ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, July 23, 2010

Did Zuckerberg Sign Away 84% of Facebook?

Facebook_logo Wunderkind Mark Zuckerberg (who dreamed up Facebook in his college dorm room) is facing a lawsuit by Paul Ceglia, a man who claims that he has a contractual right to an 84% stake in the company.  The Wall Street Journal reported:

In his suit, Mr. Ceglia claims he signed a contract with Mr. Zuckerberg on April 28, 2003, to develop and design a website, paying a $1,000 fee but getting a 50% stake in the product. The contract stipulated that Mr. Ceglia would get an additional 1% interest in the business for every day after Jan. 1, 2004, until it was completed.

In a statement, a spokesman for closely held Facebook said, "We believe this suit is completely frivolous and we will fight it vigorously."

Mr. Ceglia didn't return calls seeking comment. His lawyer, Paul A. Argentieri, also didn't return a call for comment.

It's unclear how Mr. Ceglia might have become involved with Mr. Zuckerberg.

A copy of the contract seen by The Wall Street Journal says it is "for the purchase and design of a suitable website for the project Seller [Mr. Zuckerberg] has already initiated that is designed to offer the students of Harvard university [sic] access to a wesite [sic] similar to a live functioning yearbook with the working title of 'The Face Book.'"

There is a factual question whether Zuckerberg ever signed the purported contract.  Copies of the document appear to bear his signature.  Is it a forgery?  In court, Zuckerberg’s attorney stated that she was “unsure” whether Zuckerberg signed the contract.  In an interview with CBS’ Diane Sawyer, Zuckerberg said that he never signed the contract:

Assuming, however, that the document did not say anything about how/when it became binding as a contract, the objective theory of contract formation certainly makes it is possible for Zuckerberg to manifest assent without actually signing the document. 

That said, the whole discussion could become academic because, as Prof. Victor Goldberg (Columbia) told the WSJ, Ceglia might have a problem with the 6-year statute of limitations for breach of contract. 

UPDATE: Here's the complaint, which contains a copy of the "work for hire" contract.

[Meredith R. Miller]

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Is a copy of the purported contract available anywhere? Since this involves a purported "work for hire," and assignment of rights, the wording is very important. Without an actual signed agreement with the appropriate language, the case seems to be very weak (even putting aside the very big SOL issue that was mentioned).

Posted by: Nancy | Jul 24, 2010 12:15:11 PM

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