Lawsuit Against Oculus VR Founder Is Back On After Initially Being Tossed

A case against virtual reality pioneer Oculus VR and its founder can proceed after a Ninth Circuit order issued Monday. The Northern District of California had previously granted summary judgment in the 2015 contract and intellectual property suit. The Ninth Circuit found that the plaintiffs had the authority to sue despite the defendant’s argument that the partnership agreement governing Total Recall barred the lawsuit.

The underlying lawsuit claimed that Oculus VR used a design that founder Palmer Luckey created when he worked at Total Recall Technologies. Total Recall stated that Luckey was hired to design a virtual reality headset, for which Total Recall would have the exclusive rights. The plaintiff further alleged that Luckey took the design with him when departing the company, only to form his own company and use this design at Oculus VR. One partner in Total Recall, Ron Igra, wanted to pursue a lawsuit against Luckey, while the other, Thomas Seidl, did not. Igra sued Seidl to compel the suit on behalf of the partnership; Igra later filed suit against Oculus and Luckey before that action was resolved.

In March 2019, the Northern District of California granted summary judgment after the defendants challenged the authority of Total Recall’s partners to sue on the corporation’s behalf. The Ninth Circuit determined that Igra does have the authority to sue, stating that Igra had the sole authority to control Total Recall’s litigation participation because Seidl is no longer a partner in Total Recall. As a result, the suit was reinstated by the Ninth Circuit.

The Ninth Circuit reversed the district court’s ruling, finding that even if defendants “could challenge Total Recall’s capacity or Igra’s authority to sue on Total Recall’s behalf”, the court said “Total Recall retroactively cured any defect and that the cure was not time-barred.” The court went on to say the district court “abused its discretion by requiring Seidl to consent to the action as a condition of ratification,” thus forcing Total Recall to “keep its same structure and ownership to continue prosecuting the action.” The court noted that Hawaii’s partnership law, which governs Total Recall, does not “tie Igra’s hands in that way,” rather it must “account for the makeup of the partnership under state law.” Moreover, Thomas Seidl is no longer a partner at Total Recall, and thus Igra has “unilateral authority to control Total Recall’s participation in this litigation.”

Total Recall was represented by Quinn Emanuel Urquhart & Sullivan, while Oculus VR, now owned by Facebook, was represented by Cooley and Mayer Brown.