Real Trouble for Virtual Reality

In May 2014, Zenimax Media, a company that predominately creates and publishes video games, filed a lawsuit against the Facebook owned Oculus VR, a virtual reality hardware and software company. ZeniMax claimed that, among other things, its former employee John Carmack had taken intellectual property that Carmack had worked on during his time at ZeniMax and used it to help his current employer Oculus VR. Moreover, ZeniMax claimed that Palmer Luckey, founder of Oculus VR, violated a non-disclosure agreement he had with ZeniMax that expressly disallowed Luckey from using ZeniMax’s “valuable intellectual property includ[ing] copyrighted computer code, trade secret information, and technical know-how” which led to a “breakthrough in VR technology.”
Although ZeniMax sought $2-$6 billion in damages, earlier this month a jury awarded the company $500 million. A large part of the case was determining if any of ZeniMax’s copyrighted code was in fact used by Oculus. After all, “software doesn’t need to copy code line for line in order to violate intellectual property law. . . . [I]t’s possible to violate software copyrights without using the exact code found in the original program.” The court ruled that Oculus VR had not misappropriated any trade secrets and instead that Oculus VR’s founder Palmer Luckey had violated the non-disclosure agreement he had signed before he began working with ZeniMax and that Luckey had “used [ZeniMax’s] copyrighted code without permission.” Facebook commented that it would fight the “legally flawed and factually unwarranted” verdict while Oculus highlighted the fact that “the heart of [the] case was about whether Oculus stole ZeniMax’s trade secrets, and the jury found decisively in [Oculus’s] favor.” ZeniMax, on the other hand, asserted that Oculus “admitted [to] cutting and pasting ZeniMax code into the Oculus software development kit.”
Although ZeniMax was “pleased” that the jury found for them, they were ultimately unsatisfied with the result. ZeniMax filed an injunction against Oculus earlier this week saying “The jury’s damage award here, however substantial, is an insufficient incentive for Defendants to cease infringing. Just minutes after the jury reveal its verdict, Facebook’s COO, Sheryl Sandberg, publicly stated that the jury’s verdict of a half billion dollars was ‘not material to [Facebook’s] financials.’”

If the injunction is enforced, Oculus would be “permanently enjoined, on a worldwide basis, from using, marketing, selling, distributing, modifying, servicing, copying, or offering for sale or license any products . . . that utilize in any form or for any purpose any of [ZeniMax’s] copyrighted materials.”

Oculus maintains that they did not use any of the code owned by ZeniMax and that “Oculus products are built with Oculus technology.” Parsing out which parts of Oculus’ code were based on and related to the copyrighted code by ZeniMax versus those which were originally created by Oculus employees and then determining which parts of the Oculus software use ZeniMax’s code could be a difficult and time consuming process, “which would put an ‘incredible amount of pressure on Facebook to enter into some sort of settlement.’”
Upon Oculus VR being acquired by Facebook for $2 billion, Oculus believed that they would be able to “focus on what [they] do best: solving hard engineering challenges and delivering the future of VR.” This injunction threatens to bring all of Oculus’s progress, and a large portion of virtual reality progress generally, to a halt. Competition is better for consumers and industries: it drives down prices while driving up innovation. Oculus VR is one of the two major players in the virtual reality hardware space—the other being HTC. Without one of the largest companies innovating in the virtual reality space, the entire industry may suffer. Virtual reality is still in its infancy and without competing hardware manufacturers pushing each other there may be stagnation. Although it may put a part of virtual reality progress on hold, ZeniMax has a strong argument that $500 million is a drop in the bucket to Facebook–an injunction may be the only way that justice may be served.