We’ve all heard about The Social Network movie, which portrays the founding of Facebook and the resulting lawsuits. In the movie, as well as in reality, Winklevoss brothers claimed that the idea behind Facebook was theirs, and Facebook’s co-founder Eduardo Saverin claimed that he was purposely induced to sign an agreement that led to significant dilution of his shares.
The issues leading to the above lawsuits are not an uncommon thing in the startup world. I invited Mark Howitson, former Deputy General Counsel at Facebook, who was actually leading the famous cases, to join me on the show and share his thoughts about whether similar problems can be avoided by startup founders, and how. Mark also comments on how much truth about the Facebook’s lawsuits is conveyed in the movie and published on the Internet.
I feel very honored that Mark accepted my invitation, since he doesn’t appear much in the media, and until now he hadn’t publicly commented on Facebook’s cases. Watch the interview carefully, as we refer to the lawsuits throughout our talk.
Here are some highlights:
“You’ve got to make a judgement about what are you going to disclose to people you are talking to.”
“They had no agreement whatsoever to prove that there was an agreement to keep anything undisclosed, quiet or confidential. Above and beyond, whether or not there was any copying of anything. Which, there wasn’t.”
“Like the NDA, the agreement that you often have for people who perform services for you, is a Proprietary Information Agreement. It’s an NDA, but it also adds language related to who owns intellectual property that the person creates while he or she is working for you.”
“One of the beautiful and problematic things in United States is that people sue each other constantly.”
“It’s not uncommon in an employment arrangement for the Executives or senior people in a startup to have a provision in their employment agreement saying, that they can only be fired for cause.”
“Mr. Saverin was saying that he was fraudently induced to sign an agreement, because he wasn’t told about all the different dilutions were going to happen to the company. That issue was never resolved in court about who was right.”
“The disputes in the situations that Facebook faced are not terribly unusual, they were just magnified by the success of the company and public position that Mark holds. Then and now.”
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