General Intellectual Property Litigation

Paul Ceglia Arrested on Fraud Charges Stemming From Facebook Lawsuit -No Shock There!

Paul Ceglia,the plaintiff, in a bizarre case brought against Facebook in a Western New York Federal Court was arrested by the US Attorney’s Office yesterday. Ceglia claimed in court that he had a contract from back in 2003 that proved that Facebook founder Mark Zuckerberg promised him 50% of the company Zuckerberg was developing. He produced a copy of a contract with Zuckerberg’s signature on it as his key piece of evidence in the lawsuit. FB and Zuckerberg strenuously opposed the claim, stating the document was a forgery and citing proof that Zuckerberg first began developing FB in 2004. I have blogged about this case several times focusing principally on the electronic discovery going on between the parties.

Well, it was that discovery that was the doom of the plaintiff. First, a thorough and exhaustive search of Harvard’s servers found no copies of he emails Ceglia produced that purported to show him emailing Zuckerberg at Harvard about the company. Second, the original contract between Ceglia and Zuckerberg was found deep in Ceglia’s hard drive. It showed that the document was actually a contract where Ceglia paid Zuckerberg for a small programming job. It appears Ceglia just changed the first page of the agreement to allow him to use Zuckerberg’s authentic autograph.

Ceglia is charged with one count of mail fraud and one count of wire fraud, each of which carry a maximum sentence of 20 years in prison.Federal agents arrested Ceglia Friday at his home in Wellsville, N.Y., about 90 miles south of Buffalo. This is likely the end of the long and curious legal battle that has raged on since 2010. I went back to look at my original post on the subject to see if I had made any predictions about the outcome of the case. Here’s what I said back in early 2011:

Could someone really be crazy enough to file a lawsuit suing Zuckerberg for half his interest in the company based on a fraudulent document? How did he connect with Zuckerberg? Why did he wait until now to produce the document and file the lawsuit? Has he seen Social Network? What makes this even more intriguing is that Ceglia’s lawyer is Dennis Vacco, the former NY State Attorney General. Vacco could end up with serious egg on his face if he is in charge of this case and it ends up that the whole thing was a sham. He’s going to have his hands full. Zuckerberg is represented by the extremely capable Orin Snyder of Gibson, Dunn & Crutcher. They are pulling no punches: “The lawsuit is a brazen and outrageous fraud on the court,” the Facebook response said. There is no middle ground here someone is going to lose very badly with very bad ramifications. And I don’t expect it to be FB or Zuckerberg.

Wish I could be that accurate making my football picks each week. But this one was not hard to call. The real question remains “What were Ceglia and his lawyers thinking?” The authenticity of the contract was highly suspect right from the beginning and the case made no sense. Ceglia has had several brushes with the law, including a 1997 felony conviction for possession of 400 grams of a compound found in certain hallucinogenic mushrooms. In 2009, Ceglia was convicted of fraud in connection with a wood pellet company he owned. So the guy had a shady background fro the beginning an d no real explanation for why he waited so long to stake his claim. I am sure he wished he just would have put the original contract with Zuckerberg up for sale. Ceglia had arranged to pay Zuckerberg for development work on a now-defunct site called StreetFax. I am sure he would have gotten some decent bids for the actual contract. Oh well, he’s going to have a few years of quiet time to mull over his decision.

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