It must have been quite the unwanted holiday gift: CNET has learned that there's a new lawsuit on the table against Cameron and Tyler Winklevoss, the identical twins who alleged that Facebook founder Mark Zuckerberg stole their code and business plan--and who will be prominent supporting characters in the forthcoming film "The Social Network."
Now, a former partner of the twins claims in the suit that he was shut out of ConnectU's own business and is owed a part of the settlement it recovered from the Facebook suit.
The court complaint obtained by CNET, filed December 21 in Superior Court in Suffolk County, Mass., names as defendants ConnectU, the Winklevoss twins, their father and investor Howard Winklevoss, their business partner Divya Narendra, and their attorney Scott Mosko along with his firm Finnegan, Henderson, Farabow, Garrett, & Dunner. The suit attempts to recover damages for the denial of plaintiff Wayne Chang's alleged ownership rights in ConnectU, as well as to charge the legal team with negligence and a failure to represent Chang adequately in court.
He states in the complaint that he retains a 15 percent stake in ConnectU, held a 50 percent stake in the now-dissolved joint venture he formed with the twins, and therefore is entitled to part of the ConnectU vs. Facebook case--a $65 million mixture of cash and Facebook stock.
"All litigation was ultimately settled without Chang's knowledge of the terms," explained a statement provided upon request by Chang's law firm, the Boston-based Rose Chinitz & Rose LLP. "In fact, ConnectU was sold to Facebook for millions of dollars in cash and Facebook stock. That settlement benefited the Winklevosses--not Chang. Through this litigation, Chang asserts his ownership interest in The Winklevoss Chang Group and ConnectU, including the settlement proceeds."
Cameron and Tyler Winklevoss were not immediately available for comment. The argument in their favor, however, would likely be that they had already sued Zuckerberg over ConnectU's intellectual property long before Chang had partnered with them.
Chang may be a familiar figure to those who followed the brutal legal battles over peer-to-peer file sharing in the middle of the 2000s. He was a former University of Massachusetts, Amherst student who'd created a file-sharing program for college students called I2hub in late 2003, right around the same time that Facebook itself emerged. The peer-to-peer software relied on Internet2 networks, supercharged connections available at many universities and research institutions. In August 2004, I2hub's administrators said students at 226 universities around the world were using it, chalking up 344,000 hours on the network in the previous month alone.
This popularity brought I2hub to the attention of the Winklevoss twins, by that point recent graduates of Harvard. They had already filed their original suit against Zuckerberg and the nascent but fast-growing Facebook, the details of which form much of the plot of "The Social Network" and the book that it's based on, Ben Mezrich's "The Accidental Billionaires." According to Chang's court complaint, the twins approached him and proposed going into business together; Chang agreed and the team formed The Winklevoss Chang Group. The complaint explains that the integration "(provided) ConnectU with I2hub's assets, including thousands of its users, its technology, its publicity, and its reputation." It adds that Chang helped build new ConnectU technologies, including a textbook resale site called Jungalu.com and an aggregator called "Social Butterfly" that pulled in data from external social-networking sites, including Facebook.
The I2hub.com Web site now redirects to Waynechang.com, which is also Wayne Chung's LinkedIn profile. The top of that profile is shown here.
(Credit: Waynechang.com)Very little has been made of the relationship between I2hub and ConnectU. A 2005 article from University of Massachusetts student publication Daily Collegian, no longer publicly available but cached in Google, covered the I2hub phenomenon and noted that "The I2hub has created a partnership with ConnectU, an online social network, to allow users to share personal online profiles that may be accessed through the I2hub. Students will be allowed to use their existing profiles from sites such as ConnectU, TheFacebook, and Friendster, and import them to the hub."
But in April 2005, the court complaint alleged, Cameron and Tyler Winklevoss severed ties with Wayne Chang. An instant message conversation between Chang and Tyler Winklevoss, included in the court documents, reveals that the Winklevosses staked a claim to a bigger share of The Winklevoss Chang Group because they had contributed more financial backing. Shortly thereafter, the complaint says that the Winklevosses "informed Chang that they were ceasing any further funding and were terminating their relationship with Chang."
Also in the spring of 2005, the RIAA began targeting students whom it had flagged for using I2hub to engage in music and video piracy. In November 2005, slightly more than a year after the business partnership was formed, I2hub closed its doors in the wake of heavy pressure from the entertainment industry's legal muscle. According to the court complaint, though, Chang remains in control of the company and its intellectual property.
Though no longer in partnership with the Winklevosses, Chang was regardless named as one of the plaintiffs in the 2007 countersuit filed by Facebook in which the social network accused ConnectU of scraping Facebook users' e-mail addresses and spamming them with ConnectU invites. This, according to the Chang vs. Winklevoss et al. complaint, was the result of Chang's Social Butterfly product; Chang alleges that he was insufficiently represented by ConnectU's attorneys in this case.
