Facebook and the latest lawsuit

Yet another early Facebook stakeholder has crawled out the woodpile, this time claiming 50% of The Face Book - SAI:

The first transaction, which appears undisputed at this point, covers web-development work Mark was to perform for a Paul Ceglia company called StreetFax. No issue there.

The SECOND transaction (and this is the key part) calls for Paul to PURCHASE (yes, it says "purchase") a 50% interest in a project that Mark is already working on--an online yearbook for Harvard students known as "The Face Book". There are also penalties for late completion that increase this ownership percentage over time.

The reference to "The Face Book" transaction is repeated many times, in separate sections of the contract.

As SAI is quick to point out, there are a few things that need sorting first:

Where is the original contract (and has a judge seen it)?

The document we have all now seen appears to be an electronic copy of paper-based contract. Electronic documents are vastly easier to forge or doctor than paper-based documents. The first order of business, therefore, is for both parties to examine the original contract to assess whether it is genuine. This analysis will eventually likely include ink testing and other forensic analysis.

Why did Paul Ceglia wait 7 years to make this claim?

Facebook's vast value has hardly been a secret for the past few years. In 2007, Microsoft invested in the company at a valuation of $15 billion. It seems beyond bizarre that, if Paul Ceglia remembered this contract existed, he would wait until now to file this lawsuit. The most plausible explanation might be that he forgot about the contract and then stumbled upon it. But "why now?" would seem a simple and reasonable question for him to answer, especially in light of the fact that he and his wife were arrested for grand larceny last year for allegedly defrauding customers of his wood-pellet company. (That doesn't mean he's guilty of defrauding customers or that he's now trying to defraud Facebook, but it certainly makes this a reasonable question.)

Where is the payment-trail evidence?

If Paul Ceglia gave Mark Zuckerberg $1,000 to fund "The Face Book" in exchange for 50% ownership in the entity, there is presumably a simple payment trail we can follow that proves this. This would take the form of a canceled check, perhaps, or a wire transfer. It is presumably possible that Ceglia made the payment in cash, but this would be highly unusual, even for a payment this small (normally, when you make an investment in a company, you WANT a payment trail).

In other words it is pretty clear cut that we don't know enough yet to know if the document is genuine, never mind whether there is a case or not. Of course this hasn't stopped every TV and Blog lawyer (and non lawyers) jumping on the bandwagon.

However, two things that do make this curiously more credible:

(i) This is not the first time Mark Zuckerberg has paid other people who claimed similar, (in a strictly no-fault way you understand)

(ii) So far the strongest denial from Camp Zuckerberg has been that "I think we were quite sure that we did not sign a contract that says that they have any right to ownership over Facebook,"

Being non-lawyers and not on TV, as yet we refuse to prognosticate on the validity of the document. But on past form, we're offering 3/2 odds on a payoff

The Faebook Story - its somethin you just couldn't make up - no one would believe it!