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Facebook Loses $500 Million Verdict in Virtual Reality Case

By William Vogeler, Esq. on February 02, 2017 | Last updated on March 21, 2019

Maybe Mark Zuckerberg should have taken the blue pill.

The "blue pill" reference comes from The Matrix, a sci-fi movie in which one character bemoans the day he realized the virtual world was not real. Zuckerberg, stunned by a $500 million verdict against a virtual reality company Facebook acquired in 2014, may be wondering whether this was worth it.

Zuckerberg will certainly have second thoughts about it. At least, his lawyers are contemplating an appeal.

A jury found in favor of ZeniMax Media against Oculus VR and its founders for breach of contract, copyright and other violations. Faceboook had purchased Oculus for $2 billion plus stock before the lawsuit, banking on the belief that the company's virtual reality headset was the next big thing.

Next Big Thing

Settlement could be the next thing because ZeniMax is content with the verdict but not with the conclusion that Oculus did not steal its virtual reality trade secrets. ZeniMax wanted $2 billion with that claim, and is contemplating further litigation to protect its technology.

"We will consider what further steps we need to take to ensure there will be no ongoing use of our misappropriated technology, including by seeking an injunction to restrain Oculus and Facebook from their ongoing use of computer code that the jury found infringed ZeniMax's copyrights," said Tracey Thomas, global communications director for ZeniMax.

Facebook acquired Oculus from co-founders Brendan Irebe and Palmer Luckey in a whirlwind courtship, according to a report by Vanity Fair. After a short phone call with Iribe, a shorter meeting with Luckey and a pizza -- literally -- Zuckerberg offered them $2 billion cash plus stock for their company.

At trial in the ZeniMax case two weeks ago, Zuckerberg said he did not know about ZeniMax or its ties to Oculus until the lawsuit. He also did not know something that turned into a major piece of the $500 milliion award.

Break Down

ZeniMax claimed that John Carmack, who was developing a VR headset while he was with ZeniMax, took information from the company when he later joined Oculus. Carmack also signed a non-disclosure agreement when he went to Oculus. Zuckeberg didn't know that; the jury did.

The jury awarded as follows:

  • Oculus was ordered to pay $200 million for violation of the non-disclosure agreement, $50 million for false designation, and $50 million for copyright infringement;
  • Co-founder Brendan Iribe was ordered to pay $150 million for false designation; and
  • Co-founder Palmer Luckey was ordered to pay $50 million for false designation.

According to reports, the award will barely make a dent in Facebook. The company is valued at $375 billion and reports $29 billion in cash on hand.

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