If True, the Ceglia Case Could Rewrite Part of Facebook’s Early History

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By Eric Eldon Comment

The first few years of Facebook’s existence has already been closely scrutinized in court and in the media. This fall, there’s even a feature-length movie coming out about one version. The common theme is that, during late 2003 and early 2004, founder Mark Zuckerberg was both working on his own Facebook precursor sites while talking or even working with rivals. But now all of those stories could be getting updated, if claims in a new court case against Facebook turn out to be true.

During his sophomore year at Harvard, in late 2003, Zuckerberg became famous for launching a site called Facemash. A college version of Hot or Not, it scraped students’ names and photos from university sources, then asked students to rank each others’ photos for attractiveness.

Aaron Greenspan, meanwhile, had launched a student web portal of sorts called houseSYSTEM, that he says he discussed with Zuckerberg in great detail over the course of the fall. By the end of the year, Zuckerberg was also doing contract work for HarvardConnection, a site intended to serve as a student portal, per an oral contract agreement. Greenspan has up to this point laid claim to the earliest date, having launched his houseSYSTEM site on August 1st of that year.

The new court case implies that Zuckerberg was actually working on “The Face Book” back in the spring of 2003, apparently before any of the others.

A wood-pellet company owner named Paul Ceglia is suing Facebook founder Mark Zuckerberg in New York federal court, claiming that the two had an agreement whereby Ceglia would get a large ownership portion of a Zuckerberg project called “The Face Book.” The two signed the agreement on April 28, 2003.

Ceglia was a designer at the time, looking for Zuckerberg’s help on a separate project, and happened to sign on for a good chunk of Facebook stock as part of a contractor agreement. Or so the story went in New York today, as Bloomberg reports:

[Ceglia lawyer Terrence Connors] told the judge that Ceglia was a Web designer trying to develop a project called “StreetFax” in the spring of 2003. Ceglia’s plan was to put millions of photos of streets into a database and charge insurers money to access it.

“What he needed was a coder,” Connors told the judge.

Ceglia solicited bids to do the work. The lowest bidder was Zuckerberg, then a Harvard freshman. Zuckerberg said he would do the job for $1,000, Connors said.

“But I’ve got a project of my own,” Connors said Zuckerberg told his client. “I’m developing an online yearbook for Harvard kids now, but I’m thinking of expanding it.”

The contract was intended to cover the coding work on StreetFax and Ceglia’s investment in Zuckerberg’s “fledgling project,” Connors said. “Who knew then that it would turn into what it is today?”

VentureBeat has taken a closer look at the documents submitted by Ceglia. Although riddled with typos, and in parts not clearly phrased — it refers to Ceglia being granted ownership of the software language that Zuckerberg was to use, for example, rather than the code — it would give him most of Facebook’s shares. From VentureBeat:

The contract itself says that Ceglia agreed to pay Zuckerberg $1,000 for StreetFax and $1,000 for another project called PageBook. The contract also mentions an expanded project called The Facebook to be completed by January 2004, saying “an additional 1% interest in the business will be due the buyer for each day the website is delayed from that date.”

Ceglia attached a $1,000 receipt from his checkbook, dated six months after the contract, as evidence that he paid Zuckerberg for his work. But it wasn’t the full $2,000 amount and the agreement doesn’t describe what happens if there is a default.

Facebook, for its part, has not yet completely denied the specific claims. In court, one of the company’s lawyers confirmed that Zuckerberg did have a contract with Ceglia, but also said that there are “many substantial questions surrounding the authenticity” of the particular document provided by Ceglia, and was “unsure” such as whether Zuckerberg had actually signed it.

The company’s general statement on Ceglia’s claim sounds confident, in any case: “We believe this suit is completely frivolous and we will fight it vigorously.”

Whether or not the document is real, Ceglia’s case has other problems, beyond some of vague phrasing. For example,  his claim is more than six years old, seemingly disqualifying it under New York’s statute of limitations. And his document oddly has Zuckerberg using the term “Facebook” nine months before Zuckerberg actively began using the term. Legal experts have noted both as major issues. And Ceglia himself has been in trouble with the law recently, getting arrested for failure to fulfill wood pellet orders after having taken their money — maybe he was just having business problems, but the timing makes his Facebook suit (and character) look more suspicious.

Given the many frivolous lawsuits brought against major companies, only to be summarily dismissed, one wouldn’t be surprised to see the judge relegate Ceglia’s claims to the same category. But if the document does somehow turn out to be authentic, Facebook’s legal team will no doubt contest its language, the time-lapse, and anything else it can find, and look for a quick settlement. We have a hard time seeing Ceglia’s desired outcome — 84% ownership of Facebook — ever happening.

And, if the claim is found true, there’s another twist coming: the Harvard Connection (now ConnectU) team and Greenspan will need to explain how Zuckerberg was working on his idea many months before they say he stole it from them. Sure, ConnectU’s long-running lawsuit is mostly done, and Greenspan has moved on to other projects, but ConnectU’s version of events appears slated for a retelling in The Social Network, the new movie coming out on October 1st of this year. The new headlines about the Celia case — which, to our knowledge is not addressed in the movie — might confuse the movie’s plot, or at least its audiences.

If Ceglia’s case turns out to be somewhat true, but not true enough to give Ceglia anything like the stock he wants, the result could be an odd sort of public relations win for Facebook.