Facebook Didn't Sign Contract Surrendering Ownership, CEO Zuckerberg Says

Facebook Inc., facing a lawsuit from a New York man claiming an agreement entitles him to 84 percent of the company, is “quite sure” it never signed such a contract, Chief Executive Officer Mark Zuckerberg said.

Zuckerberg, speaking in a TV interview with ABC World News yesterday, was responding to an earlier comment from Facebook lawyer Lisa Simpson, who told a judge the company was “unsure” whether he had signed a contract. Paul Ceglia sued Facebook and Zuckerberg in New York state court, claiming that an April 2003 agreement entitles him to ownership of most of the company.

“If we said that we were unsure, I think that was likely taken out of context,” Zuckerberg said in the interview with Diane Sawyer. “Because I think we were quite sure that we did not sign a contract that says that they have any right to ownership over Facebook.”

Ceglia’s lawsuit challenges the provenance of the world’s most popular social-networking site, estimated to be worth $24.6 billion by SharesPost.com, an online marketplace for closely held companies. An earlier lawsuit by brothers Cameron and Tyler Winklevoss, which claimed Zuckerberg used code developed for their ConnectU startup, was settled in 2008.

Ceglia, a resident of Wellsville, New York, included in his June 30 complaint a two-page “work for hire” contract, which he claimed entitled him to control of the site.

Simpson’s Comment

His lawyer produced a copy of the document for U.S. District Judge Richard Arcara this week at a hearing in federal court in Buffalo, New York.

“Whether he signed this piece of paper, we’re unsure at this moment,” Facebook attorney Simpson said in court.

Paul Argentieri, a lawyer for Ceglia, responded to Zuckerberg’s comments yesterday.

“If he thinks he can go to court and give an answer like that -- I think it’s not possible,” Argentieri said.

“What Zuckerberg is trying to do is put into play the issue of whether the contract was signed by him or not,” said Russell Block, a professor of business law at San Diego State University.

Zuckerberg also said the company would go public “when it makes sense.”

“At some point along the path, I think it’ll make sense to have an IPO,” he said in the ABC interview. “But we’re not running the company to do that. We’re running the company to serve more people.”

Facebook, started by Zuckerberg in a Harvard dorm room in 2004, has lured 500 million users worldwide, he said yesterday. Name-brand advertisers like Starbucks Corp. and JetBlue Airways Corp. have helped the company boost sales.

Separately, Zuckerberg said at a technology event in Mountain View, California yesterday the company is focusing on growing in Russia and Japan this year as Facebook turns to countries where it isn’t the market leader. He also indicated he’s not planning to recruit a CEO.

“I don’t know if the model of hiring a CEO to be externally facing while the people who are making a lot of the decisions aren’t that person is really a viable model,” he said. “Technology companies are really product companies.”

The case was filed in state court and later transferred to a federal court in Buffalo.

The case is Ceglia v. Zuckerberg, 10-CV-00569, U.S. District Court, Western District of New York (Buffalo).

To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; Douglas MacMillan in New York at Dmacmillan3@bloomberg.net

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