The man who claims to have a contract with Mark Zuckerberg regarding the initial development of what would eventually become Facebook cites purported e-mails between the two in a new court filing as proof that he is entitled to a 50 percent stake in the social-networking giant.
Paul Ceglia of Wellsville, N.Y., claimed in a lawsuit filed last year that he entered into a contract with Zuckerberg in 2003 to design and develop the Web site that would ultimately become Facebook--a company that now has an estimated value of $50 billion.
Ceglia said he hired Zuckerberg through a Craigslist ad to write code for a project called StreetFax and paid Zuckerberg $1,000 for coding work; he also allegedly invested $1,000 in Zuckerberg's The Face Book project, which gave him a 50 percent interest in the company as well as an additional 1 percent interest for every day after January 1, 2004, that The Face Book was delayed.
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In a revised complaint filed today in U.S. District Court in Buffalo, N.Y., Ceglia cites more than a dozen e-mails purportedly between himself and Zuckerberg that detail discussions on design, development, business plans, and eventual contract disputes regarding The Face Book.
According to the filing, on July 30, 2003, Zuckerberg allegedly sent Ceglia an e-mail in which he discusses the design and functionality of The Face Book Web site:
...I've been tweaking the search engine today [referring to the StreetFax.com project] and I'm pleased with its results. I'd like to use it for the Harvard site [referring to The Face Book], I think it will really help people find each other, even if they spell names incorrectly. Would it be agreeable with you if I adapt the source code? Thanks!
In another e-mail, dated September 2, 2003, Zuckerberg allegedly discusses ideas with Ceglia on how best to monetize The Face Book project:
I have been away for a few days without internet, during that time I revised the business plan for the Harvard site. I would like to talk to you on the phone about it in detail. As you mentioned last week, the issue we must resolve is how to produce a revenue stream from the users. My conclusion this past week is to charge Alumni $29.95 a month. With this in mind, considering just 300 people, and the projection of a $9000 monthly revenue, we could, as you suggested, rapidly expand to other colleges. Further, since the plan involves more than one college, the name can't have Harvard in it and remains unresolved. Additionally, both original names >facebook.com and pagebook.com are unavailable, so there is no actual domain name either. thefacebook.com and thepagebook.com are both available but are clearly not a premium quality domain as they are much harder to remember.
In another e-mail with the subject line "Urgent! Let's Talk," dated November 22, 2003, Zuckerberg allegedly informs Ceglia of a rival project in the works at Harvard--points central to the plot of "The Social Network," the 2010 movie about Facebook's early days:
I have recently met with a couple of upperclassmen here at Harvard that are planning to launch a site very similar to ours. If we don't make a move soon, I think we will lose the advantage we would have if we release before them. I've stalled them for the time being and with a break if you could send another $1000 for the facebook (sic) project it would allow me to pay my roommate or Jeff to help integrate the search code and get the site live before them. Please give me a call so that we can talk more about this.
Coincidentally, the filing comes the same day that a federal appeals court upheld the 2008 settlement agreement between Zuckerberg and Cameron and Tyler Winklevoss and their partner Divya Narendra. In that settlement, the Winklevosses and Narendra agreed to accept $65 million in exchange for dropping their lawsuit against Zuckerberg. They also freed Facebook from any further litigation. In their original suit, the Winklevosses and Narendra accused Zuckerberg of stealing their idea for a social-networking site called ConnectU. Zuckerberg denied the allegations but settled the case in 2008.
Accusations of broken promises
Eventually, the e-mails become less cordial, with Zuckerberg and Ceglia purportedly engaging in discussions about project funding and contract details before eventually leading to accusations of broken promises. In one e-mail, dated January 5, 2004, Ceglia allegedly asked Zuckerberg about the status of The Face Book launch and issued a threat of reprisal if something wasn't produced soon:
It is well past January 1st and to my knowledge you don't have a single thing done for the site, (sic) I gave you an extra $1k in November so we could rush it ahead of these other guys and as far as I know you don't even have a domain name or a home page built, let alone the actual database. For now I suggest you use my search engine and we work out the details. I'm starting to think you just blew that money Mark. You know perfectly well that you can't just take a persons (sic) investment and then spend it on women and beer or whatever you do up there in Harvard. I've been stalled long enough on this thing and if I don't see something soon (sic) I'll have no choice but to contact the school and perhaps your parents in Dobbs Ferry and let them know whats (sic) been going on.
In his response dated January 6, 2004, Zuckerberg allegedly complains about the amount of money Ceglia has invested in the project and pleads with him not to involve Zuckerberg's parents:
Threats to call my parents are uncalled for and unprofessional and you would be seriously violating our trust by doing so, I have done what I can with the small amount of money you have invested and I will have something live for you to view soon. Again I want to state that under no circumstances do you have my permission to contact my parents as they have nothing to do with my business and just because I am young doesnt (sic) mean I'm afraid of my parents (sic) response. Please do not contact them about this issue, they would probably just laugh you off anyway.
Ceglia accuses Zuckerberg of misleading him about the level of financial interest in the site. In an e-mail dated July 22, 2004, Zuckerberg allegedly writes to Ceglia to wish him a happy birthday and offer to repay his investment in the project because Zuckerberg had no time to work on it:
Please give me your address and I will mail you back the $2000 for your trouble, more if it will repair our business relationship. Another summer is here and I still don't have any time to build our site, I understand that I promised I would, but other things have come up and I am out in California working during break.
However, Ceglia claims, Zuckerberg had already secured funding from angel investors and was in the process of meeting with venture capitalists to raise additional funding. Ceglia claims in the filing that he never accepted Zuckerberg's offer of repayment and is still owed a 50 percent stake in the company.
Also in the complaint, Ceglia accuses Zuckerberg of hacking into the StreetFax.com Web site on multiple occasions and altering the code, causing it to shut down.
Last year, Ceglia produced a canceled check that he said proved he paid Zuckerberg $3,000 for some freelance software development work for a project called "The Face Book." Facebook initially said it believed the contract was a "likely" forgery. It has since become more forceful and said it consider it to be an outright fake.
Facebook representatives did not immediately respond to a request for comment.