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Total Recall's suit against Oculus VR, Luckey dismissed

Total Recall's suit against Oculus VR, Luckey dismissed

Total Recall's lawsuit against Oculus VR and Palmer Luckey has been dismissed, following a judge's conclusion that one of the two partners behind the company failed to obtain the agreement of the other before filing the suit.

Total Recall Technologies (TRT) has had its lawsuit against Oculus VR and its founder Palmer Luckey dismissed, following a ruling last year that the company may have a case for breach of contract - but on a filing technicality, rather than the merits of the case itself.

Following its acquisition by deep-pocketed social networking giant Facebook in 2014 Oculus VR has courted a series of lawsuits alleging breach of contract, theft of intellectual property, and copyright infringement. The biggest of these cases centre around two figures: Palmer Luckey, founder of Oculus VR and the public face of the company during its record-breaking crowdfunding campaigns prior to its acquisition by Facebook, and id Software co-founder John Carmack. The case against Carmack was found in favour of plaintiff Zenimax in February, with a jury finding Oculus guilty of copyright infringement but innocent of the theft of trade secrets; the case against Luckey, however, may never see the inside of a courtroom.

In January last year US District Judge William Alsup told Total Recall Technologies to proceed with a claim of breach of contract against Palmer Luckey, following the company's accusations that Luckey was hired to develop a prototype head-mounted display by the company in 2011 - prior to the launch of Luckey's crowdfunding campaign for a head-mounted display which bears no small resemblance to the device TRT hired Luckey to design and build. According to TRT, Luckey signed a non-disclosure agreement and agreed to providing the company with 'exclusive rights to [Luckey's headset] design unless we decide not to use it' - agreements Luckey broke when he went on to develop the Oculus Rift headset, TRT claimed in its filing.

Despite Judge Alsup's initial recommendation, though, he has now has thrown out the company's case - though under the fact that one of the two people behind TRT, Thomas Seidl, has refused to authorise the lawsuit, rather than on the merits or otherwise of the case itself.

Seidl, who founded TRT with Ron Igra, was responsible for the written agreement for a prototype head-mounted virtual reality display system around which the lawsuit centres. When Oculus VR was sold to Facebook, Igra was the one who wanted to sue Luckey for alleged breach of contract; Seidl refused, and Igra filed suit in Hawaii against Seidl in an effort to compel his business partner to authorise a lawsuit pitting TRT against Oculus VR and its owner Facebook.

When Total Recall Technologies filed its suit against Luckey and Oculus VR early last year, the court found, it was not the company acting but rather Igra himself and against his partner's wishes - a move disallowed by the company's founding articles, which gave both partners power of veto regarding any and all businesses decision. As a result, the defendants' counsel was able to argue that Igra had no authority to file the suit - an argument the court accepted in June 2016 with the proviso that Igra had until the end of the year to gain proper authorisation.

In an attempt to do so, Igra signed an agreement with Seidl in which Seidl received all assets and intellectual property surrounding the company while Igra received the company name and the rights to the lawsuit against Luckey and Oculus VR but with the agreement of a 30 percent share of any payout for Seidl. While this removed Seidl from the TRT legal entity and thus his power of veto, the court has ruled that his was not enough: 'Absent Seidl’s unequivocal authorisation and ratification, this lawsuit remained improper from the outset. The June 16 Order gave plenty of time for Seidl to come forward to authorise and to ratify this lawsuit and thereby vivify it. Seidl has studiously refused to do so,' Judge Alsup's latest ruling explains. 'The new Igra plan does nothing by way of providing ratification by Seidl, which was a key concern in the June 16 Order.

