JURIST - Paper Chase: Federal court enforces Facebook trade secret settlement

[JURIST] A judge in the US District Court for the Northern District of California [official website] Wednesday granted a motion [order, PDF] to enforce a previous settlement agreement between two social networking websites, Facebook [corporate backgrounder] and ConnectU [corporate website]. The ruling effectively ends the two companies' ongoing legal battle [case materials] concerning ownership of source code forming the basis of Facebook. The two sides had agreed on a settlement in February, but ConnectU had sought to annul that agreement [Bloomberg report], arguing that Facebook had committed fraud in the procurement, material terms were missing, and the agreement did not reflect the parties' intentions. Judge James Ware rejected ConnectU's arguments asserting unclear terms and fraud:

In sum, the Court finds that the Agreement reached by the parties does not display on its face a failure to agree or any uncertainty regarding its material terms. Accordingly, the Court finds that the Agreement is enforceable...[T]he Court finds that Defendants have failed to tender sufficient evidence of fraud in the circumstances proffered to the Court to create a genuine dispute as to whether the Agreement was fraudulently induced.

The actual terms of the financial settlement were not released, but as a result of the agreement, all ConnectU stock will be acquired by Facebook in exchange for cash and common shares of its stock. The New York Times has more.

ConnectU and Facebook originally went to court last year amid allegations that Facebook's founder, Mark Zuckerburg [corporate profile], had stolen the idea for the site while working for a student-run Harvard University website, the Harvard Connection, which later became ConnectU, in 2003. Facebook, which was established in 2004, is said to have a value in excess of $1 billion, and according to reports by ComScore [corporate website] it has 80 million active users and it is the sixth most-trafficked website in the world.

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