A Look at the Trial Against Facebook over Video Game Technology

Two masters were at work spinning opposite tales in a Dallas federal courthouse in the huge intellectual property fight over virtual reality technology that could revolutionize the $90 billion video game industry.

On one side: Facebook Inc. — represented by lead counsel Beth Wilkinson of Wilkinson Walsh + Eskovitz. Facebook CEO Mark Zuckerberg testified by strongly defending his company's 2014 acquisition of Oculus VR for $2 billion (though the plaintiffs claim the true price tag is closer to $3 billion).

The social networking company is being sued by videogame maker ZeniMax Media, represented by a team from Skadden, Arps, Slate, Meagher & Flom led by P. Anthony Sammi.

ZeniMax says Oculus stole its technology — Sammi in opening arguments called it “one of the biggest technology heists ever.” ZeniMax is claiming trade secret misappropriation, breach of contract, copyright infringement, unfair competition and unjust enrichment.

Facebook responded that Zenimax's story is nothing but a “fantasy” by a company that was “embarrassed, humiliated that they didn't do the deal,” as Wilkinson put it.

It's worth taking a closer look at how each side is framing the fight.

ZeniMax has the more complicated narrative — something of a disadvantage for the nine-member team from Skadden, who were in court along with lawyers from Haynes and Boone and Haltom & Doan.

Sammi in his opening led off by breaking the case down to its simplest element: “This case is about theft. This case is about stealing something very valuable. This case is about the defendants stealing our technology, selling it for $3 billion — that's billion with a B — and then covering it up by destroying evidence,” he argued.

“First, I want to show you what the defendants stole. Second, I'm going to show you how they profited enormously from this technology. Third, I'm going to show you how they tried to cover it up by destroying evidence,” he said.

It was a clean, aggressive start, but Wilkinson hit back hard. “What you heard this morning was a fantasy, and what you're going to see in the evidence is the reality,” she said in her opening. “It's really a case about who had vision and who didn't; who missed an opportunity and who didn't; who had the perseverance to pursue this technology, to invest in it, and to continue to this day to invest and work on this technology and who didn't.”

In addition to a nine-member team from Wilkinson Walsh, Facebook is represented by Cooley; Richard Smith, PC; Durie Tangri; and Lynn Pinker Cox & Hurst.

Zuckerberg's celebrity factor aside, perhaps the key witness in the case was the one called first: John Carmack. Lawyers for both sides call the video game developer a genius. He founded Texas-based id Software, which was purchased by ZeniMax in 2009 for $150 million — of which about $100 million went to Carmack.

While working for ZeniMax, Carmack connected with Oculus founder Palmer Luckey, a college-age video game enthusiast who came up with the prototype for a virtual reality headset called The Rift. Carmack added physical hardware components and developed specialized software for its operation.

The result was what's been called the holy grail in video gaming: a true virtual reality experience that immerses the user in an imaginary world.

What happened next is where the two sides split. To hear ZeniMax tell it, Carmack betrayed his employer. His agreement with ZeniMax stipulated that all of his work while employed by the company would belong to ZeniMax. As Sammi said: “It's OK if he wants to leave. His contract had a term of four years. We paid him $100 million, it is a four-year contract, we held up our end of the bargain. If Mr. Carmack doesn't want to renew his contract, that's OK. It's a free country. But remember when we said [you] can't take anything with you?”

Sammi continued: “Three days before Mr. Carmack's employment contract is up, he plugged in a USB drive, beginning serial number 3515, into his id computer and downloads thousands of documents on to a USB drive and thousands of lines of source code. And then he leaves.”

Carmack went to work for Oculus. ZeniMax said he took proprietary information that rightly belonged to ZeniMax and gave it to his new employer. Carmack admitted he copied information from his computer — though he stressed much of it was things like personal emails — and that it was wrong to do so. But he testified that he re-wrote all the source code for the Oculus Rift, and that “I wrote it better the second time.”

Wilkinson asked: “Is any of that information, the ZeniMax information, is any of that in any Oculus products?”

Carmack answered, “No, it is not.”

Wilkinson argued ZeniMax didn't value the technology at the time, and told Carmack to stop working on it. In essence, she said, the video game company only cared about it after they realized how much Facebook valued it.

“Their focus is on the game, because they are game makers and that was their business plan all along. Good for them. They're in the business of making software games. That's all they cared about,” she said. “They didn't have the long-term vision to see where this virtual reality technology could go.”

***** Jenna Greene writes for The Litigation Daily, an ALM sibling of this newsletter. She can be reached at [email protected] or on Twitter @jgreenejenna.