Facebook, ConnectU reportedly reach $65 million settlement

Facebook Inc. reportedly paid out $65 million to settle a lawsuit filed against it by the founders of ConnectU Inc. The suit had charged that Facebook founder and CEO Mark Zuckerberg pilfered their business ideas while a student at Harvard University.

Facebook and ConnectU had agreed to a confidential settlement last year.

The Recorder, a legal online newsletter, broke the story about the details of the Facebook-ConnectU settlement yesterday. The Recorder said that ConnectU’s former lawyers from Quinn Emanuel Urquhart Oliver & Hedges LLP published information about the settlement in their firm’s newsletter. The results of the settlement were supposed to be sealed, but it appears the law firm unintentionally let the cat out of the bag, according to the Record.

Any information about Facebook’s $65 million agreement to settle the lawsuit, including an advertisement touting the pact (download PDF), has since been removed from the newsletter.

Barry Schnitt, a spokesman for Facebook, declined to comment on what he described as a “confidential agreement.” And officials of both ConnectU and Quinn Emanuel Urquhart Oliver & Hedges did not respond to requests for comment on the settlement.

“Given the size of the settlement, it’s obvious that the case against Facebook’s founder at least had some merit,” said Dan Olds, principal analyst at Gabriel Consulting Group. “Companies do not pay $65 million to get rid of nuisance lawsuits. It isn’t bad aside from the money. This is just something that happens in business. Users don’t care.”

Several years ago, the three founders of social networking site ConnectU filed a lawsuit in federal district court in Boston, claiming that Zuckerberg stole their ideas when he worked for them while they were all students at Harvard University.

The plaintiffs accused Zuckerberg of fraud, copyright infringement and misappropriation of trade secrets. The plaintiffs were seeking an injunction to shut down the site and transfer its assets to them. They are also seeking unspecified damages.

In court documents, Zuckerberg’s attorneys denied that their client stole the ideas of the other three Harvard students — Cameron Winklevoss and Tyler Winklevoss, who are brothers, and Divya Narendra. They also said that the ConnectU founders didn’t have any evidence of a contract with Zuckerberg.

As it passes its five-year anniversary, Facebook’s business has shot past rival MySpace.com. In fact, Facebook had nearly double the worldwide visitors that MySpace attracted in December.

Facebook, once thought of as an up-and-coming social network, had almost 222 million unique visitors last month, while MySpace came in at 125 million, according to online research firm comScore Inc. That’s a dramatic change since the race for unique visitors was a near dead heat in April 2008.