Meanwhile, ConnectU faded away--the company has long alleged that this was because Zuckerberg, under ConnectU's employ as a programmer, worked on Facebook as a side project and launched that first instead--and the suit against Facebook was eventually settled in August 2008.
It's nothing extraordinary for there to be legal battles over the early intellectual property of a start-up that eventually gets huge, particularly when board rooms are replaced with dorm rooms and contracts take the form of instant-message conversations. But the ConnectU-Facebook saga has been an unusually alluring one: centered on Zuckerberg, widely considered to be the youngest self-made billionaire ever, the tale gets more colorful when you consider the photogenic Winklevosses, natives of upscale Greenwich, Conn., who were members of the U.S. Olympic rowing team in 2008. Cameron Winklevoss is now the publisher of Guest of a Guest, an upstart New York society blog; both twins are currently in business school at Oxford University in the U.K.
The legal battle will be thrust even more into the mainstream when "The Social Network," directed by David Fincher ("Fight Club") with a screenplay penned by "West Wing" creator Aaron Sorkin, hits theaters this fall. Twenty-three-year-old actor Armie Hammer is playing both Winklevoss twins with the help of some computer wizardry and camera tricks.
Chang and I2hub are not depicted in the screenplay.
Here's a message for all the tech bloggers and reporters freaking out over the alleged Associated Press bombshell that some copy-paste legerdemain led to the revelation that Facebook valued itself at $3.7 billion at the time of the ConnectU vs. Facebook court settlement:
Please, chill out! This is not news!
While it had not yet been reported that the ConnectU settlement was a reported $65 million (though since it was in cash and stock, that value may have dropped with the onset of the recession), the $3.7 billion Facebook valuation has been around since July.
The New York Times' Brad Stone broke the figure--well, $3.75 billion--amid the hullabaloo surrounding the redacted court transcripts. I know we're bloggers and we have the attention spans of goldfish and all, but the hype over this "shocker" is a bit silly.
Earlier this week, the AP had obtained court documents dating back to June, when ConnectU vs. Facebook was settled. The founders of ConnectU, former Harvard classmates of Facebook founder Mark Zuckerberg, had sued the eventual CEO because they alleged he stole their intellectual property when he was employed as a programmer for ConnectU. But the court documents were kept sealed, largely because there was information pertaining to the privately owned Facebook's valuation. Media outlets, among them CNET News, had lobbied to have the redacted documents made public. The AP eventually used a copy-paste function in an electronic version in order to expose the censored content. Oops.
ConnectU, meanwhile, has contested the settlement because its founders, who include identical twins and Olympic rowers Cameron and Tyler Winklevoss, claimed they were misled as to how much Facebook was worth.
Facebook's valuation has been the subject of scrutiny ever since Microsoft invested $240 million in the social network at a sky-high $15 billion valuation. But that investment was one of preferred stock, and it soon became clear that Facebook's paper valuation was significantly lower.
The AP story does have one new tidbit: Facebook was appraised at $8.88 per potential share as part of the $3.7 billion valuation. That figure obviously has dropped since then, given the impact of the recession.
Aside from that, this is a story that was reported almost eight months ago. Keep calm and carry on, folks. To my fellow members of the media, I'm sure there's a "cool new use for Twitter" story to be reported. We clearly can't get enough of those.
Talk about spilling the beans: A marketing brochure for law firm Quinn Emanuel Urquhart Oliver & Hedges, which represented would-be social network ConnectU in its much-publicized suit against Facebook, claimed that the final settlement netted the site's founders a handsome $65 million in Facebook stock and cash.
Oops.
A Law.com article dug up the brochure and its claim, and has posted a .pdf file on the Web. According to the same article, principals at the law firm now regret posting the results. Meanwhile, ConnectU remains in a fee dispute with Quinn Emanuel, a fact which came to light when the plaintiff changed its mind about the suit's eventual settlement last year.
ConnectU was founded by twins Cameron Winklevoss and Tyler Winklevoss, along with their classmate Divya Narendra, when all three were students at Harvard University. They hired Mark Zuckerberg, now the CEO of Facebook, as a programmer and eventually alleged that he swiped their code and business model to create the now-ubiquitous social network.
ConnectU vs. Facebook, which had dragged on since 2004, eventually settled in August right around when Cameron and Tyler Winklevoss, who are identical twins, were finishing in sixth place in a rowing event at the 2008 Olympics in Beijing.
