work for Zenimax, who became the parent company of id.

dkonofalski 10y ago
It wasn't indirect, by any means. Carmack was working on a VR version of Doom 3 (the BFG Edition) while working at id/ZeniMax before he jumped ship to go work at Facebook. There's still tons of remnant news stories about the Doom 3 BFG VR Edition that was supposed to launch with the CV1 Rift.

dvdcxn 10y ago

>John Carmack, Oculus chief technology officer and founder of a company owned by ZeniMax, improved on the device using his knowledge from his previous work as a ZeniMax employee. That's a scary precedent...

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xadhominemx 10y ago
Fortunately, juries do not create precedent.
- DannyBee 10y ago
  Unfortunately, every piece of caselaw in the united states is the same, and has found the same. IE This has been the law in every state forever. Even the most liberal of states here, like california, find the same way, because they let employers claim things that "relate, at the time of conception or development, to the employers business, or the employers actual or demonstrable anticipated research or development". Most engineers like to cut it off before the or, and like to believe their employer's business is very narrow. Courts read both very broadly.
psyc 10y ago
It's also an outrageous insinuation that John Carmack, the father of the FPS, needed "knowledge gained from Zenimax" in order to make Oculus happen.
- ojr 10y ago
  I think you are undervaluing the codebase, if he used a codebase that was touched by 10 engineers with an average pay of 100k, the codebase cost 1 million to make in just one year, it would be hard for any engineer no matter how good to match the man hours of 10 engineers, Zenimax owned that knowledge and paid a high price for the value
  - 10y ago

modeless 10y ago

Good to hear that the jury made the right decision on the ridiculous charges against Carmack. Sad to hear that they think a bunch of litigious assholes deserve $500 million for getting a signature on an NDA.

dvt 10y ago
Litigious or not, that's how intellectual property works. It's pretty clear that ZeniMax tried to reach some kind of agreement and no common ground was found.
- modeless 10y ago
  It's clear there were negotiations. It's not clear how hard ZeniMax was trying. Based on how much support they gave Carmack it seems that they really wanted nothing to do with VR and that didn't change until they started smelling 2 billion Facebook dollars.
psyc 10y ago
Zenimax, an investment vehicle for Providence Equity Partners, is literally run by actual lawyers. In the early days of Oculus, Carmack tried to get them interested in VR, and they wanted nothing to do with it. Now all of a sudden Oculus is a result of their tech. They wouldn't even have the slimy case that they have, if not for the fact that Carmack and others used to work there. People can debate the legal technicalities all they want, but the plain, everyday explanation of what happened is that some lawyers figured out how to retroactively create and profit massively from a virtual non-compete that never existed.
- whyileft 10y ago
  Bingo. First person I found in this entire thread that knows what actually happened.
- manquer 10y ago
  Hmm.. they still paid 100m to get carmack's previous company partly for his and others talent .. they had explicit NDA signed with oculus. carmack was working on their resources and IP(doom) on company time. Carmack was critical to success of occulus. The suit also predates Fb acquisition It is not their problem that Fb didn't do due diligence.

doctorpangloss 10y ago

Large fines like these, even if the facts are clear, do not support competition and seem anti-consumer and anti-innovation. Either the fines should be smaller or the laws changed to better balance what concretely happened: a poaching of a key employee that led to the development of a big product. That being said, Facebook doesn't really seem to have its R&D figured out. It's poisoned by bad leadership. Palmer Luckey managed to disgrace himself in public opinion in a way that seems hostile to recruiting the kind of progressive, free-thinking talent that makes up most R&D teams. John Carmack, besides his political leanings, speaks derisively of "Hollywood people" (Oculus users) and came out of this lawsuit looking like a real jerk chasing a huge check at any cost. At the end of the day, he betrayed a video game company. Mark Zuckerberg has a lot of leadership faults disguised behind an amateurish ownership structure that puts him outside of public accountability. Despite its huge head start, Oculus is seriously threatened by HTC, Sony, Google and Samsung. Paper and Facebook payments didn't really go anywhere. Though Instagram and WhatsApp seem to be good acquisitions, even at their extraordinary prices, a broken clock can still be right twice a day. And it doesn't really take leadership to spend huge amounts of money on acquisitions—that's the easy way out. Outside of Facebook, his New Jersey schools efforts were not well regarded. Will his $3 billion commitment to a SF Biohub be marred by similar issues? I'm just nervous is all. I think market sentiment will catch up with this ruling. Eventually someone's going to ask if he's the right guy to be in charge of Facebook. The public investor may never actually have the power to do something about it.

