Lawsuits involving Facebook

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 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]

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]

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]

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]

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. 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]

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. [37]

• Facebook history
• Criticism of Facebook
• Europe v Facebook
• Issues involving social networking services