Facebook Loses VR Lawsuit, But Will Appeal

Ordered to pay $500 million to ZeniMax
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Facebook has been ordered to pay $500 million to ZeniMax after losing a lawsuit alleging that Oculus co-founder Palmer Luckey violated a non-disclosure agreement to create prototypes of the Oculus Rift VR headset.

Facebook, which plans to appeal the judgement, acquired Oculus in 2014 for $2 billion, and led to the commercial debut of the Oculus Rift in early 2015. Oculus’s technology also powers the Samsung Gear VR headset (Samsung has shipped more than 5 million Gear VRs).

According to Business Insider, ZeniMax, which was seeking $2 billion from Oculus and another $4 billion in additional damages, Oculus/Facebook is on the hook to pay ZeniMax $200 million for the NDA violation, another $50 million for copyright infringement, and $50 million more for false designation. Additionally, former Oculus CEO Brendan Iribe is ordered to pay ZeniMax $150 million for false designation and Luckey will have to pay ZeniMax $50 million also for false designation, the report added.

Iribe stepped down from that CEO role late last year to instead head up Oculus’s PC VR division. Facebook recently tapped Hugo Barra to lead the company's VR division, including the Oculus team. 

RELATED: Facebook Hires Hugo Barra to Lead VR Division

Facebook COO Sheryl Sandberg told Recode that the lawsuit is “not material” to Facebook’s business. “We’re disappointed in certain elements of the decision and we’re considering our options to appeal,” she told the publication.

Facebook also issued a statement published by multiple media outlets:

 “The heart of this case was about whether Oculus stole ZeniMax's trade secrets, and the jury found decisively in our favor. We're obviously disappointed by a few other aspects of today's verdict, but we are undeterred. Oculus products are built with Oculus technology. Our commitment to the long-term success of VR remains the same, and the entire team will continue the work they've done since day one – developing VR technology that will transform the way people interact and communicate. We look forward to filing our appeal and eventually putting this litigation behind us.”

The lawsuit did not come up on Facebook’s Q4 2016 earnings call today, but company CEO Mark Zuckerberg again stressed that VR remains a long-term business.

“We’re still early in our ten-year plan for virtual reality, but we’ve made some progress,” he said pointing to the December 2016 shipment of Touch controllers for the Oculus Rift and the progress being made by Samsung with the Gear VR.

He said there is no strategy underway to accelerate the strategic timeline for VR in half.

“I just think it’s going to be a ten-year thing,” Zuckerberg said, but acknowledged that delays in the Rift and the Touch products were “"somewhat of a disappointment.”

He again used the smartphone analogy, noting that, following the launch of products like the Blackberry and Palm Treo, it took a decade to get to 1 billion units.

“If we can be on a similar trajectory of anywhere near 10 years for VR and AR, then I would feel very good about that,” he said. “I think we're making the right bets now to plant the seeds for that, but I would ask for the patience of the investment community…because we’re going to invest a lot in this and it’s  not going to return or really profitable for us for quite a while." 

The court decision didn't ruin the day for Facebook. Its stock closed up $2.91 (2.23%) to $133.23 per share Wednesday, and were up more than 1% in early after-hours trading. 

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