AmirS2 10y ago
> what concretely happened: a poaching of a key employee Not quite the reason for the fine according to TFA: > Instead, it ruled that Luckey, who was working as a contractor for Zenimax before starting the Kickstarter for the Oculus Rift headset, violated his non-disclosure agreement,
- doctorpangloss 10y ago
  In my personal opinion, whether or not Luckey violated the NDA is a little academic. Clearly, the $3 billion acquisition occurred on the reputation of John Carmack, who was poached. I don't think you should charge $500 million for a poaching. That's the crux of my anticompetitiveness argument. Nonetheless, you definitely shouldn't charge $500 million for merely violating an NDA, even if that's what the jury found.

gshulegaard 10y ago

This whole situation leaves me with a bad taste in my mouth regarding Zenimax. So their biggest claim, surrounding Oculus being built on trade secrets, is found false but they get a half-billion dollar payout anyway? Considering the purported fines could be traced back all the way to practically the original Kickstarter...I wonder if Zenimax would have gotten such a sum had Oculus not been bought by FB for $3B[1]... ...or am I misunderstanding something? [1] http://www.businessinsider.com/facebook-actually-paid-3-billion-for-oculus-vr-2017-1?r=UK&IR=T http://www.businessinsider.com/facebook-actually-paid-3-bill...

LandoCalrissian 10y ago
It's the NDA that killed them.
- gshulegaard 10y ago
  Yeah...but that breach was originally made during the original Kickstarter in 2012. Aren't most statute of limitations for NDA breaches 3-4 years from original breach? But even if it's still within the statute of limitations I can't help but get the feeling Zenimax is just trying to cash in on the unlikely success of Oculus.
  - elastic_church 10y ago
    They sued in 2014 so the clock stops there.
    - cpncrunch 10y ago
      It looks like they sued in May 2014, and the acquisition closed in July 2014, so it looks like facebook just didn't do adequate due diligence.
      - gshulegaard 10y ago
        Having filed suit before the FB acquisition, I am a lot less perturbed. But a lot of the negative posturing from ZeniMax during the case still rubs me the wrong way.

6stringmerc 10y ago

Very interesting result and shows the value of contracts. A lot of times people want to say, "Oh, that's just paperwork" and after years and years of Alphabet Soup Regulatory Agencies hovering over my RFP and business proposal work for clients, I have the utmost respect for signed documents and what they are there to enforce. This isn't just finger-pointing accusations any more, this is a multi-hundred-million dollar verdict about a significant future market. Anybody who might consider pulling a similar stunt - and didn't learn from the public shitshow that was Cruise Automation's dirty laundry hung out in public - should be wise to study this case. Disruption is fine and dandy overall, it's just that the Ends will also be measured by the Means in time.

aresant 10y ago

If the original complaint is to be believed(1) - which Juror's found credible -the course of events, tldr was something like this: - Zenimax bought ID software for >$100m(1) on June 24, 2009. - Carmack signed up with Zenimax for an earn-out / golden-handcuffs agreement that ended in June of 2013. - Carmack was enthralled with VR. - Carmack found Palmer via an internet forum, reached out to get a rift to try. - Carmack tinkered with the Rift, adding sensors, building calibration, etc. while on the clock / using hardware from zenimax. - Carmack brought a prototype of the Rift working on Doom 3 to E3 with him providing Oculus with their early press. - Zenimax realized the extent to which Carmack was enabling Oculus and worked to negotiate equity with Brendan Iribe. - Oculus sent Zenimax a proposal to discuss a partnership Sept 21, 2012 but never followed up / followed through. - Carmack quit Zenimax the day his contract was up in June 2013, joined Oculus as CTO a few months later and took his 5 best guys with him. - FB bought Oculus March 2014, Zenmix got pissed and sued. Clearly it's Carmack's genius that made this viable. It's Carmack's video that lent credibility to the campaign. And it's Carmack's original IP (Doom) that made the demos compelling. It may be a weird system that Zenimax is entitled to $500m but since Carmack was an employee, under contract with Zenimax - who had paid >$100m to buy him / his IP - it sounds like this was a fair verdict. (1) https://www.scribd.com/document/274211118/Judge-denies-Facebook-motion https://www.scribd.com/document/274211118/Judge-denies-Faceb... (2) http://www.gamespot.com/articles/zenimax-raised-105-million-to-buy-id/1100-6213068/ http://www.gamespot.com/articles/zenimax-raised-105-million-...

drzaiusapelord 10y ago
Seems fair to me as well. There's already postings dismissing any IP settlement as "unfair" here but that's fairly unrealistic in the real world. If IP can't be defended then that chills investor confidence. Why should I invest in company x if employees can leave with all the IP and go start company y? Note this wasn't some submarine patent troll out of nowhere. This was a Zenimax employee working on another company's product on their time. This was also about NDA violations and a boatload of shady dealings by Facebook who famously bought Oculus over the weekend and left no time for a proper discovery of liabilities. There's little controversial about this. Carmack and Luckey were simply wrong and Oculus should have worked things out better with Zenimax. FB needs to do better due diligence. A lot of bad players were punished today. The VR industry is too young and fragile to have these shenanigans become the norm. Signaling to investors that VR IP is protected is a good for everyone.

