Facebook Moves To Dissolve Injunction Against It, Fights New Yorker's Claim That He Owns 84% Of The Social Network

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Disputing an "outlandish" claim by New York resident Paul Ceglia that he owns 84% of Facebook, the company is asking a federal court to lift a state judge's restraining order banning any asset transfers.

"It is clear even from the sparse filings in state court that [Ceglia] is not entitled to any preliminary injunctive relief in this case," the company argues in papers filed late last week with the U.S. District Court in the Western District of New York.

Ceglia, a resident of Wellsville, alleges in a lawsuit filed in late May that he obtained a majority share of Facebook as a result of a contract he entered into with Mark Zuckerberg in April of 2003. A state court judge in Allegany County, N.Y. late last week entered a temporary restraining order banning Facebook from transferring assets.

Facebook transferred the case to federal court last Friday and also filed papers asking that the injunction be dissolved. The company argues that Ceglia's case is likely to be dismissed for a variety of reasons, including that New York has a six-year statute of limitations for contract claims.

"Even apart from the outlandishness of plaintiff's claim that he has for the past six years (since the founding of Facebook) sat silent on his purported 84% ownership in the company, plaintiff's claims are based on a breach of contract alleged to have occurred in 2003, and are therefore almost certainly barred by the applicable statute of limitations," the company argues.

A Facebook spokesman added: "We believe this suit is completely frivolous and we will fight it vigorously."

Ceglia filed what appears to be a two-page contract between himself and Zuckerberg with his court papers, but questions are swirling around that document and Ceglia himself.

Ceglia and his wife reportedly were arrested last year for grand larceny in connection with their business, Allegany Pellets, according to the Wellsville Daily Reporter. They allegedly took $200,000 worth of orders for wood pellets that they never delivered. Although unrelated to the lawsuit against Facebook, the allegations could cast doubt on Ceglia's credibility.

The document filed with the court also raises questions. The purported contract says that Ceglia agreed to pay Zuckerberg $1,000 to develop software for a project "designed to offer the students of Harvard university access to a website similar to a live functioning yearbook."

It also says that Ceglia would obtain a 50% ownership in the software and the "business interests derived from the expansion of that service to a larger audience," with additional percentage points if the software was delivered late.

The purported contract, dated April 4, 2003, refers to the project as both "The Face Book" and "The Page Book."

But while Facebook was initially known as TheFacebook.com, Zuckerberg didn't register that domain January of 2004. Furthermore, Zuckerberg isn't believed to have started working on Facebook until late 2003.

And although Zuckerberg launched earlier projects, they didn't carry the name Facebook or Page Book. Instead, Zuckerberg built Course Match in Sept. 2003, and also built Facemash in October and November of 2003.

Even assuming that the contract Ceglia filed is genuine, that wouldn't necessarily mean that he is entitled to any portion of Facebook, says corporate attorney David R. Lee, a partner in the Silicon Valley law firm White and Lee.

One reason is that the contract doesn't appear to contain any details about the software that Zuckerberg allegedly agreed to create. Therefore, Lee says, it's possible that whatever code was created pursuant to the contract wasn't used in Facebook.

In addition, he says, Ceglia's decision to wait until now to sue weighs against him. "If this were true, why did it take seven years?" Lee asks.

1 comment about "Facebook Moves To Dissolve Injunction Against It, Fights New Yorker's Claim That He Owns 84% Of The Social Network".
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  1. Paul Benjou from The Center for Media Management Strategies, July 14, 2010 at 10:18 a.m.

    It appears Facebook is finding safe harbor in the late filing and a breach of contract they assess ocurred in 2003. So ...Zuckerberg obviously made the deal which would tend to confirm his immaturity and, consequently, lack of integrity. Why would anyone trust his intentions with Facebook considering his position on privacy?

    Paul Benjou

    Ad Blog: www.MyOpenKimono.com

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