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Winklevoss twins seek to undo $65-million settlement over founding of social network Facebook

Cameron and Tyler Winklevoss allege Facebook founder Mark Zuckerberg stole their idea, which Facebook denies. The twins say they were owed more shares based on an undisclosed valuation by Facebook.

January 11, 2011|Reuters

SAN FRANCISCO — Cameron and Tyler Winklevoss found a skeptical audience Tuesday as they tried to persuade a U.S. appeals court to let them out of a $65-million settlement over the founding of online social network Facebook Inc.

The saga of the Winklevoss twins and Facebook Chief Executive Mark Zuckerberg became silver screen lore with the release of the film "The Social Network" last year. It has long been a legal battle as well.

The 6-foot-5-inch brothers were hard to miss in the front row at the U.S. 9th Circuit Court of Appeals on Tuesday. The two, Olympic rowers who participated in the 2008 games in Beijing, both wore dark suits and listened quietly as a three-judge panel peppered their attorney with questions.

Zuckerberg did not attend.

The Winklevoss twins, along with Divya Narendra, started a company called ConnectU while they were students at Harvard University. They say fellow Harvard student and Facebook founder Zuckerberg stole their idea. Facebook denies these claims.

The twins argue that based on an internal valuation at the time that Facebook did not disclose, they should have received more Facebook shares as part of the 2008 settlement of the dispute. Facebook argues it was under no obligation to reveal an internal valuation.

At one point the ConnectU founders agreed to a settlement valued at $65 million in cash and stock, an attorney for the twins, Jerome Falk, noted during Tuesday's proceeding.

"Then they suffered a bout of settlers' remorse," Facebook said in a court filing.

A federal trial court judge refused to allow the twins to get out of the deal. They then appealed to the 9th Circuit. Senior Judge J. Clifford Wallace pointed out that the twins had several lawyers representing them at settlement talks and that their father is a business expert.

That makes it difficult to believe that anyone took advantage of them, Wallace said.

"I agree my clients were not behind the barn door when brains were passed out," Falk said.

After the hearing, Cameron Winklevoss said they are looking forward to a decision.

"I just think it's in the hands of the court," he said.

A Facebook representative said via e-mail that the company appreciates the court's time and also looks forward to a decision.

Facebook earned $355 million in net income and $1.2 billion in revenue in the first nine months of 2010, according to documents that Goldman Sachs provided to clients last week to entice investors in a special fund set up to invest in the social networking giant.

A growing secondary market has developed for buying and selling private shares of Facebook, and many investors are eagerly anticipating a potential initial public offering of Facebook.

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