Read Before You Sign: The Battle for Facebook

By now most of you have heard about the lawsuit against Facebook.  Web developer Paul Ceglia alleges he paid Mark Zuckerberg $1000 to create code for a project he owned, Street Fax.  Ceglia also agreed to assist Zuckerberg with developing Zuckerberg’s project, TheFacebook.com which eventually became Facebook.com.

In exchange for the $1000 and investment by Ceglia into Zuckerberg’s Facebook project, Zuckerberg granted Ceglia a 50% interest in the Facebook website.  In addition, Zuckerberg granted the Ceglia an additional 1% of the company for each day after January 1, 2004 (the site completion date) the site remained incomplete.  The website was actually finished on February 4, 2004, so 34 days later, Zuckerberg allegedly owned an additional 34% fee.  Hence the 84% controversy.

Is the contract valid

I read a copy of the complaint here and if the signature of both parties are proved valid, it is a valid agreement.  Apparently, Zuckerberg was a freshman at Harvard University and probably had no idea what he was signing or had any clue of the ramifications of such an agreement.  However, ignorance is never an excuse to any legal obligation.  There are several situations in which a contract can be cancelled or nullified.  They are:

1. If a minor, someone under the age of 18, signed he contract.

2. The person was incapacitated, mentally ill or intoxicated by drugs or alchohol

Zuckerberg was 19 when he signed the contract.  He clearly is not mentally ill and there is no evidence he was intoxicated when he signed the agreement.

Resolution

Ceglia is not revealing whether he attempted to settle this contractual dispute with Zuckerberg before filing suit.  However, he may be out of luck.  The statute of limitations to file a breach of contract lawsuit in the state of New York is six years.  The contract was signed in 2003 and Ceglia is just bringing a civil action in 2010.  He is one year late.  In fact, Facebook’s legal team is making this very argument before the court. Considering this is Facebook’s new strategy to defeat this lawsuit, pretty much confirms the contract was valid.

I predict Facebook and Ceglia will settle this matter out of court.  In light of the statute of limitations and the public embarrassment for Zuckerberg, a quick settlement is in both parties best interest.

About the Author
Latoicha Givens is the founder and a member of the firm Phillips Givens, LLC. Ms. Givens practice includes represention of start-ups, small, and mid-sized businesses in intellectual property matters, specficially, trademarks, copyrights, and licensing issues. She is the author of IPLAW101.com, a blog covering Intellectual Property issues specifically trademark law - trademark registration and infringement; Domain Name Disputes: Cybersquatting; Licensing and Intellectual Property issues in New Media.
See all posts by Latoicha Givens.