A Dallas jury awarded ZeniMax Media $500 million against defendant Oculus VR despite ruling that Oculus did not misappropriate any ZeniMax trade secrets. Of the $500 million award, $200 million arose from Oculus’s alleged breach of a non-disclosure agreement.
ZeniMax sued Oculus in 2014 on the heels of the latter’s $2 billion acquisition by Facebook; alleging that Oculus founders misappropriated trade secrets and infringed on code developed as part of their former employment at ZeniMax subsidiary Bethesda Softworks. In relevant part, Oculus founders signed an NDA with their former employer as part of their employment and early talks about a potential partnership which eventually broke down. During the NDA-covered period the Oculus founders allegedly accessed certain sensor technology which ZeniMax later claimed that Oculus misappropriated and incorporated into its virtual reality product.
The significance of the jury verdict which, of the $500 million total, awarded $250 million on a false designation claim, $50 million on the copyright infringement claim, and $200 million on the non-disclosure breach claim, is that the jury ruled that Oculus did not misappropriate any ZeniMax trade secrets. In other words, the $200 million award was based purely on the NDA contract breach claim and not on the fact that anything the Oculus founders learned from ZeniMax during the NDA-covered period was a “trade secret” within the meaning of the law.
This case highlights the importance of non-disclosure agreements as a contractual mechanism by which companies may protect sensitive business assets that may not otherwise rise to the level of independent intellectual property protection (e.g., copyright or patent) or even trade secret designation.
If you have questions about non-disclosure agreements and how they may be used to support various business assets, please contact Tim Bukher or any member of the Thompson Bukher Intellectual Property Practice at (212) 920-6050.
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