3. How Does Facebook Fit into the Equation If the Main IP Issues Started with Oculus, Luckey and Carmack?
In March 2014, Facebook announced it would acquire Oculus for about $2 billion in cash and stock. But the IP allegedly owned by ZeniMax and unlawfully used in the Rift occurred well before Facebook’s acquisition—how is Facebook potentially liable?
Five of the nine causes of action name Facebook. They are: common law misappropriation of trade secrets, copyright infringement, tortious interference with contract, unfair competition and unjust enrichment. While ZeniMax’s allegations are extensive and nuanced, it essentially is alleging that when Facebook bought Oculus it knew or should have known (had it performed reasonable due diligence) that the Rift uses ZeniMax IP.
Facebook CEO Mark Zuckerberg was called to testify at the trial, and his testimony was illuminating about the details of the acquisition. ZeniMax’s cross-examination of Zuckerberg was aimed at establishing that Facebook rushed to purchase Oculus, and in doing so, inadequately conducted due diligence that would have revealed that ZeniMax IP was made part of the Rift.╫
Zuckerberg also testified that he had never even heard of ZeniMax before the lawsuit╫. But evidence presented included a note Zuckerberg wrote to John Carmack while he was CTO at Oculus, saying it had been surreal to meet him and how he grew up playing games Carmack designed╫.
The defense contends ZeniMax sued Facebook seeking a “chance for a quick payout”—the lawsuit was filed within two months of Facebook’s announcement of acquiring Oculus. If the financial negotiations were breaking down between Oculus and ZeniMax in early 2013, but ZeniMax decided to sue for IP infringement after the Facebook acquisition announcement a year later, the jury could be persuaded that ZeniMax was ultimately going after the deep pockets of Facebook.
ZeniMax attorney Sammi posed to Zuckerberg: “So your plan for a $2-point-something-billion deal was to begin legal diligence on Friday, and sign the deal on Monday, over a weekend, right?” “Yeah,” Zuckerberg replied╫.
Ironically, jurors also have had this weekend to consider the complex facts at issue in this case and could deliver a verdict as early as today.