At Facebook, More Members Means More Lawsuits

Facebook just might have a new daddy, and his name isn't Mark Zuckerberg.

What seemed like a nuisance suit filed by a complete unknown named Paul Ceglia, who claims he owns 84 percent of Facebook, could come back to bite the 26-year-old hoodie-wearing CEO in the assets.

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The story is that Ceglia, a Web designer, hired then-Harvard freshman Zuckerberg to do some coding for him back in April 2003. Now Bloomberg is reporting Zuckerberg may indeed have signed a legal agreement with Ceglia, though why it took him seven years to remember it is still a mystery.

A lawyer for Facebook Inc. said she was “unsure” whether company founder Mark Zuckerberg signed a contract that purportedly entitles a New York man to 84 percent of the world’s biggest social-networking service....

“Whether he signed this piece of paper, we’re unsure at this moment,” Facebook lawyer Lisa Simpson told Arcara.

Zuckerberg allegedly signed a contract that paid him $1,000 to write code for a database project Ceglia called "StreetFax" (which sounds like a crude version of Google Street View) and another $1,000 for something called PageBook. It also apparently mentioned a future project called Facebook. According to VentureBeat, Zuckerberg got paid for one of those projects, but not the others.

If this story sounds strangely familiar, it's because Zuckerberg had a similar arrangement with Tyler and Cameron Winklevoss (yes, really) back in December 2003. They hired Zucky to do some coding for their nascent campus social network, then called HarvardConnection (later ConnectU). A few weeks later, Zuckerberg magically came up with his own idea for a social network, named theFacebook, which itself was borrowed from the name for Harvard's online student directory. Later, Winkledudes.

That bit of fancy codework ended up in a lawsuit that got settled when Facebook agreed to pay the Winklevoss twins (yes, really) $65 million. The Winklevosses are now disputing the terms of their settlement, claming that Facebook's attorneys lied about the company's true worth. They're accusing Zuckerberg of securities fraud.

And you'll be able to see it all on the big screen on Oct. 1, when "The Social Network" movie opens. Bring popcorn, it looks like an interesting story.

All of this is happening during the same week Facebook officially celebrated its 500 millionth member, making it more than 15 times bigger than AOL at its height. (Of course, people had to pay for AOL -- at least, those who hadn't used up their 5,000-free-hours CDs. Facebook is still entirely free.)

That feat is even more impressive considering that, according to surveys conducted by the American Customer Satisfaction Index, many of Facebook's own users don't like it very much. On a scale from 1 to 100, Facebook earns a score of 64 -- below Wikipedia and YouTube, and just 1 point above MySpace. That must be galling.

Even so, the still-no-IPO-in-sight Facebook is worth nearly $25 billion on paper, according to SharesPost.com. The question is, how many of those dollars will Facebook have to part with to make Ceglia go away? Otherwise, that would really ruin the storybook ending -- or, at least, make for a lousy sequel.

Is Facebook really worth that much? Post your thoughts below or email me: cringe@infoworld.com.

This story, "Facebook: More members, more lawsuits, more problems" was originally published at InfoWorld.com. Read more of Robert X. Cringely's Notes from the Field blog.

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