SAN FRANCISCO (CN) - A federal judge partially dismissed a case brought by virtual-reality company Total Recall Technologies claiming a breach of a confidentiality agreement by former partner Palmer Luckey, with leave to amend the complaint.
Total Recall claimed in a May 2015 lawsuit that Luckey took their ideas and went on to form Oculus Rift VR, which Facebook recently acquired for $2 billion.
In his 18-page ruling, U.S. District Judge William Alsup noted that Total Recall "studiously avoided" making any trade secret claims in their complaint, suing instead for conversion, fraud and unfair competition.
But their arguments under those theories do not hold up, Alsup said, finding that the company did not allege the necessary element of wrongful dispossession in the conversion claim or plead facts "showing that Luckey harbored, much less concealed, an intent to breach the contract at the time it was made." (Italics in original.)
In addition, since Total Recall's claim for actual fraud relies on the misappropriation of information, the claim is superseded by the California Uniform Trade Secrets Act, Alsup said.
Nor could the company make a claim under the "fraudulent" prong of California's unfair competition law, he said, since the alleged misappropriation was "not likely to mislead the public."
And although Total Recall adequately pleaded a claim for breach of contract, Alsup said that its claim for bad faith "is subsumed under its breach of contract claim." The company may pursue the theory through the contract claim, he said.
Alsup gave the company 14 days to amend its complaint.
Neither side's lead counsel immediately responded to an email requesting comment on Wednesday evening.