How Oculus went up to half a billion for Facebook

A jury in a court in Dallas, Texas, allowed litigation between Facebook and ZeniMax in favor of opponents of Mark Zuckerberg. Although the court found that Oculus did not appropriate the ZeniMax technology, the virtual reality helmets manufacturer would have to pay 500 million US dollars. According to the court, so much is the violation of NDA and copyright on software in the modern world.

On August 1, 2012, the BP revolution began: a fundraiser on the Kickstarter crowdfunding platform was opened for the Rift virtual reality helmet project. The money was requested by the startup Oculus VR, which was founded by Palmer Lucky. In addition to the unknown inventor, the faces of the game industry founders flashed in promo videos: Michael Abrasch , Gabe Newell and John Carmack spoke about virtual reality. Due to the interest in BP, the last one of the first games with Rift support was the re-release of Doom 3: BFG Edition.

The requested 250 thousand Oculus received in the first days after the start of the campaign. Totally fascinated by the idea of ​​virtual reality, the backers gave almost $ 2.5 million. A new Kickstarter record was followed by a product wait. Months stretched in years. The development of prototypes can be traced by such a parameter as their screen clarity. The first helmet that Oculus sold was a development kit with a 7-inch screen with a resolution of 1280 × 800. Two years later, in July 2014, the second development kit went on sale, its resolution was higher - 1920 × 1080.
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These helmets sold quickly despite the new direction and experimental technology. The final, consumer version with a screen of 2160 × 1080 was released only in the spring of 2016 with significant delays in deliveries. Backers began getting helmets closer to summer, almost four years after the opening of the original crowdfunding campaign.

Helmets were supplied by a not quite that young gaming startup who asked the whole world for development money. On March 25, 2014, Facebook announced that it had reached an agreement to take over $ 2 billion in Oculus VR. The purchase caused concerns for users and developers. Of course, the support from the giant guaranteed a bright future for technology, but around Facebook there is an aura of mistrust associated with obtrusiveness and privacy issues.

On May 1 of the same year, shortly after the purchase news, the Wall Street Journal reported on the conflict between Oculus and ZeniMax. According to the latter, before leaving id Software, Oculus technical director John Carmack managed to create some workings of virtual reality devices. Intellectual property is owned by id Software, a ZeniMax subsidiary, the company said.

In April 2012, Carmack first noticed a prototype for the helmet Lucky at one of the forums, and later left id Software to join Oculus VR as a technical director. ZeniMax argued that along the way, he had brought along key technologies and 5 employees of the company, and then invested many years in the Rift development of his former employer. Carmack denied his guilt. On May 21, ZeniMax filed a lawsuit against Oculus VR and Lucky.

Both Oculus and Facebook tried to force the court to reject the lawsuit, but in vain. A legal case and an investigation were initiated, the details of the claims of ZeniMax were changing and expanding, and it came to studying Carmack’s computer and even evaluating Gear VR technology, which Oculus helped to create with Korean Samsung.

Last August, claims focused around a non-disclosure agreement that Lucky signed with ZeniMax in May 2012. As part of the NDA, he obtained access to ZeniMax intellectual property, but only for familiarization - licensing was required for use. This was followed by a demonstration of the Rift at E3 in June 2012, in which Carmack, still working at id Software, the daughter of ZeniMax, helped. Throughout 2013, Carmack and other id Software employees helped Oculus improve the helmet, says ZeniMax.


Corrected version of the claim dated August 2016. It is curious that there is even a screenshot of Carmack's microblog in it, where he mentions the re-implementation of the code written in the previous work.

In this case, all cooperation between ZeniMax and Oculus was carried out without entering into financial agreements. The only contract was the NDA contract signed by Lucky on a personal basis.

In August of the same year, Carmack goes to Oculus. As the correspondence shows , before this in January, he recommended that the ZeniMax management stand at the head of the trend for virtual reality, but he was asked to direct efforts to the Doom 4 project.

On the last day of work at id Software, Carmack copied thousands of working letters to an external disk, but, he claims, did not use the proprietary code ZeniMax in Oculus solutions. In the course of the trial, the court attracted a computer expert who compared the Oculus and ZeniMax codes and confirmed Carmack’s words.

Jury trials began only on January 9, 2017. Among others, Mark Zuckerberg , founder and head of Facebook, acted as a witness during the meeting. He expectedly denied the theft of technology ZeniMax, but also gave some interesting details. Thanks to a lawsuit, the real costs of a social network for the purchase of Oculus VR have become known. In addition to the $ 2.3 billion actually paid for the startup, we had to invest $ 300 million in its development and spend $ 700 million to retain key employees.

On February 1, after two and a half days of deliberation, the jury made a decision that added another half billion to the purchase price. On the day the decision was announced , both Carmack and Lucky were present in the courtroom. They were discussing something, there were smiles on their faces. Representatives of the plaintiff, on the contrary, remained silent. During the reading of the text of the verdict in the hall there were no flashes of indignation or shock. The judge read one by one points with millions of damages and jury decisions, and both sides were unemotionally silent.


The verdict of the court.

Although the jury acknowledged that neither Oculus, the company's two founders, nor Facebook, nor Carmack assigned ZeniMax trade secrets, they considered that Lucky and, accordingly, his company had violated the non-disclosure agreement. The court also decided that ZeniMax software copyrights were violated.

The amount of 500 million dollars in favor of ZeniMax is not collected from one organization or person, but consists of several:

• $ 200 million - Oculus, for the NDA violations that Lucky signed with ZeniMax.
• $ 50 million - Oculus, for copyright infringement.
• $ 50 million - Oculus, for a false description of the product (the so-called false designation ).
• $ 50 million - Palmer Lucky, co-founder of Oculus, false designation.
• $ 150 million - Brendan Iribe, co-founder of Oculus, false designation

Interestingly, the results of the trial partly satisfied Oculus, while ZeniMax did not. As stated by the representative of Oculus, the main issue of the court case was the fact of theft of technology, which the jury did not see. Of course, a complete victory did not come out, and the company will try to appeal the court’s decision, but after that it will leave this litigation in the past.

ZeniMax still believes that the company's technology has been stolen. Last week, a lawyer for the company called the incident a robbery and demanded an increase in the amount of compensation to 4 billion dollars. ZeniMax threatens to suspend the sale of Oculus Rift helmets.

For Facebook, the next spending on virtual reality is a habit. On Wednesday, during a conference call, Zuckerberg admitted that BP technology is a bit late, and patience is needed to realize its potential. As the head of Facebook says, virtual reality will not bring profit yet. Probably, the company can afford such investments and play in the market, where there are already competitors in the face of Google , Sony , Samsung , Razer , HTC and Valve . According to financial statements published today , the social network has earned over the last quarter of 8.81 billion dollars.