Facebook paid the founders of ConnectU $65 million to settle lawsuits accusing Facebook CEO Mark Zuckerberg of stealing the idea for the wildly successful social-networking Web site, according to a law firm’s marketing brochure.
Lawyers in the heavyweight fight had expended great effort to keep the settlement secret — even going as far as persuading a judge to clear the courtroom of reporters on one occasion. But ConnectU’s former lawyers from Quinn Emanuel Urquhart Oliver & Hedges published the settlement amount in a firm advertisement trumpeting the firm’s prowess.
“WON $65 million settlement against Facebook” appears, along with dozens of other Quinn outcomes from last year, in the firm’s January business litigation newsletter.
The disclosure was apparently inadvertent. Firm Chairman John Quinn asked The Recorder to not print the amount, citing the confidentiality provision, and declined to comment further.
ConnectU fired Quinn Emanuel last year, and they are now locked in a fee fight, with Quinn seeking $13 million pursuant to a contingency fee agreement. Although ConnectU threatened to sue the firm for malpractice, the two sides are now in arbitration in New York.
The $65 million is presumably an estimated value of the settlement, which was paid in a mix of cash and Facebook shares.
Scott Mosko, a Finnegan, Henderson, Farabow, Garrett & Dunner lawyer who still represents ConnectU in the matter, declined to comment.
Facebook spokesman Barry Schnitt said the company wouldn’t comment on the confidential settlement. Neel Chatterjee, an Orrick, Herrington & Sutcliffe partner who represents Facebook, also declined to comment.
It’s a big settlement, but also not a huge percentage of Facebook’s value, IP lawyers say. Once pegged at $15 billion, the private company is now valued at $4 billion, according to a report from Silicon Alley Insider.
“Sixty-five million is a significant sum — it’s certainly more than the cost of the defense,” said Chris Scott Graham, an IP litigator with Dechert in Mountain View who was not involved in the case. “But it’s a very small percentage of [Facebook's] valuation and therefore could be argued by Facebook to be a payment based on considerations other than the merits of the claims.”
The ConnectU dispute got started at Harvard, where ConnectU’s founders, Cameron and Tyler Winklevoss and Divya Narendra hired fellow student Zuckerberg to work on code for a dating Web site for Harvard students. They sued Facebook in 2004, accusing Zuckerberg of delaying the project while using the information to start his own Web site. He quit Harvard and moved to Palo Alto, Calif., to start the company. ConnectU’s lawyers argued that it amounted to trade secret theft and copyright infringement. Last February, Facebook agreed to settle the matter by paying to acquire ConnectU. But soon after, the ConnectU founders claimed they were hoodwinked into a cheap settlement and said they had new evidence implicating Zuckerberg.
ConnectU fired the Quinn Emanuel lawyers who’d hammered out the settlement and appealed to San Jose federal Judge James Ware to toss the deal. At a hearing in June where the two sides were arguing over the deal, Ware booted reporters at the request of the lawyers. The amount of the settlement was placed under seal and an effort by online news organization CNET to unseal it was unsuccessful.