Facebook's Oculus Fights Sales Ban for Virtual-Reality Headset

Facebook wants a federal judge to let it continue sales of its virtual-reality headsets even though a jury said the social-media giant's Oculus unit stole another company's computer code.

ZeniMax Media's request for a court order blocking sales of unspecified models of the Oculus Rift, which is priced at $600 (roughly Rs. 39,000) with controllers, follows a $500 million verdict in February over claims that Oculus and some of its executives purloined proprietary information when they designed the headset prototype.

Facebook bought Oculus in 2014 for $2 billion. 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. But projections by Bloomberg Intelligence show the market for virtual and augmented-reality hardware may exceed $40 billion in sales in 2020.

A sales ban would place an unfair hardship on Oculus and its business partners and customers, the company argued in a filing in Dallas federal court, where a hearing on ZeniMax's request for an injunction is scheduled for Tuesday.

It "would serve no one but ZeniMax, who would use it only as leverage to try to extract money from Oculus," lawyers for Oculus said in the filing. "The injunction would create a windfall for ZeniMax while detracting from the public's enjoyment of Oculus's groundbreaking products."

It's tough to get a product pulled from the market in these types of cases, even when the two sides are direct competitors. If the judge decides ZeniMax can be made whole with money, then he's unlikely to disrupt Facebook's business. US District Judge Ed Kinkeade will consider Facebook's chances of winning on appeal, the existing or potential harm to each company and what's in the public's interest.

Oculus said that re-engineering the software for the Rift to work around the disputed technology wouldn't be easy.

The company "would have to hire clean-room engineers to make myriad changes not just to the code fragments ZeniMax presented at trial, but to numerous other segments of interrelated and interdependent code," according to the Oculus filing. "The process would be lengthy, burdensome, and costly."

Representatives of ZeniMax and Oculus declined to discuss specifics of how an injunction would affect sales of the current line of Rift products. A spokeswoman for Oculus said there would be "business effects," but declined to elaborate.

Oculus is also set to ask Kinkeade at Tuesday's hearing to set aside the February verdict, or to reduce the damages to no more than $50 million, saying in a filing that amount reflects the value of "a lump-sum license to use copyrighted material."

David Dobkin, a Princeton University computer science professor who testified as an expert witness for ZeniMax, told jurors during the January trial he found numerous examples of computer code containing ZeniMax trade secrets in then-current versions of Oculus software.

The trial turned on a non-disclosure agreement signed in 2012 by Oculus VR co-founder Palmer Luckey, a virtual reality hobbyist whose crude headset was developed into an early working prototype by John Carmack, then a star video-game programmer with ZeniMax.

Luckey and Brendan Iribe formed Oculus shortly after Carmack demonstrated the device at a video gaming trade show. Carmack, designer of hit games such as Doom and Quake, defected to Oculus in 2013 and became its chief technology officer. He acknowledged during the trial that he took with him e-mail records including computer code related to virtual reality.

The jury rejected ZeniMax's claim that Oculus stole trade secrets but hit Oculus with $200 million in damages for violating the non-disclosure agreement, $50 million for copyright infringement and $50 million for improper use of ZeniMax's trademarks. Jurors also ordered Iribe and Luckey to pay $150 million and $50 million in damages, respectively, for the trademark misuse. The jury found that Carmack took property belonging to ZeniMax but didn't order him to pay damages.

Luckey left Oculus in March after Facebook began distancing itself from him following a report that he was financing a group creating anti-Hillary Clinton memes for the internet ahead of the US presidential election.

© 2017 Bloomberg L.P.