Lawsuits involving Facebook

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Facebook, Inc. has been involved in multiple lawsuits since its founding.

ConnectU.com lawsuit[edit]

Divya Narendra, Cameron Winklevoss, and Tyler Winklevoss, founders of the social network ConnectU, filed a lawsuit against Facebook in September 2004. The lawsuit alleged that Zuckerberg had broken an oral contract to build the social-networking site, copied the idea,[1][2] and used source code that they provided to Zuckerberg to create competing site Facebook.[3][4][5][6] Facebook countersued in regards to Social Butterfly, a project put out by The Winklevoss Chang Group, an alleged partnership between ConnectU and i2hub. It named among the defendants ConnectU, Cameron Winklevoss, Tyler Winklevoss, Divya Narendra, and Wayne Chang, founder of i2hub.[7] The parties reached a settlement agreement in February 2008, for $20 million in cash and 1,253,326 Facebook shares. On August 26, 2010, The New York Times reported that Facebook shares were trading at $76 per share in the secondary market, putting the total settlement value now at close to $120 million.[8][9]

ConnectU filed another lawsuit against Facebook on March 11, 2008,[10] attempting to rescind the settlement, claiming that Facebook, in settlement negotiations, had overstated the value of stock it was granting the ConnectU founders as part of the settlement. ConnectU argued that Facebook represented itself as being worth $15 billion at the time, due to the post-money valuation arising from Microsoft's purchase in 2007 of a 1.6% stake in Facebook for US $246 million. Facebook announced that valuation in a press release.[11] However, Facebook subsequently performed an internal valuation that estimated a company value of $3.75 billion.[12] ConnectU then fired the law firm Quinn Emanuel that had represented it in settlement discussions. Quinn Emanuel filed a $13 million lien against the settlement proceeds and ConnectU sued for malpractice.[13] On August 25, 2010, an arbitration panel ruled that Quinn Emanuel had "earned its full contingency fee". It also found that Quinn Emanuel committed no malpractice.[14] ConnectU's lawsuit against Facebook to quadruple its settlement remains ongoing.

In January 2010, it was reported that i2hub founder Wayne Chang and The i2hub Organization launched a lawsuit against ConnectU and its founders, Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra, seeking 50% of the settlement. The complaint states "Through this litigation, Chang asserts his ownership interest in The Winklevoss Chang Group and ConnectU, including the settlement proceeds."[15] Lee Gesmer (of Gesmer Updegrove, LLP) posted the detailed 33-page complaint online.[16][17] On April 12, 2011, a three-judge panel of a federal appeals court in San Francisco ruled that the Winklevoss brothers, whose fight over Facebook's origins was a major narrative arc of the film The Social Network, cannot back out of a settlement they signed with the company in 2008.

Aaron Greenspan and houseSYSTEM[edit]

Aaron Greenspan created a web portal as an undergraduate called houseSYSTEM that launched in August 2003.[18] Two weeks after launching Harvard became aware that houseSYSTEM was asking for students' Harvard network credentials in violation of the school's policy, and ordered Greenspan to shut the site down immediately. Greenspan was required to turn over a list of students so the administration could reset their passwords, with the threat of disciplinary action if he failed to comply.[19]

Seven months after the initial launch of houseSYSTEM Greenspan added a new social networking module called FaceNet to compete with Facebook, telling the Harvard Crimson, "It is possible for multiple sites to co-exist. [We support] entrepreneurship, and we applaud Mark’s efforts. Competition is a very real part of entrepreneurship".[20] However, students who had tried both websites expressed doubts about Greenspan's website noting that "FaceNet isn’t as easy to use as thefacebook.com. It might be too little, too late. It will be hard to compete with thefacebook.com when thefacebook.com already has about 5,000 members and lots of momentum".[20]

In 2006, two years after Mark Zuckerberg launched thefacebook.com, Greenspan claimed in an open letter to Zuckerberg that Facebook used features that originally belonged to houseSYSTEM.[21] Regarding Greenspan's allegations, years later Zuckerberg was described in The New York Times as "saying through a spokeswoman that he was not sure how to respond".[22] Greenspan later filed a Petition to Cancel the "Facebook" trademark at USPTO.[23] Facebook, Inc. agreed to a formal settlement with Greenspan in late May 2009 and issued a press release, but the terms were not disclosed.[24]

2009 class action lawsuit[edit]

On November 17, 2009, Rebecca Swift, on behalf of herself and all others similarly situated, filed a class action lawsuit against Zynga Game Network Inc. and Facebook, Inc. in the United States District Court for the Northern District of California for violation of the Unfair competition law and the Consumers Legal Remedies Act, and for unjust enrichment.[25][26]

Paul Ceglia[edit]

