Facebook and others lose $500 million virtual reality headset case

A US Court has recently ordered social media site Facebook, virtual reality headset developer Oculus, the co-founder of Oculus and the former CEO of Oculus to pay Zenimax Media Inc $500 million after finding the defendants unlawfully used virtual reality technology belonging to Zenimax and the co-founder of Oculus broke a confidentiality agreement with Zenimax.

Facebook acquired Oculus in 2014.  One factor leading to the acquisition was due to its advances in virtual reality headset technology. The jury found that Oculus carried out software copyright infringement when it used source code belonging to the video game developer id Software which is owned by Zenimax, to launch its own virtual reality headset.

It was alleged that the co-founder of id Software took intellectual property belonging to id Software before he left the business to join Oculus as its Chief Technology Officer.

Whilst the jury found that none of the defendants misappropriated trade secrets belonging to Zenimax, a co-founder of Oculus was found to have breached a confidentiality agreement with Zenimax in the early days of building the Oculus headset.

Part of the $500 million damages were made up of the following:

  • $200 million in respect of breaching the confidentiality agreement; and
  • $50 million in respect copyright infringement.

It is unclear whether Facebook and Oculus will be appealing the verdict and whether the finding affects Oculus selling any further virtual reality headsets which are based on the technology originally derived from id Software, however the case highlights the importance of ensuring any intellectual property used to develop software is developed independently of any intellectual property belonging to a third party and the importance of ensuring confidentiality agreements are adhered to even when employees leave a business.

Find out how our commercial solicitors can help your business.