The founders of ConnectU were apparently paid as much as $65 million in cash and Facebook stock to settle their longstanding dispute with Mark Zuckerberg and Facebook, according to an ad unearthed by The Recorder this morning. The advertisment was placed by Quinn Emanuel Urquhart Oliver & Hedges, the lawfirm that represented ConnectU founders Cameron and Tyler Winklevoss and Divya Narendr up until spring of last year, and includes a listing of all of Quinn’s successes over 2008, proclaiming that “It’s Our Opponents Who Need A Bailout.” Listed among the victories was the Facebook claim – a bizarre move given the great lengths all parties involved took to ensure that the press would not learn the details of the settlement.
From the article in The Recorder:
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….
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.
Because neither Facebook nor Quinn are willing to discuss the ad, it’s unclear how much of the settlement was paid out in equity and cash, or the valuation of the Facebook stock (it may have been based on the vaunted $15 billion valuation established by Microsoft’s ad deal 2007, while recent internal valuations are only around a quarter of that). Given the fact that it’s in Quinn’s best interest to claim the highest figure possible and the apparent lack of judgment from the ad’s writer, I wouldn’t be surprised if the actual value of the settlement is significantly less.
The case centered on ConnectU’s claims that Facebook founder Mark Zuckerberg stole their intellectual property and code to build the hugely popular social network, and has dragged on for years. As The Recorder and other publications have noted, the payout is not necessarily an admission of guilt on Facebook’s part – the company may well have just wanted to put the case (and the associated negative press) behind it.
Its kinda funny.
Wow, unbelievable.
This law firm needs to hire some good legal counsel themselves, as Facebook is sure to sue them if they violated a confidentiality agreement as part of the settlement.
Perhaps they will need a bailout very soon.
Anjali Sen
Doubtful. They want this to go away. Because it was an admition of theft. Or, business as usual for fuckerburg.
pirates of harvard university?
YouLocator.com – be yourself
Ouch, that’s not admission of guilt is it?
Read the article?
ConnectU made out BIG
sounds fishy
Hrm, sounds to me like a nuisance lawsuit from some shiester attorneys who were in it all for their own glory.
That they would go to such lengths to keep the terms of the settlement undisclosed (which is usual in such cases) and then have their own attorneys spill the beans? Oy!
BTW, FB, being the Goliath here, probably just paid them off b/c they were being a nuisance and so that they would go away. What’s $65,000,000 compared to billions in revenue/stock options?
Unfortunately, Facebook only have billions on paper. The ConnectU guys are the real winners here. They have 65M in the bank.
i am still confused by the code issue. did mark steal the code also? i thought it was just the concept he stole but the coding was all his.
Yes, Zuck was given code by the Brothers who had hired a previous programmer who created a dating site but could not get the dual social network site to work. Zuck was given the partial code to finish and he then told the Brothers he stopped working on it and quit the project only to launch The Facebook a few months later.
thanks
There are lots of articles about FAcebook’s founding including the release of documents on the case published by the magazine 02138. Zuck wrote in some of the code comments about a girl who dumped him, hah.
Given that the twins tried to get the deal annulled I bet this was almost all stock based on the MSFT $15 billion valuation. Whatever cash they got certainly went to their lawyers.
65million/15billion is ~0.5%.
Except Facebook clearly isn’t worth 15 billion. Zuckerberg knows this.
If they paid in stock with the 15B valuation then the number isn’t really 65 million.
Do anyone know of anyone that has an ConnectU account?
http://twitter.com/cliffdailey
I was at Harvard when Facebook launched and was an acquaintance of the Winklevoss’s and Divya. They hired Zuckerberg to develop ConnectU and a few weeks before the planned launch of ConnectU, Zuckerberg decided to launch the code himself as “thefacebook” (after the name for Harvard’s year book).
From a coding standpoint, thefacebook was relatively simple. The concept of a social network already existed too. The magic of Facebook, which can be attributed to the ConnectU guys, is launching a social network site exclusive to Harvard and then gradually expanding to other schools.
ConnectU launched a month later but that was enough delay to put them behind the curve for good. Also, thefacebook was a better name.
I wasn’t there when the deal with Zuckerberg was made, but for a variety of reasons (number of people who know this story, the fact that there was no reason to lie at the time, no one knew Facebook would blow up like it did, etc) I’m pretty confident this is the true story. Also, I find it hard to believe that Facebook would hand over up to $65M to a pack of liars.
I don’t see how you can call the Winklevoss’s brothers a pack of liars.