abandonliberty 10y ago

Can anyone find a copy of the NDA that was violated?

rasz_pl 10y ago
its under NDA
- abandonliberty 10y ago
  I honestly don't know if you are joking. I would appreciate seeing a source for that.
  - koko775 10y ago
    NDAs are under NDA more often than not
  - josephpmay 10y ago
    I think he probably meant that as a joke, and I would imagine that the contents of the NDA were part of the trial's discovery, however most NDA's I've been signing recently have included a clause that the NDA itself is confidential.

rounce 10y ago

> ZeniMax isn’t a household name with most consumers, but the company’s subsidiaries have produced video games like “Quake,” “Fallout,” and “Wolfenstein. So read the complaint in full, and it's a fair bit different to how it's reported in the OP. Article frames the situation in a pretty odd manner, almost implying ZeniMax by association had a hand in those titles. Also completely misses out the depth of prior association between Carmack and ZeniMax.

Yuioup 10y ago

John Carmack has to pay $150M. I know he's a very successful person but that has to be a lot of money for him. Is facebook going to pay that cash?

akhilcacharya 10y ago

So when's the movie coming out?

antoniuschan99 10y ago

So fb will pay 300 mil and luckey and crew 200 mil. I think its good for fb and bad for the others. If fb had to pay all then that would've been bad for them. How many units is occulus selling now?

timhj 10y ago

300m + 150m + 150m (Payout structure stated in the article) = 600m, not $500m.

jayjay71 10y ago

I wonder if this decision will be final, or if either party will appeal. Facebook has stated they will appeal, but Zenimax has threatened an injunction. While an injunction seems unlikely to achieve fruition, just the chance that it might (which would completely halt VR for Facebook) seems enough of a risk to just move on. http://uploadvr.com/verdict-zenimax-oculus/ http://uploadvr.com/verdict-zenimax-oculus/ Then again, what do I know about giant corporations suing each other. I've always found it comical how much money Samsung and Apple spent suing each other, but they seem to make money just fine.

soheil 10y ago

> with Carmack having to pay another $150 million His net worth seems to be only $40 million. What happens to him now?

Keyframe 10y ago
Serve time at Zenimax. Or maybe it's not final decision.

Jerry2 10y ago

This is a very interesting part: [0] >The liability of Defendants was established by uncontradicted evidence presented by ZeniMax, including (i) the breakthrough in VR technology occurred in March 2012 at id Software through the research efforts of our former employee John Carmack (work that ZeniMax owns) before we ever had contact with the other defendants; (ii) we shared this VR technology with the defendants under a non-disclosure agreement that expressly stated all the technology was owned by ZeniMax; (iii) the four founders of Oculus had no expertise or even backgrounds in VR—other than Palmer Luckey who could not code the software that was the key to solving the issues of VR; (iv) there was a documented stream of computer code and other technical assistance flowing from ZeniMax to Oculus over the next 6 months; (v) Oculus in writing acknowledged getting critical source code from ZeniMax; (vi) Carmack intentionally destroyed data on his computer after he got notice of this litigation and right after he researched on Google how to wipe a hard drive—and data on other Oculus computers and USB storage devices were similarly deleted (as determined by a court-appointed, independent expert in computer forensics); (vii) when he quit id Software, Carmack admitted he secretly downloaded and stole over 10,000 documents from ZeniMax on a USB storage device, as well as the entire source code to RAGE and the id tech® 5 engine —which Carmack uploaded to his Oculus computer; (viii) Carmack filed an affidavit which the court's expert said was false in denying the destruction of evidence; and (ix) Facebook's lawyers made representations to the court about those same Oculus computers which the court's expert said were inaccurate. Oculus’ response in this case that it didn’t use any code or other assistance it received from ZeniMax was not credible, and is contradicted by the testimony of Oculus programmers (who admitted cutting and pasting ZeniMax code into the Oculus SDK), as well as by expert testimony. [0] http://www.polygon.com/2017/2/1/14478258/zenimax-oculus-injunction http://www.polygon.com/2017/2/1/14478258/zenimax-oculus-inju...

zaroth 10y ago
Wow... Very damn compelling and puts the $500m in perspective. I always wonder when they are able to show someone made a particular Google search months after the fact, where are they pulling that data from? Surely the browser history is long gone...
- 10y ago

seesomesense 10y ago

Good to see that unethical behaviour has costs.

Kiro 10y ago

> Luckey having to pay $150 million What's the reasoning behind that?