On June 30, 2010, Paul Ceglia, the owner of a wood pellet fuel company in Allegany County, New York, filed a lawsuit against Zuckerberg, claiming 84% ownership of Facebook as well as additional monetary damages. According to Ceglia, he and Zuckerberg signed a contract on April 28, 2003, that for an initial fee of $1,000, entitles Ceglia to 50% of the website's revenue, as well as additional 1% interest per each day after January 1, 2004, until website completion. Zuckerberg was developing other projects at the time, among which was Facemash, the predecessor of Facebook, but did not register the domain name thefacebook.com until January 1, 2004. Facebook management has dismissed the lawsuit as "completely frivolous". Facebook spokesman Barry Schnitt issued a statement indicating that the counsel for Ceglia had unsuccessfully attempted to seek an out-of-court settlement. In an interview to ABC World News, Zuckerberg stated he is confident of never signing such an agreement. At the time, Zuckerberg worked for Ceglia as a code developer on a project named "StreetFax". Judge Thomas Brown of Allegany Court issued a restraining order on all financial transfers concerning ownership of Facebook until further notice; in response, Facebook management successfully filed for the case to be moved to federal court. According to Facebook, the order does not affect their business but lacks legal basis.[27][28][29][30][31][32]

Young v. Facebook, Inc.[edit]

In Young v. Facebook, Inc., plaintiff Karen Beth Young alleged violations of the Americans with Disabilities Act and related state laws on disability as well as breach of contract and negligence. A District Court judge dismissed the complaint, ruling that Facebook is a website, not a physical place, so the Americans with Disabilities Act does not apply.[33]

Lane v. Facebook, Inc.[edit]

In March 2010, Judge Richard Seeborg issued an order approving the class settlement in Lane v. Facebook, Inc.[34] This lawsuit charged that user's private information was being posted on Facebook without consent using Facebook's Beacon program.

Fraley v. Facebook, Inc.[edit]

Fraley v. Facebook, Inc. was a class-action case that alleged that Facebook had misappropriated users' names and likenesses in advertisements.[35] The case settled in 2013,[35] with checks to class members mailed in November 2016.[36]

King et al. v. Facebook, Inc.[edit]

Franklin D. Azar & Associates filed a nationwide class action lawsuit on October 11, 2018, King et al. v. Facebook, Inc., Case No. 3:18-cv-06246 (N.D. Cal 2018), which also included California, New Jersey, and Colorado Sub-Classes. The lawsuit alleged that Facebook Users’ personal and private information has been compromised and remains vulnerable due to Facebook’s failure to maintain adequate security measures and a lack of timely security breach notifications[37][38].

FTC antitrust lawsuit[edit]

On December 8, 2020, the Federal Trade Commission, along with 46 US states (excluding Alabama, Georgia, South Carolina, and South Dakota), the District of Columbia and the territory of Guam, launched an antitrust lawsuit against Facebook. The lawsuit concerns Facebook’s acquisition of two competitors - Instagram and WhatsApp - and the ensuing monopolistic situation. FTC alleges that Facebook holds monopolistic power in the US social networking market and seeks to force the company to divest from Instagram and WhatsApp to break up the conglomerate. [39]

See also[edit]

References[edit]

