Ahead of IPO, Facebook Demands Dismissal of Ownership Suit

Facebook demanded a federal judge Monday dismiss an "extortionate" lawsuit brought by Paul Ceglia, an entrepreneur with a shady past who is claiming half ownership of the social-networking service.Ahead of IPO, Facebook Demands Dismissal of Ownership Suit

Evidence allegedly showing Ceglia "baked" a forged contract that claimed he owned half of Facebook.

The filing comes as Facebook seeks to terminate the ownership flap ahead of a looming, but as yet unscheduled, initial public offering valued at an estimated $5 billion.

The Palo Alto-based company said forensic evidence, including an examination of Ceglia's hard drive, proves that Ceglia had forged e-mails and a 2003 contract between himself and Facebook founder Mark Zuckerberg - a contract that is at the center of Ceglia's nearly 2-year-old New York federal court lawsuit.

"Ceglia's lawsuit was nothing more than an attempted shakedown," Facebook attorney Orin Snyder wrote U.S. District Judge Richard Arcara. Snyder said the suit amounted to "extortionate demands" from Ceglia.

Zuckerberg has maintained all along that Ceglia's contract was a fake. Judge Acara had authorized the forensic testing last year. The results - including allegations that Ceglia employed a hex editor to manipulate the text of the disputed contract in order to make the datestamps look accurate - was submitted to him Monday. The documents also say Ceglia employed a method called "baking" by which he allegedly exposed a forged contract to light, which produced tan lines "where Ceglia appears to have used clothespins or binder clips to suspend the document and expose it to sunlight."

Among other things, Facebook said it had discovered the original "Work for Hire" contract on Ceglia's computer and one e-mailed in 2004 to a Ceglia lawyer, neither of which mention Facebook.

Zuckerberg has said all along that the contract involved another project for which Ceglia hired Zuckerberg to work on his StreetFax company nearly a decade ago. Ceglia alleges the contract also included fronting Zuckerberg $2,000 in exchange for half of Facebook when Zuckerberg was a young Harvard University computer science student.

"The discovery of the StreetFax contract left no doubt about the nature and extent of Ceglia's crime. He had created the forged Work for Hire document by doctoring the text of page 1 of the StreetFax Contract, adding in provisions purportedly giving him ownership of Facebook," Snyder wrote. (.pdf)

Snyder added: "There is no need for further analysis. The discovery of the StreetFax contract proves that the Work for Hire document is a forgery and compels immediate dismissal of this fraudulent lawsuit."

Ceglia has already been hit with a $5,000 fine and a $75,000 bill for Facebook's legal fees for failing to turn over his passwords to his online e-mail accounts when ordered to do so by the court.

But Ceglia attorney Dean Boland said the case is far from over.

"They are claiming that there are other digital images of the contract. All I have to say about the is: stay tuned," Boland said said in a telephone interview.

"We haven't gone after their documents and Zuckerberg's computers to forensically analyze," Boland said in a telephone interview. "By the time we are done, this case is going to look 180 degrees different from what has been out there thus far."

Facebook claims discovering the "authentic StreetFax contract" was not the only "smoking-gun" found on Ceglia's computer.

Snyder wrote that forensic examiners discovered seven versions of the Work for Hire document, according to the records filed Monday.

The metadata for these documents reveal Ceglia's attempts at backdating and document manipulation, as he repeatedly created different versions of the document and attempted to backdate them by adjusting the system clock on his computer. Ceglia also made extensive use of a hex editor - a program commonly used by electronic forgers that allows a user to edit the raw data that make up a file in a manner that makes the fraudulent changes to the document more difficult to detect - in testing the ways he could attempt to modify and manipulate Word documents without leaving a digital fingerprint.

What's more, Facebook also claims that Ceglia created fake e-mail between him and Zuckerberg by employing a method of resetting his computer's system clock to dates in 2003 and 2004. But the dates, according to the documents, were all stuck in Eastern Daylight Time. None were set to Eastern Standard Time which is what the time should have been for the e-mails from October to April.

No court date has been set for the motion to dismiss.


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