Facebook and Oculus lose $500m virtual reality dispute

Significant damages were awarded against both companies and key individuals after a US court ruled against them.

Following a three week trial in Dallas, Texas, the US District Court has upheld claims by video game developer ZeniMax that Facebook, Oculus (which Facebook owns) and a number of Oculus executives infringed ZeniMax’s rights in its virtual reality technology.

ZeniMax’s lawsuit claimed that Oculus, which was acquired by Facebook in 2014, had copied their technology and trade secrets. They also brought claims against Facebook for copyright infringement, and against Oculus Founder Palmer Luckey for breach of a non-disclosure agreement with ZeniMax that he had signed when ZeniMax and Oculus had worked together.

Although ZeniMax’s claims of unlawful copying were rejected by the jury, they did find in the ZeniMax’s  favour in relation to the following claims, totaling $500 million (£395 million):

  • Oculus, breaching its NDA with ZeniMaz, $200 million
  • Oculus, copyright infringement, $50 million
  • Oculus, false designation, $50 million
  • Palmer Luckey, false designation, $50 million
  • Former Oculus CEO Brendan Iribe, false designation, $50 million

Both ZeniMax and Oculus have released statements about the court ruling, with an Oculus spokesperson admitting that the company was disappointed with the decision and would appeal.

Facebook grew its net profit by 177% in 2016, up to $10.2bn. This was largely due to an increase in advertising revenues rather than a focus on the virtual reality sector. However, this sector is clearly seen as important to Facebook in the long term considering the acquisition of Oculus in 2014 for $2 billion. This decision is therefore an undoubted setback for Facebook and Oculus and one they intend to appeal. Other companies working in virtual reality will likely be watching closely to see whether the appeal succeeds.