It seems like a staggering amount, considering the casual terms of ConnectU's employment agreement with Zuckerberg had meant that it was very difficult for the Winklevosses and Narendra to prove that there had been a physical theft of code. So keep this in mind: Even if Facebook's valuation is nowhere near the $15 billion that it was valued at in the halcyon days of that $240 million Microsoft investment, $65 million is fairly small potatoes for Zuckerberg & Co. They were likely willing to make some concessions to get a longstanding legal tiff off the table. (CNET Networks, then-publisher of CNET News, had intervened in the lawsuit for the limited purpose of trying to unseal some court records.)
Facebook, unsurprisingly, has opted not to comment on this situation.
The 2008 Olympics in Beijing are over for Cameron and Tyler Winklevoss, the founders of would-be Facebook rival ConnectU who earned spots on the U.S. rowing team. The identical twins ended up placing sixth overall in the men's pair event; they don't take home any medals, but it's still a more than respectable finish. To get there, the pair had to make it through two rounds of heats, a semifinal, and then the grand final; just making it to the last round is a big accomplishment.
The Winklevosses placed sixth out of the six boats in the final with a time of 7:05.58 on the 2,000-meter course; the gold was snagged by the Australian crew of Drew Ginn and Duncan Free, the team that had beaten the Winklevosses in the event's semifinal on Wednesday. The Aussies won with a time of 6:37.44.
Rounding out the medal stand in second and third place, respectively, were crews from Canada and New Zealand. In fourth was Germany, and South Africa placed fifth.
The brothers Winklevoss had recently settled a lawsuit against Facebook founder Mark Zuckerberg, whom they accused of stealing their plan and business code while all three were students at Harvard and Zuckerberg was employed as a ConnectU programmer. ConnectU has nevertheless contested the settlement, claiming Facebook failed to adequately disclose details involving its valuation.
Click here for more stories on tech and the Beijing Olympics.
There's been another victory on the water for ConnectU founders Cameron and Tyler Winklevoss--even as their court case against Facebook continues to peter out unfavorably.
The identical twins, representing the United States in the men's pair (M2-) event of the Olympic rowing races in Beijing, placed second in their Wednesday semifinal to advance to the grand final.
At the 500-meter mark, a quarter of the way through the race, the Winklevosses were in fifth place out of the six boats. But they powered through crews from Germany, Serbia, and Italy to cross the finish line just less than 2.5 seconds behind the winning Australian crew of Drew Ginn and Duncan Free. The U.S. pair's final time was 6:36.65.
The Winklevosses are best known in the tech world for having founded ConnectU, a social network for college students that once employed Facebook founder Mark Zuckerberg as a programmer. ConnectU's founders--the twins, along with Harvard classmate Divya Narendra--began seeking legal action against Zuckerberg and Facebook in 2004, long before its Silicon Valley deification.
They alleged that Zuckerberg, a Harvard colleague, had swiped ConnectU's business plan and development code in order to kick-start Facebook; courts, however, have been skeptical because of the casual, dorm room nature of the company's early days. No formal contracts were signed, weakening ConnectU argument, and even though the case has been settled, the plaintiffs have continued to fight due to a dispute over Facebook's valuation.
Things have thus far fared much better for the Winklevosses in Beijing, where rowing insiders say the twins were not expected to win a spot in the grand final. In the race on Saturday, they will be up against the German and Australian crews, as well as the top three finishers from the event's other semifinal: Canada, New Zealand, and South Africa.
If they place first, second, or third in that race, they'll have some medals to take home.
Click here for more stories on tech and the Beijing Olympics.
As twins Cameron and Tyler Winklevoss power toward Wednesday's semifinal in the rowing events of the Olympics in Beijing, their longstanding court case against Facebook is winding down.
A San Jose, Calif., judge ruled late last week that ConnectU, the start-up that the brothers founded with Harvard classmate Divya Narendra, must transfer its stock to Facebook as part of the settlement acquisition by Tuesday, despite the claims on behalf of ConnectU that Facebook failed to disclose its true valuation when negotiating the terms of the settlement. The start-up's founders alleged fraud on Facebook's part, and claimed that irreparable harm would ensue from the settlement going through in its present form.
Facebook had been valued on paper at $15 billion when Microsoft took a $240 million stake last November. But that valuation was specific to Microsoft's preferred stock and the business deal surrounding it, Facebook said. Its real valuation is between $3 billion and $4 billion--reports place it at $3.75 billion.
Judge James Ware ruled last Friday that while ConnectU's appeal can be heard, the settlement has to go through first. "The longer the court delays in enforcing the settlement between the parties, the more likely the value of the consideration subject of the settlement (i.e. the value of the stock of each company) will change," Ware wrote in his ruling. "This means that the status quo cannot be preserved with a stay."
Ware originally rejected claims of fraud in June, prompting the appeal.
