Facebook Sued, A Man claims 84% Ownership of the company [Updated]
A man from New York who names himself Paul D. Ceglia has claimed 84% ownership of Facebook and has sued both Mark Zuckerberg and Facebook in New York’s Allegany County State Supreme Court.
According to Wall Street Journal, Ceglia, to support his claim, has showed a contract paper signed by Mark Zuckerberg and himself dating April 28 2003 which says Zuckerberg paid him $1000 to design and develop a website (thefacebook.com, Facebook’s initial domain) which was partly developed by Zuckerberg before, also in return Ceglia gets 50% stake in Facebook in addition to 1% interest of Facebook’s equity for each day after 30 days till the website is finished as a part of his compensation. So by the time Facebook was launched, which was in February 2004, Ceglia’s stake increased from 50% to 84% by adding those 1% interest.
A part of that contract document states that, “the purchase and design of a suitable website for the project Seller [Mr. Zuckerberg] has already initiated that is designed to offer the students of Harvard University [sic] access to a website [sic] similar to a live functioning yearbook with the working title of ‘The Face Book.”
The claim completely contradicts with Facebook creation as Zuckerberg purchased thefacebook.com domain in January 2004 while his earlier product Facemash was built in October/November 2003. As the case is currently in court, Judge Thomas Brown who is hearing the case has issued a temporary restraining order against Facebook transferring any of its assets.
TheNextWeb quotes on the issue:
why Zuckerberg would agree to giving away half or more of his idea – if this is true – is pretty hard to grasp
Although a Facebook Spokesperson has said the suit is completely frivolous and they will fight it vigorously. According to local news paper, Wellsville Daily where the case is currently being heard, Facebook has asked the court to move the case to federal court. Here is what it had to say.
Court officials confirmed Ceglia is claiming because of a written contract with Zuckerberg, Ceglia is asking for a “declaratory judgement that defines ownership rights.” and he’s seeking 85 percent of ownership of Facebook. It has to do with the “formation of the entity,” court officials said.
According to WSJ, Ceglia does not have a good reputation in court circles as he is accused of defrauding over $200,000 from his wood-pellet fuel company’s customers which case is still going on.
According to a commentator named Jason Hanna on WSJ, who has downloaded and read the contract says:
Bizarre. I just download the legal filing myself. The seller in this contract is in fact Mr. Zuckerberg and the Buyer is Mr. Ceglia. It is a “work for hire contract” in which Mr. Ceglia is the purchaser of services to be performed by Mr. Zuckerberg for the StreetFax Database – owned by StreetFax LLC (i.e. Paul Ceglia’s enterprise).
If I’m interpreting this correctly (I’m not a lawyer) Mr. Zuckerberg agreed to give away equity in his own company (i.e. FaceBook) to work for Mr. Ceglia and receive a $1000 payment? Why delivery of services to StreetFax LLC would be tied to equity in Facebook, and the go-live date of Facebook, is completely nonsensical.
It all seems quite suspicious.
Well by looking at Jason’s comments and at Ceglia’s reputation, the whole case looks fake but if by any chance if court favors Ceglia it will be a huge setback for Facebook which currently has over 500 million users.
What do you people say about this sue on Facebook. If anyone of you gets a hold of this legal filing please let us know about it in our comments.
Update: Earlier there were conflicting reports that Ceglia claimed either 84% or 85% stake. After studying the original court filing document by Ceglia, we got to know that he indeed claimed 84% stake. Below is the copy of that court complaint document and also the Facebook filing to dissolve the temporary restraining order.
Ceglia v. Zuckerberg complaint
Ceglia v. Facebook Motion for Dissolution
[Via WSJ]
