A Texas jury awarded game development firm ZeniMax, $500 million in a lawsuit filed just months after Facebook purchased Oculus in 2014.
As I understand the facts, ZeniMax claimed, among other things, that Oculus founder Palmer Luckey and CTO John Carmack violated a non-disclosure agreement (NDA), stole trade secrets and/or misappropriated intellectual property. While the Dallas-based jury found that Luckey violated the non-disclosure agreement, it also found that Oculus did not steal certain trade secrets or misappropriate intellectual property.
It’s reported that Oculus was ordered to pay $200 million for violation of the non-disclosure agreement and $50 for copyright infringement. Furthermore, Luckey and Oculus were each found responsible for $50 million for misrepresentation. Another $150 million was ordered to be paid by CEO Brendan Iribe of Facebook’s PC VR division. Facebook’s liability would stem, absent an agreement, from Oculus’ liability. A good overview of the primary claims and causes of action can be found here
What’s Happens Next
I don’t care how Facebook tries to spin this, the outcome of this trial is bad for the defendants. I’m confident they will file post-trial motions to reduce the verdict or have it tossed out altogether. The defendants’ will also bring a motion for a new trial.
Depending on any procedural, evidentiary, or legal issues that may have happened during the trial, the trial judge will grant, grant in part, or deny one or more of these motions. When all said and done, I expect the defendants to eventually appeal any unfavorable post-trial motions.
In civil cases, I’ve found that because of the strong presumption in favor of respecting a trial court’s jury verdict, a majority of judgments are not overturned on appeal. Because of this, I see the case eventually be resolved via a post-trial settlement or payment of the final judgment with interest.
My Take-A-Way
I believe a strong message was delivered by this verdict. Entrepreneurs need to appreciate and understand how important NDA and intellectual property rights are. While Facebook has the resources to easily handle this type of financial hit (its shares were up 3 percent in after-hours trading), most business do not.
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