Didn’t you just say they hired Zuckerberg?
You are reading it wrong. He’s not pro-facebook.
Is there anything that he didn’t steal? First class loser. Seems like it is the year of the con man.
He should go to Washington, he’d fit right in.
Hi,
It’s always seemed pretty obvious that Mark Zuckerberg is great at making friends and influencing people, but not necessarily a boy of Integrity, honesty or honor.
It was network-effect based around universities that was the secret sauce of FB’s initial success, the fact that’s what was “stolen” suggests the ConnectU founders should have got a lot more.
Kind regards,
Quevoni
That second paragraph is right on the money, good call.
putting the case behind for $65 million? over 10% of their 500mm funding. yea… i dont think so. there was something substantial there.
Yeah — it really does Zuck. If true, it’s one of the biggest weasel moves I’ve ever heard of in my life.
it’s a lot of cash.
Or maybe it’s zero cash.
None of us know.
If they really had the code stolen from them, thee is no way they would have settled for such a low number. just does not make sense-
I agree. There was most likely a smoking gun here. The truth will eventually come out. Zuck hopes to be so rich that ethics won’t matter anymore, I guess.
I guess I’d be happy if someone payed me 65millions after stealing my idea and code.
Quinn is mega $$$ generating firm. I believe profits per partner for 2008 were over $3 mil. can’t believe they made this silly mistake. I guess they were too busy being full of themselves.
what is connectu?
this is a great post,very relevant
Not as great as you think, but not bad, either…
Lawfirm gets 30%
Uncle Sam takes 35%
Assume 50/50 Cash & Equity
Equity is worth 60% less now vs. then
Divided by two guys
= $5-7m each in cash? The equity is $2-3m?
Wow, what a screw up.
Regardless of the exact #, it was big $$$!
Code is easy – plenty of developers that could write the original code for FB. Copyright of the code remains with the original author unless they specifically sign over the copyright: even then it’s a mess.
But, it’s not the code that made FB. It stuck, made mainstream and then went nuclear! I doubt ConnectU provided anyone with a roadmap for that.
Codes changed now – rewritten to scale properly I’m sure.
I reached out to Cameron Winklevoss back in 07. He is down to earth. I’m glad his team was compensated. Although I do not know if anyone knows, he comes from a very successful financial family. They probably had some of the best lawyers biting on Marks toes. His family business website is http://www.wink...s.com/index.htm . I had taken a peak at it way back in 07, they have been around awhile. The compensation is probably just a drop in the bucket for him. But I’m sure he is very happy to put this behind him. Congrats U Connect, you deserve it.
Quote from the SV start-up cookbook:
1. Steal.
2. File a ridiculous patent ‘covering’ what you’ve just stolen and MUCH MORE.
3. Lie as exciting as you can and get funding.
4. Hire somebody to build SOMETHING slightly resembling the initial idea. Outsource as much of this dirty job as possible, preferably to the countries without any legal system.
5. HYPE it up
6. HYPE it up MORE
7. HYPE it up as loud as possible
8. Hype it up… even louder (hire Arrington, he knows).
9. Sell a piece of your sh…t to somebody big (allocate some funds in advance, it requires a big wining and dining!).
10. Don’t open the door and don’t answer e-mails when the owners of the original thing come to you.
11. Hire lawyers and drag your feet with a lawsuit as long as possible.
12. Settle out of court if necessary. Throw this piece of sh…t at them, they are losers, they need a pension.
Add stupid interviews and false claims about your congeniality to the taste.
Interesting. What is connectU up to these days?
If this were an isolated incident I’d say it, but major law firms are known to let information (like this) escape easily. We’ll see what kind of sanctions are ahead.
This type of press for Facebook is long overdue… they have been the media’s little darlings for way to long… I don’t like the way they do business!
I would hope most lawyers would not take the case if there would be no evidence supporting it-
but that is just my hopes-
Notwithstanding this foolish marketing blunder — which clearly resulted from the right hand not knowing what the left was doing at a large law firm — Quinn is a top-notch litigation firm. As someone who has defended companies in class actions and other big-ticket litigation, I would take them seriously as opposing counsel. Cases are won or lost on the facts, and FB’s willingness to settle for $65 million strikes me as a signal that the facts were looking unfavorable. It’s true that a settlement is never an admission of liability, but presumably they felt that there was enough in the record to be worried about that a jury could ultimately rule against FB. Merely seeking to avoid the cost and distraction of protracted litigation would NEVER justify a settlement of this magnitude.