'Significantly, to repeat, the new Igra plan studiously avoids any authorisation or ratification by Seidl. This is fatal — and all the more aggravating, since Seidl retains a thirty percent stake in any recovery herein. The truth is that the new plan is a clever smoke-and-mirrors work-around to protect Seidl from ratifying anything while creating an appearance that Igra now controls the partnership. But it does nothing to carry us back to the moment in time of the filing of the original complaint to fix the defect that plagued this action from the start. Only Seidl’s ratification could have done that.
'

Igra's decision to file the lawsuit without Seidl's consent, then, coupled with evidence entered into the case in which Seidl told Luckey that Igra's filing 'seems to be illegal to me' and that he had not 'signed anything or let him take action against you,' as well as further communications in which Seidl told Igra '[Luckey] does not owe us on a legal level,' has been the crushing blow to the case - not the point of fact of whether or not Luckey misappropriated technology developed on TRT's dime nor broke his agreements with the company.

Oculus VR has stated that it is, unsurprisingly, pleased with the court's ruling; Igra has not yet made a public statement on the matter.

5 Comments

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greigaitken 13th March 2017, 11:21 Quote
that Seidl chap sounds ungreedy
fix-the-spade 13th March 2017, 13:07 Quote
I got the impression from this that TRT were effectively contract trolls, signing a teenage Luckey up to a 'we own your ass,' type contract that was only vaguely legal. Luckey doesn't seem to have a very good business brain so it wouldn't surprise me if he signed something without reading it properly.

One guy sounds like he's got dollar sign blindness and the other looks like he knew full well that Facebook's lawyers would grind them into the dirt.
Gareth Halfacree 13th March 2017, 13:36 Quote
Quote:
Originally Posted by fix-the-spade
I got the impression from this that TRT were effectively contract trolls, signing a teenage Luckey up to a 'we own your ass,' type contract that was only vaguely legal.
I'm not sure that's fair: they hired Luckey to build a prototype VR headset, he produced a round one prototype, they gave him some feedback, then he disappeared - only to pop up on Kickstarter with a prototype VR headset. Signing an NDA and an agreement that anything you build on the company dime belongs to the company is absolutely normal, and in no way the sign of a 'contract troll.' Hell, Steve Wozniak had to get permission from Hewlett Packard to sell the Apple personal computer, 'cos his contract had the same clause - and he wasn't even working on the thing on company time.

TRT hired Luckey to build a thing, retained rights to the thing, and one-half of TRT believes Luckey then wandered off with the thing and got rich (though the other half seems to think that's either rubbish or simply not provable when you're going up against the might of the Facebook legal department.)

But Igra's agreement with Seidl does suggest he sees the lawsuit as TRT's only hope of a big payday (which, now that it's lost the opportunity to be the first to hit the market with a commercialised next-gen VR headset, is probably entirely true.)
edzieba 13th March 2017, 16:02 Quote
Quote:
Originally Posted by Gareth Halfacree
Quote:
Originally Posted by fix-the-spade
I got the impression from this that TRT were effectively contract trolls, signing a teenage Luckey up to a 'we own your ass,' type contract that was only vaguely legal.
I'm not sure that's fair: they hired Luckey to build a prototype VR headset, he produced a round one prototype, they gave him some feedback, then he disappeared - only to pop up on Kickstarter with a prototype VR headset.
Not quite: he made a prototype, sent it to them, they sent it back with suggestions for modifications, but then dropped the contract (i.e. no more payments, no demands for the HMD back, etc). This is before the PR prototype series that culminated in the version that was sent to Carmack.
Given the contract had an explicit clause for "if we decide not to go forward, you own it" and they decided not to go forward, it seems pretty cut and dried. Particularly when the partner who was actually interacting with Luckey (Siedl) agrees with Luckey.
Gareth Halfacree 13th March 2017, 16:40 Quote
Quote:
Originally Posted by edzieba
Given the contract had an explicit clause for "if we decide not to go forward, you own it" and they decided not to go forward, it seems pretty cut and dried. Particularly when the partner who was actually interacting with Luckey (Siedl) agrees with Luckey.
Fair point, that, and a big part of the reason Seidl'll have not agreed to the lawsuit. Guess they should have just kept going forward, then they could have been bought by Facebook for all the money!
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