Oculus VR sued over alleged “misappropriated trade secrets”

On the day Linden Lab announced the arrival of the Oculus Rift capable project viewer, news also came that ZeniMax Media has pulled the trigger on a lawsuit against Oculus VR and company founder Palmer Luckey alleging, among other things, the misappropriation of trade secrets by Oculus VR.

The lawsuit, filed in the U.S. District Court for the Northern District of Texas has been widely reported in the on-line tech media, makes some heavy reading. As well as the claim of misappropriation of trade secrets relating to virtual reality technology, the Maryland-based company also alleges infringement of ZeniMax copyrights and trademarks and asserts claims for breach of contract, unjust enrichment, and unfair competition against the defendants.

The move is the latest in a war of words which initially erupted in the form of public correspondence between ZeniMax and  Oculus VR – who obviously strenuously deny all claims made by ZeniMax. The latter first informed Engadget of their intentions at the start of May, 2014, and in which they specifically pointed at John Carmack’s involvement in the development of Oculus Rift at a time when he was working for ZeniMax subsidiary id Software, as well as pointing to a non-disclosure agreement (NDA) signed by Palmer Luckey in 2012, relating to the use of ZeniMax technology.

Oculus Rift: ZeniMax lawsuit specifically related to the early development of the headset, alleged use of their technology, possible IP infringements and breach of contract (image courtesy of BGR.com)

Cormack himself took to Twitter in an immediate rebuttal of the ZeniMax allegations, noting that while he recognises that any code he wrote while under ZeniMax’s employment is clearly theirs, at the same time the company never once patented any ideas arising from his work – placing the burden of proof on ZeniMax to demonstrate trade secrets / IP has been misappropriated where no patents exist.

John Carmack, Oculus VR’s CTO used Twitter in an immediate rebuttal of ZeniMax’s claims at the start of the month.

With the claims following on the heel of Facebook acquiring Oculus VR, the latter also commented on the ZeniMax allegations, framing them in terms of the Faceback acquisition, stating:

It’s unfortunate, but when there’s this type of transaction, people come out of the woodwork with ridiculous and absurd claims. We intend to vigorously defend Oculus and its investors to the fullest extent.

Daniel Nye Griffiths, writing for Forbes Online provides a solid examination of the initial claims made by ZeniMax and the response by Oculus VR,  which although somewhat superseded by the lawsuit’s filing, help frame the two companies respective positions. In their response to the claims by ZeniMax, and without using the actual words, Oculus VR pretty much demanded ZeniMax to put up or shut up.

ZeniMax, under the direction of their founder and CEO, Robert Altman,  have opted to go the former route. In a press release on the lawsuit filing, the company states:

The suit arises from the defendants’ unlawful exploitation of intellectual property, including trade secrets, copyrighted computer code, and technical know-how relating to virtual reality technology that was developed by ZeniMax after years of research and investment. ZeniMax provided this valuable intellectual property to defendants under a binding Non-Disclosure Agreement that specifies such intellectual property is owned exclusively by ZeniMax and cannot be used, disclosed, or transferred to third parties without ZeniMax’s approval. ZeniMax’s intellectual property has provided the fundamental technology driving the Oculus Rift since its inception. Nevertheless, the defendants refused all requests from ZeniMax for reasonable compensation and continue to use ZeniMax’s intellectual property without authorisation.

Robert Altman, ZeniMax CEO “Intellectual property forms the foundation of our business” (image: Artemisboy, available via Wikipedia Commons)

Alex Wawro over at Gamasutra provides an excellent breakdown of five key claims within the ZeniMax suit, which I’ve summarised here. Please refer to his article for a more in-depth examination of each point.

  • ZeniMax claims to have entered into an NDA with Luckey in 2012 after it had devoted significant time and resources to help get a “crude prototype” of the Rift to a state where it could be showcased at E3 2012
  • ZeniMax claims that Carmack agreed to cede ownership of all copyrightable works he produced while working for Zenimax when the company acquired id Software in 2009, so giving the company a claim on any work he did for Oculus VR while still employed at ZeniMax (and his employment contract forms a part of the suit)
  • ZeniMax claims ownership of the head tracking technology used within the early Rift, and referenced as the “magic that sets the Rift apart” when referenced in the Rift’s Kickstarter campaign – thus the Kickstarter success came off the back of ZeniMax
  • ZeniMax claims it sought an equity stake in Oculus VR in order to benefit from its contributions to the product, and sought to establish a potential partnership in the wake of Oculus’ successful Kickstarter, all of which were evaded by Oculus VR. Numerous examples of correspondence said to support these claims form a part of the suit
  • ZeniMax claims Oculus poached employees to access ZeniMax trade secrets, and that Carmack may have been involved in this, despite being legally forbidden from recruiting former ZeniMax employees for two years after his departure.

So far, Oculus VR’s response to the suit has been minimal and clear:

The lawsuit filed by ZeniMax has no merit whatsoever. As we have previously said, ZeniMax did not contribute to any Oculus technology. Oculus will defend these claims vigorously.

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4 thoughts on “Oculus VR sued over alleged “misappropriated trade secrets”

  1. The lawsuits will be frequent on this one. Everyone wants in on what they think is the next big thing. But its like Laser Tag suing Paintball while the rest of us wonder how anybody thinks this is going to replace modern warfare…

    That said, now that Octopus Grip is a part of Facespam, it has deep pockets… and some folks, rightly or wrongly, will try and reach in and see what they can pull out. Once you get deep pockets, all the people you ripped off along the way see that its time to get even.

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    1. That said, employment contracts that take ownership of things you do off hours on your own time are definitely disgusting… But likely to be upheld as corps always win over real people…

      Liked by 1 person

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