Image via Business Insider
A lot has been buzzing around regarding the contract that New York resident Paul Ceglia produced claiming an 84% ownership stake in Facebook, allegedly signed when Facebook CEO Mark Zuckerberg was a Freshman in college. Two things need to be understood about this contract and what it could or couldn’t mean.
First of all, any contract is open to interpretation. What seems clear and to the point to one person is generally vague enough that another (i.e. a lawyer) can make it say something different. This is why contracts are often extremely complex and full of small print. The contract in question here is only two pages long.
As it’s written, it’s a basic “work for hire” contract which many freelancers and businesses who hire contractors have probably seen or used before. It boils down to Zuckerberg agreeing to give up 50% of a brainchild software called “The Face Book” in return for $1,000 in seed money from Ceglia. This is an interesting sum of money, since Ceglia paid Zuckerberg the same amount to write a one-off piece of software for his own website at about this same time.
If the contract is valid as-is, then Ceglia is entitled to at least half of Facebook’s current value (in stock). That, of course, assumes that the contract is valid, that there hasn’t been a statute of limitations passed in the State of New York, and that the wording is such that a judge would agree to arguments that it means half or more of the social networking site. There’s the rub, since it’s possible that the valuation could be moved backwards in time to either when Facebook first went public or when it received it’s first influx of venture capital.
The real problem here is timing. As Gawker points out, the timing of the whole thing seriously undermines Ceglia’s claim that “The Face Book” was conceived between himself and Zuckerberg. Every webrepreneur knows that the first step in starting an online project is to find the right domain name. If these two planned to make “The Face Book,” it would seem obvious that they would immediately register “Facebook.com” or “TheFaceBook.com” or some variant. That didn’t have until almost a year later.
Finally, it’s pretty obvious that someone who had a contract with Zuckerberg for something else would have access to his signature and other details and could easily create a forged document to claim ownership of another property. Especially given that at the time that this contract was supposedly signed, Zuckerberg was working on “FaceMash,” the fledgling idea for Facebook and the name that would be much more likely to be believable were it on Ceglia’s contract.
In the end, the courts or a team of lawyers and experts will decide whether Ceglia has a claim. From all indications so far, he doesn’t. What is really exacerbating the whole issue is the fact that, thus far, Facebook and Zuckerberg’s responses to this have been vague.