  1. ^ Michael Levenson (June 27, 2008). "Facebook, ConnectU settle dispute:Case an intellectual property kerfuffle". Boston Globe.
  2. ^ Malcom A. Glenn, "For Now, Facebook Foes Continue Fight Against Site", The Harvard Crimson, July 27, 2007
  3. ^ O'Brien, Luke (November–December 2007). "Poking Facebook". 02138. p. 66. Archived from the original on May 14, 2008. Retrieved June 26, 2008.
  4. ^ McGinn, Timothy J. (September 13, 2004). "Lawsuit Threatens To Close Facebook". Harvard Crimson. Archived from the original on August 15, 2007. Retrieved March 8, 2008.
  5. ^ Maugeri, Alexander (September 20, 2004). "TheFacebook.com faces lawsuit". The Daily Princetonian. Archived from the original on January 9, 2008. Retrieved March 8, 2008.
  6. ^ Tryhorn, Chris (July 25, 2007). "Facebook in court over ownership". The Guardian. London. Retrieved March 15, 2008.
  7. ^ California Northern District Court (March 9, 2007). "The Facebook, Inc. v. Connectu, LLC et al". Justia.
  8. ^ "Investors Value Facebook at Up to $33.7 Billion". The New York Times. August 26, 2010.
  9. ^ Eric Eldon (February 12, 2009). "Financial wrinkle lost ConnectU some Facebook settlement dollars". VentureBeat.
  10. ^ Jagadeesh, Namitha (March 11, 2008). "Getting the start-up documentation right". The Wall Street Journal. Retrieved March 15, 2008.
  11. ^ "FACEBOOK GOT ITS $15 BILLION VALUATION — NOW WHAT?". Retrieved July 7, 2014.
  12. ^ "Internal Facebook valuation points to strategic merit - Valuation is far below the $15 billion cited at time of Microsoft investment". Wall Street Journal. Retrieved July 7, 2008.
  13. ^ Dan Slater (June 27, 2008). "Facebook Wins ConnectU Appeal, Blames Fee Dispute". Wall Street Journal.
  14. ^ Nate Raymond (September 15, 2010). "Arbitrators Confirm Quinn Emanuel's Fee in Facebook Settlement". The National Law Journal.
  15. ^ Caroline McCarthy (January 4, 2010). "Fresh legal woes for ConnectU founders". CNET News.
  16. ^ Lee Gesmer (January 18, 2010). "The Road Goes on Forever, But the Lawsuits Never End: ConnectU, Facebook, Their Entourages". Mass Law Blog.
  17. ^ Lee Gesmer (January 18, 2010). "Chang v. Winklevoss Complaint". Commonwealth of Massachusetts.
  18. ^ "Student Site Stirs Controversy | News | The Harvard Crimson". www.thecrimson.com. Retrieved 2020-12-10.
  19. ^ "Concerns Over Web Portal Force Password Change | News | The Harvard Crimson". www.thecrimson.com. Retrieved 2020-12-10.
  20. ^ a b "New Online Facebook Launched | News | The Harvard Crimson". www.thecrimson.com. Retrieved 2020-12-09.
  21. ^ Douglas, Nick. "Someone's jealous: A college pal writes an open letter to Facebook's founder". Gawker. Retrieved 2020-06-14.
  22. ^ Markoff, John (September 1, 2007). "Who Founded Facebook? A New Claim Emerges". The New York Times. Retrieved September 2, 2007.
  23. ^ "USPTO TTABVUE Trademark Trial and Appeal Board Inquiry System Cancellation No. 92049206". Ttabvue.uspto.gov. Retrieved February 23, 2014.
  24. ^ "Facebook and Think Computer Corporation Resolve Trademark Dispute". May 22, 2009.
  25. ^ Tate, Ryan (November 19, 2009). "Facebook Named in Federal Class-Action Suit over Scammy Zynga Ads". Valleywag. Archived from the original on February 17, 2010. Retrieved February 21, 2010.
  26. ^ Tate, Ryan (November 19, 2009). "Initial Complaint in Swift vs. Zynga". Valleywag. Archived from the original on March 8, 2010. Retrieved February 21, 2010.
  27. ^ Oreskovic, Alexei (July 12, 2010). "Facebook fights New Yorker's claim of 84 percent stake". Reuters. Retrieved July 22, 2010.
  28. ^ Fowler, Geoffrey A. (July 13, 2010). "Man Claims Ownership of Facebook". The Wall Street Journal. Retrieved July 22, 2010.
  29. ^ Priyanka (July 22, 2010). "Zuckerberg 'quite sure' he didn't hand over 84% Facebook to Ceglia". The Money Times. Archived from the original on July 25, 2010. Retrieved July 22, 2010.
  30. ^ Kawamoto, Dawn (July 13, 2010). "Facebook and Website Designer Paul Ceglia Brawl Over 84% Stake". DailyFinance.com. Archived from the original on July 16, 2010. Retrieved July 22, 2010.
  31. ^ Chowdhry, Amit (July 13, 2010). "Paul Ceglia Files Lawsuit Against Facebook Claiming To Own 84% Of The Company". Pulse2. Archived from the original on July 25, 2010. Retrieved July 22, 2010.
  32. ^ Bosker, Bianca (July 13, 2007). "Paul Ceglia Claims To Own 84% Stake In Facebook". The Huffington Post. Retrieved July 22, 2010.
  33. ^ Goldman, Eric (May 9, 2011), Facebook User Loses Lawsuit Over Account Termination—Young v. Facebook
  34. ^ "FINDINGS OF FACT AND CONCLUSIONS OF LAW AND ORDER APPROVING SETTLEMENT. Signed by Judge Richard Seeborg on 03/17/2010". Docket Alarm, Inc. Retrieved July 19, 2013.
  35. ^ a b Farivar, Cyrus (January 7, 2016). "Appeals court upholds deal allowing kids' images in Facebook ads". Ars Technica. Condé Nast. Retrieved June 14, 2017.
  36. ^ Bixenspan, David (November 21, 2016). "Yes, That Facebook Class Action Lawsuit Check You Got is Real". Law Newz. Retrieved November 22, 2016.
  37. ^ "FACEBOOK (DATA BREACH)". Retrieved October 19, 2021.
  38. ^ "Colorado Strong Arm law firm sues Facebook, seeks compensation in latest hack attack". October 15, 2018. Retrieved October 19, 2021.
  39. ^ Feiner, Lauren; Rodriguez, Salvador (8 December 2020). "FTC and states sue Facebook, could force it to divest Instagram and WhatsApp". CNBC. Retrieved 8 December 2020.