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Summary:

Remember the end of The Social Network, when the Winklevosses get to walk away with a settlement worth $65 million, and all the lawsuits are…

Cameron and Tyler Winklevoss
photo: Corbis / Brian Snyder

Remember the end of The Social Network, when the Winklevosses get to walk away with a settlement worth $65 million, and all the lawsuits are finally over? In the real world, however, things were messier. The Winklevosses appealed and litigated for three more years, asking for an extraordinary “do-over” on the settlement they signed. But now it’s truly over, and the results are no surprise-Facebook won.

The Winklevosses and their partner, Divya Narendra, originally sued Facebook back in 2004, claiming founder Mark Zuckerberg stole their ideas and lied to them when he created Facebook while a student at Harvard. Eventually, a settlement was reached in 2008; the Winklevosses signed off, surrounded by big-firm lawyers. It was a mixture of cash and Facebook stock valued at the time as $65 million-today it’s worth well over $100 million.

That still wasn’t enough for the twins. They said they got swindled by Facebook, because the company’s stock wasn’t as valuable as they were led to believe it was. During settlement negotiations, the Winklevosses claim they were led to believe the shares were each worth $35.90; around the same time, Facebook had made an internal valuation of $8.88 for tax purposes.

After the settlement, the Winklevosses got involved in a malpractice dispute with their former lawyers from Quinn Emanuel Urquhart & Hedges (and lost); and they continued to litigate. They also gave interviews to 60 Minutes and to The Daily, where they were interviewed by a childhood friend. Their legal appeals culminated in a January hearing at the U.S. court of Appeals for the 9th Circuit, based in San Francisco.

At that hearing, the three-judge panel appeared quite skeptical of the Winklevosses’ claims, so this opinion doesn’t really hold any surprises. But it would seem to finally put an end to this chapter in Facebook’s history. There’s nowhere left to appeal to but the full 9th Circuit or the U.S. Supreme Court, neither of which is likely to care much about this case, which now looks like sour grapes over a run-of-the-mill contract dispute. As the opinion notes, the value of Facebook stock has continued to rise, well beyond even what the Winklevosses thought it was worth when they settled.

The Winklevosses’ appeals attorney didn’t immediately respond to a request for comment. Facebook responded with a statement from an in-house attorney stating simply the company appreciated the court’s careful consideration of the case and was pleased with the ruling.

The 11-page opinion [PDF] isn’t a riveting read, but it ends with a snap. Chief Judge Alex Kozinski writes: “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… With the help of a team of lawyers and a financial advisor, they made a deal that appears quite favorable in light of recent market activity. For whatever the reason, they now want to back out. Like the district court, we see no basis for allowing them to do so. At some point, litigation must come to an end. That point has now been reached.”

Update: Winklevoss attorney Gerome Falk has told Bloomberg and other press outlets the twins will be asking for a re-hearing by the entire 9th Circuit. Such a petition would need to be approved by a majority of the 28 judges who sit on that court. Given how squarely the twins lost the case, getting such a re-hearing seems like a real longshot.

  1. Black Market Monday, April 11, 2011

    That sucks. All the can do now is sit and wait for the Facebook IPO and make over a hundred million for Mark taking their “idea” and making it work. Poor things.

  2. Its over boys.

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