ConnectU's founders are slated to receive a mixture of cash and Facebook stock as part of the settlement. They originally sued Facebook in 2004, claiming that founder Mark Zuckerberg had swiped their code and business plan after being employed as a ConnectU software developer.
ConnectU founders Cameron and Tyler Winklevoss pulled through in a repechage (second-chance heat) on Monday on the Olympic rowing course in Beijing, where they're representing the United States in the men's pair event.
The identical twins, best-known in the tech world for being two-thirds of the Harvard-founded start-up that foisted an intellectual-property suit upon Facebook founder Mark Zuckerberg, had failed to immediately qualify for the semifinals in their Saturday heat. They'd placed fifth and needed a third-place finish to qualify. But the repechage offered another chance for them to earn a shot at the semifinals, which take place on Wednesday.
The Winklevoss twins proceeded to win their repechage, beating the second-place Croatian pair of Niksa and Sinisa Selin--who are also brothers, albeit not twins. The Croatian brothers medaled in both the 2000 Olympics in Sydney (in the men's eight) and in the 2004 Olympics in Athens (in the pair).
Click here for more stories on tech and the Beijing Olympics.
Cameron and Tyler Winklevoss, the identical twins who went from a legal spat with Facebook founder Mark Zuckerberg to a berth on the Olympic rowing team, didn't do so well in Beijing on Saturday. In the preliminary heat for their event, the men's pair (M2-), they placed fifth out of five boats.
In the 2000-meter course, the twins came in with a time of 7:13.64, behind the fourth-place Polish team with a time of 7:01.90. The top three places were taken by the French, Italian, and Canadian teams respectively.
They were in a tough heat: the French and Canadian pairs had both medaled in recent world championship events. And in international rowing events, you're never eliminated after the first round, so the U.S. pair will have a chance to compete again in a repechage (second-chance round) on Sunday to try to earn a spot in the semifinal.
Click here for more stories on tech and the Beijing Olympics.
Cameron and Tyler Winklevoss have been in the press a lot recently for being "those guys who sued Facebook." As two of the three founders of ConnectU, they had accused Facebook founder Mark Zuckerberg of intellectual property theft long before he was Silicon Valley's youngest billionaire. Unfortunately, courts didn't tend to side with the brothers Winklevoss, largely because the dorm-room start-up didn't have formal paperwork to prove a breach of contract.
That case has been settled (though ConnectU has contested it), and the Winklevosses--a pair of six-foot, five-inch identical twins with a penchant for wearing matching outfits--are in pursuit of something else. They're on the U.S. Olympic rowing team in Beijing, participating in the men's pair event (referred to in shorthand as M2-). That means they're in a two-person boat, each with one oar; not to be confused with the men's double event (M2x), in which each of the rowers has two oars.
Want to see these guys row? You can watch it online starting very, very early on Saturday morning. The NBC Olympics site will be streaming the first set of rowing heats starting at 1:50 p.m. Saturday, Beijing time, and the Winklevosses will be in the first heat of the men's pair event, which goes off at 4:10 p.m. That's 4:10 a.m. Eastern time, or 1:10 a.m. Pacific time. They'll be up against teams from Italy, France, Canada, and Poland; if they place first, second, or third, the U.S. pair will go straight to the semifinal on Wednesday. If not, they'll have another shot at it during a repechage event on Sunday.
Click here for more stories on tech and the Beijing Olympics.
Cameron and Tyler Winklevoss might not have gotten their way with Mark Zuckerberg, but they've got a different prize in mind now: Olympic glory.
Tyler Winklevoss, one-third of ConnectU's founding and one-half of the U.S. men's straight pair.
(Credit: usrowing.org)The identical twins, who founded one-time Facebook rival ConnectU with their Harvard classmate Divya Narendra, have earned spots on the U.S. Olympic rowing team that will compete later this summer in Beijing. The team's roster was announced Friday and is currently pending approval by the United States Olympic Committee.
Recently, the Winklevoss twins have been in the news because of their long-running lawsuit against Facebook founder Zuckerberg, whom they had once hired as a programmer for ConnectU.
Since 2004, they have alleged that he stole their business plan and source code. The legal fight dragged on until a settlement was reached earlier this year. Then, however, ConnectU's lawyers challenged the agreement and claimed that Facebook had committed fraud. Earlier this week, a judge decided to enforce the settlement, which provided ConnectU with a mixture of cash and stock (effectively, an acquisition by Facebook).
It was no secret that the Winklevoss twins (or "Winklevii," as they are reportedly nicknamed) were in the running for the Beijing squad, but their spots on the roster were not guaranteed until Friday's announcement.
Fittingly, the two will be rowing together. They'll be in the men's straight pair event, which pits heats of two-person boats (each rower has one oar) against one another for the standard distance of 2000 meters.
Click here for more stories on tech and the Beijing Olympics.
