Winklevoss twins must accept Facebook deal - court

By Dan Levine

SAN FRANCISCO | Mon Apr 11, 2011 7:41pm EDT

SAN FRANCISCO (Reuters) -

Mark Zuckerberg won a legal battle against former Harvard classmates who accuse him of stealing their idea for Facebook, but the feud made famous on the silver screen is not over yet.

Cameron and Tyler Winklevoss must accept a cash and stock settlement with Facebook that had been valued at $65 million, a U.S. appeals court ruled on Monday. Meanwhile, a New York man filed an amended lawsuit against Zuckerberg on Monday, citing a 2003 email in which Zuckerberg discusses an urgent need to launch his site before "a couple of upperclassmen" could launch theirs, an apparent reference to the Winklevoss twins.

The Winklevoss brothers argued their settlement with Facebook was unfair because the company hid information from them during talks. But the twins were sophisticated negotiators aided by a team of lawyers, 9th U.S. Circuit Court of Appeals Chief Judge Alex Kozinski wrote for a unanimous three-judge panel.

"At some point, litigation must come to an end," Kozinski wrote. "That point has now been reached."

An attorney for the brothers, Jerome Falk Jr., said on Monday his clients would seek a rehearing before a larger, "en banc" group of 9th Circuit judges.

That larger group can overrule a three-judge panel, although only a fraction of cases undergo such a review. Should the 9th Circuit refuse to rehear the case, the last option would be an appeal to the U.S. Supreme Court.

Falk said he "respectfully" disagreed with the 9th Circuit's conclusions.

The 6-foot, 5-inch (1.96-meter) Winklevoss brothers are Olympic rowers who participated in the 2008 games in Beijing, and their saga with Zuckerberg was dramatized in the film "The Social Network."

In the movie, actor Armie Hammer played both identical twins. Zuckerberg's character snidely called them on-screen the "Winklevi."

FACT AND FICTION

The twins, along with Divya Narendra, started a company called ConnectU while at Harvard. They say Zuckerberg stole their idea. Facebook denies these claims.

Facebook took in $1.2 billion of revenue in 2010's first nine months, according to documents that Goldman Sachs provided to clients to entice investors in a special fund set up to invest in the giant social networking firm.

The company was valued at $50 billion as part of that transaction. The company said on Monday it is evaluating the Internet market in China, but a source indicated it has not yet signed a business deal with any companies there.

The Winklevoss twins and Narendra agreed to a settlement that had been valued at $65 million. But they argue that, based on an internal valuation that Facebook did not reveal, they should have received more Facebook shares as part of the deal.

A lower court had granted Facebook's request to enforce the settlement with the Winklevoss twins and Narendra. The 9th Circuit agreed on Monday.

"The Winklevosses are not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace," Kozinski wrote.

Facebook deputy general counsel Colin Stretch said the company appreciated the court's careful consideration of the case and was "pleased" it ruled in their favor.

The case is not the only ownership dispute Zuckerberg must fend off. A New York businessman, Paul Ceglia, claims a contract with Zuckerberg to develop and design a website entitled him to an 84 percent stake in the privately held social networking site.

In a new twist to the long-running case, Ceglia filed an amended lawsuit on Monday, in which he outlined an 2003 email from Zuckerberg that suggested the Facebook founder stalled "a couple of upperclassmen here" from launching their competing website. The lawsuit does not specifically name the Winklevoss twins.

"If we don't make a move soon, I think we will lose the advantage we would have if we release before them," the lawsuit claims Zuckerberg wrote in an email.

Ceglia claims Zuckerberg pleaded with him for money to finance the social network's set-up with the intention of getting it live before the other site.

Facebook has repeatedly said it believes the lawsuit is fraudulent. Orin Snyder, a lawyer for the company, said Facebook looks forward to defending the case in court and on Monday characterized Ceglia's claims as "ridiculous."

The case involving the Winklevosses in the 9th Circuit is The Facebook Inc v. ConnectU Inc. 08-16745.

(Reporting by Dan Levine; editing by Gerald E. McCormick)