Earlier this year, ZeniMax won a $500 million judgment against Facebook-owned Oculus and many of its executives for illegal use of ZeniMax's VR technology and copyrights. That wasn't the end of Oculus' legal trouble, though. The company is now fighting off a proposed injunction that is seeking to bar the sale of any hardware or software "derived" from ZeniMax's technology or to enforce a 10-year, 20-percent royalty to ZeniMax on that hardware.
US District Judge Ed Kinkeade of the Southern District of Texas heard arguments in that injunction case Tuesday, and he also addressed a ZeniMax request for an additional $500 million in false designation damages and lawyer's fees. In court filings, ZeniMax argues that "the jury verdict clearly establishes that Oculus wrongly obtained ZeniMax VR technology under the NDA and used it... to establish a business that would not have existed without ZeniMax."
While Oculus' sale to Facebook "[made] tycoons out of the individual Defendants," ZeniMax writes, the company "never received a penny for its investment in this revolutionary technology—even though it was ZeniMax that had proven its value to the world long before Defendants ever came along." The company also points to specific language in the Oculus/ZeniMax NDA that establishes an injunction would be called for if that agreement was broken.
The $500 million in damages already awarded by a jury is "inadequate remedy for ongoing harm," ZeniMax argues, because that amount "is an insufficient incentive for Defendants to cease infringing." To argue this, the company cites Facebook COO Sheryl Sandberg, who said in an interview that the jury award was "not material to [Facebook's] financials."
Oculus answers back
In its own court filings in response to the injunction motion, Oculus argues that "ZeniMax cannot show it is suffering continuing harm" from Oculus' actions. On the contrary, Oculus argues that the trial found ZeniMax would likely suffer "zero" monetary harm in the future because of Oculus' NDA breaches, which it says took place years ago and are not ongoing. "ZeniMax does not offer any products that compete with Oculus’s virtual-reality platforms and headsets," the company points out.
Any injunction on Oculus hardware would "impose undue hardship on Oculus," the company argues, and even "disserve the public interest" by letting Zenimax "turn around and wield it as leverage in future licensing negotiations." In any case, Oculus writes, ZeniMax has not provided evidence that the company's current source code continues to infringe on the early code that a jury found infringed on ZeniMax's copyright.
Oculus says rewriting the entire Oculus code base from scratch, as ZeniMax is requesting, would be a "lengthy, burdensome, and costly" process requiring "clean-room engineers to make myriad changes not just to the code fragments ZeniMax presented at trial, but to numerous other segments of interrelated and interdependent code." That process wouldn't be necessary if Zenimax had asserted its rights in a more timely fashion, Oculus writes.
Beyond rebutting the proposed injunction, Oculus also argued in court that the entire jury verdict should be thrown out. In arguments, an attorney for Oculus argued there is "not one ounce of evidence" that ZeniMax actually lost sales or took financial damage because of Oculus' actions. The jury award amounted to mere speculation about lost future earnings that weren't supported by the evidence, he argued, according to a Law360 summary of the hearing (subscription required). Furthermore, Oculus is seeking damages from ZeniMax for failing to disclose important information about ZeniMax's valuation that were ordered to be produced during the trial.
Judge Kinkeade asked Zenimax to be "more specific" in which pieces of current Oculus code infringe on Zenimax's copyright, according to the Law360 report. While the judge didn't issue a ruling following the hearing, he urged both parties to reach a settlement instead of risking a big decision that he said could come down hard against either side rather than "splitting the baby." The judge said he would likely "resolve the heck out of [this] big, hairy fight" sooner rather than later, according to Law360. So absent a settlement, we expect a ruling could come any day.