On Monday, a $2 billion copyright lawsuit against Facebook started in Dallas. The suit claims that Oculus VR stole key parts of its technology from video game company ZeniMax – Oculus was acquired by Facebook in 2014 for $2 billion. Lawyers for Facebook denied the claims but a prolonged trial could lead to a number to top Facebook executives being subpoenaed to testify – including founder and CEO, Mark Zuckerberg.
At question is whether Facebook was aware of the potential copyright issue when it acquired Oculus. However, proving the connection may be a challenge for ZeniMax’ legal team. While one of its former employees left the company to join Oculus in 2013; lawyers will have to prove that he shared secrets with his new employers.
Furthermore, it is uncertain how this will impact Facebook. While the company now owns the intellectual property of Oculus, proving that Facebook was culpable in the theft will mean presenting evidence which shows that the company knew about the issue and decided not act.
In absence of proving its claims, the case will probably be thrown out of court. If this happen, the only option left to ZeniMax might be to sue the former executives of Oculus who profited from Facebook’s acquisition.
Some believe this might be a more winnable position for ZeniMax given some lingering questions about Oculus founder Palmer Luckey, who was only 17 when he developed his first Virtual Reality (VR) headset, the PR1.
In fact, a critical aspect of ZeniMax’ case is the ability to poke holes in the Oculus genesis story. According to Mr. Luckey, he developed the prototype for what became the Oculus Rift in his parent’s garage. However, the ZeniMax claims he lacked the equipment and expertise to accomplish this task.
As with most civil cases, the burden of proof is with the Plaintiffs and while lawyers for ZeniMax appeared confident in court on Monday, the first hurdle will be to make sure the case is not dismissed. If they can overcome this challenge, then it is likely that Facebook might seek an out-of-court settlement to ensure many of its senior executives are not called to testify.
Based on the regulatory filings the company currently has a free cash flow of $6 billion. While $2 billion would represent a sizable chunk, a structured settlement would probably be significantly less than the total amount ZeniMax seeks in this case.
Along the lines of generating cash for Facebook, the company announced on Monday that it will start to embed ads in videos of 90-seconds or longer. The deal structure is somewhat similar to how Google’s YouTube has been selling advertising and many observers believe this could be a big revenue driver for Facebook going forward.
In other Facebook-related news, the company is under fire for censorship. Observers in Thailand noted the company has started to redact posts which are critical of the country’s new king. While the UK newspaper The Guardian ran an opinion piece on how Facebook’s failure to remove videos of people committing suicide is harmful.
Both developments highlight the challenges presented to Facebook as it seeks to take a more responsible approach to how it verifies and manages news and other events for its users.