Dallas Jury: Palmer Luckey Broke ZeniMax NDA

Dallas Jury: Palmer Luckey Broke ZeniMax NDA
February 1, 2017

A Dallas jury found Wednesday that Facebook is required to pay $500 million to tech company ZeniMax in a lawsuit that questioned the technological origins of the revolutionary virtual reality goggle Oculus Rift.


The news was first reported on gaming website Polygon. ZeniMax and Facebook did not immediately respond to a request for comment.


Facebook shares (FB) were little changed on the report, which ended the day up 2% at $132.86, but then shot up 3% in after hours trading after the social networking company smashed Wall Street expectationsfor its fourth quarter earnings.


ZeniMax had sought as much as $4 billion in compensation and damages. The gaming company had alleged that when Facebook purchased Oculus from inventor Palmer Luckey for nearly $3 billion in 2014, it acquired a product that had been developed with its expertise.


The Polygon report, which maintains that Oculus will be appealing the verdict, notes that of the $500 million, Oculus will pay $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 Brendan Iribe, a cofounder of Oculus VR and now its CEO, has to pay $150 million for the same.


The jury, which took two and a half days to deliberate after hearing from Luckey as well as Facebook founder Mark Zuckerberg, did not agree with ZeniMax lawyers who charged that Facebook stole trade secrets.


But it agreed that Luckey, now 24, had violated the terms of a non-disclosure agreement he had signed with ZeniMax while he was developing the groundbreaking goggle.


Back in 2012, VR whiz John Carmack, who worked for iD Software, a game-maker that is part of ZeniMax, began helping then-student Palmer with his goggle project. That technical assistance eventually required Luckey to sign the NDA.


Not long after, Oculus Rift was an instant hit on Kickstarter, raising $2.4 million and confirming its commercial potential. Carmack eventually went to work for Luckey.


The defendants in this trial said that what ultimately became Oculus Rift did not contain ZeniMax code or IP; instead, the plaintiffs maintained that the NDA was violated and ZeniMax was therefore due remuneration from the mammoth sale.


The verdict is a blow to Luckey, who had gone from an outspoken poster boy for youthful tech innovation to a virtual recluse.


Last September, The Daily Beast reported that Luckey had donated $10,000 to Nimble America, a conservative non-profit with a mission to develop memes to attack Hillary Clinton.


Facebook recently announced that former Google executive Hugo Barra would take over its virtual reality strategy. Zuckerberg has repeatedly said that "virtual and augmented reality will be the next major computing platform."

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