Facebook Payout in Oculus Copyright Spat Cut to $250 Million

(Bloomberg) -- Facebook Inc. won a ruling that halved a jury’s $500 million verdict against its Oculus unit for using computer code in its virtual reality headset that was taken from another company.

U.S. District Judge Ed Kinkeade in Dallas also on Wednesday rejected ZeniMax Media Inc.’s request that he ban sales of Oculus headsets.

ZeniMax sued shortly after Facebook acquired Oculus in 2014 for $2 billion. ZeniMax claimed it was responsible for key breakthroughs in the development of software and hardware for the headset, only to be betrayed when one of its star employees, John Carmack, joined with two other entrepreneurs and stole ZeniMax’s intellectual property for their startup.

Facebook Chief Executive Officer Mark Zuckerberg has said that the company’s bet on virtual reality as the next big computing platform will take years to pay off. Currently, the headsets are mostly popular among video game players -- not the mainstream.

Kinkeade affirmed the jury’s February 2017 award of $200 million for breach of contract and $50 million for copyright infringement. He wiped out the other $250 million awarded by jurors, including the damages against Oculus co-founders Brendan Iribe and Palmer Luckey.

A ZeniMax lawyer argued at a hearing a year ago that the Facebook unit was continuing to infringe its copyrights and “a permanent injunction is the only way to stop it.” Oculus argued that a sales ban would place an unfair hardship on the company, its business partners and customers. The judge sided with Oculus.

Oculus contended that the copyright infringement wasn’t “substantial” and that damages should be thrown out. The company said just seven lines of computer code in Oculus software were copied literally from ZeniMax “out of approximately 42 billion lines” introduced as evidence at trial.

ZeniMax said it’s pleased to have won $250 million -- plus $54 million in interest -- and disappointed that the jury verdict was cut in half.

“Based on a strong evidentiary record, the jury in this case found that ZeniMax was seriously harmed by the defendants’ theft of ZeniMax’s breakthrough VR technology and its verdict reflected that harm,” the company said in a statement, adding that it’s weighing next steps.

Paul Grewal, Facebook vice president and deputy general counsel, said the court’s ruling “was a positive step toward a fair resolution, and we will be appealing the remaining claims.”

“We’ve said from day one the ZeniMax case is deeply flawed, and today the court agreed,” Grewal said in a statement. “Our commitment to Oculus is unwavering and we will continue to invest in building the future of VR.”

The case is ZeniMax Media Inc. v. Oculus VR Inc., 3:14-cv-01849, U.S. District Court, Northern District of Texas (Dallas).

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