Facebook, ConnectU settle dispute

Case an intellectual property kerfuffle

Mark Zuckerberg started Facebook, a social-networking site, while he was a student at Harvard.

They were three Harvard students with a bright idea but not a lot of computer expertise, so Cameron and Tyler Winklevoss and Divya Narendra enlisted a sophomore named Mark Zuckerberg to help them build a social-networking site for college students.

The students said they had an "oral contract" with Zuckerberg to help them build their site, ConnectU. But Zuckerberg dragged out the work for several months, they say, and eventually began ignoring their e-mails. A month later, in February 2004, he launched Facebook, which has since become the world's largest social-networking site.

Contending that their idea had been ripped off, the ConnectU founders launched a battle that started at Harvard's disciplinary board and eventually reached federal court. Yesterday, after a protracted battle, a judge finalized a settlement that will require Facebook to give Narendra and the Winklevoss twins an undisclosed sum of cash and stock.

The settlement, approved by Judge James Ware of the US District Court for the Northern District of California, appeared to end for now a bitter dispute that pitted young and ambitious Harvard-educated entrepreneurs against one another, with millions of dollars at stake.

The Winklevoss twins and Narendra, all of whom graduated in 2004, could not be reached for comment.

Facebook released a statement saying it was happy the settlement had been finalized and gratified that the court rejected ConnectU's allegations that Facebook had lied about its value during settlement talks. The statement said ConnectU's founders were suffering from buyer's remorse, after they made the allegation and tried to back out of the settlement in February.

Facebook's statement added that "we now consider this chapter closed and wish the Winklevoss brothers the best of luck in their future endeavors."

A final hearing July 2 will consider any objections to the settlement.

The case underscores the difficulties in pinpointing the originators of ideas on the Internet, particularly for social-networking sites.

"One thing about the Internet is that most ideas are developed collaboratively in the Internet space, and one thing that was difficult in this matter was trying to parse what was an original idea they had and that somebody else had taken advantage of," said John Palfrey, executive director of the Berkman Center for Internet & Society at Harvard. "That was going to be awfully hard to show."

Palfrey said both sides should be happy the case was settled. Zuckerberg and Facebook "have a bright future ahead of them that did not need the cloud of litigation hanging over them," he said.

And ConnectU's founders, he said, were making assertions that were broad and "extremely hard to prove."

The battle dates to 2003, when all four men were undergraduates and social-networking sites were a relatively new phenomenon.

At the time, Zuckerberg was a 20-year-old computer science and psychology major well known on campus for launching a website called Facemash that allowed users to rate who was "hotter." The site eventually landed Zuckerberg on probation for unauthorized use of Harvard photos.

Narendra and the Winklevoss twins asked Zuckerberg to help them launch ConnectU.

In a 2004 interview with the Globe, Zuckerberg said he did about six hours of work on the site but had no business relationship with ConnectU.

"I was a student who agreed to help a fellow student," he told the Globe. "I did not agree to complete their project."

In December 2003, he e-mailed ConnectU's founders, telling them: "I'll keep you posted as I patch stuff up and it starts to become completely functional."

But in January 2004, they say, he stopped e-mailing them, abandoned the project, and launched Thefacebook, which eventually became Facebook.

As Facebook exploded in popularity, drawing more than 250,000 users at 99 colleges within its first seven months, ConnectU's founders were incensed. Their website, which they launched in May 2004, had drawn just 15,000 members in its first few months and is to this day a small player in online social networking.

Zuckerberg dropped out of Harvard and moved to Silicon Valley a few months after launching Facebook, which currently boasts 80 million users worldwide.

He is now believed to be worth $1.5 billion, according to Forbes magazine's rankings of the world's richest people. At 24, he is the youngest person on the list.

"You feel robbed," Tyler Winklevoss told the Globe in 2004. "The kids down the hall are using it, and you're thinking, 'That's supposed to be us.' "

Michael Levenson can be reached at mlevenson@globe.com.