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Posted on April 15th, 2014, by

Facebook and its founder Mark Zuckenberg have reached a tremendous success shortly after Facebook ran public. However, the decision of Mark Zuckerberg to run Facebook public has provoked the threat of lawsuits from the part of his former business partners, who believed they have deserved a part of Facebook’s shares. In this regard, Winklevoss twins have already filed and won the lawsuit against Zuckerberg and their example encouraged other entrepreneurs to do the same. However, recently one of such attempts have resulted in the new lawsuit to the company and its CEO, Mark Zuckerberg, from the part of Paul Ceglia, who insisted on his right to own a part of Facebook’s shares. Ironically, the lawsuit filed by Ceglia eventually resulted in the prosecution of the plaintiff since Ceglia was officially accused of fraud attempt that is one of the serious violations of business ethics and law. In such a way, the fraudulent lawsuit against Mark Zuckerberg and Facebook has turned against the plaintiff and resulted in the current prosecution of Paul Ceglia and this case raises a number of legal and ethical issues.

Actions that led to the lawsuit

In fact, the lawsuit of Ceglia was not new for Facebook and its CEO. The lawsuit from Winklevoss twins preceded the allegation of Ceglia and his demand of the half of Facebook shares. Winklevoss case has proved to be successful and Mark Zuckerberg had to settle the case and pay off $65 million. In fact, the previous lawsuit has shattered the company because the lawsuit and its settlement created the precedent for other former business partners of Mark Zuckerberg, who could also file their lawsuits against him and the company demanding their shares of Facebook.

In this regard, Paul Ceglia attempted to follow the lead of Winklevoss twins and to file a lawsuit against Mark Zuckerberg, the CEO of Facebook pretending that Zuckerberg entitled him a major stake in the social-networking giant. Obviously, he counted to settle the case before the trial. Moreover, he strongly believed that his position is advantageous and he could prove his righteousness in the court, if Zuckerberg and Facebook refuse from settlement of the case before the trial. Ceglia prepared evidence to prove his position.

In such a situation, Ceglia demanded the half of the shares of the company but his evidence was fraudulent and he has been arrested recently and, at the moment, he undergoes prosecution for the fraud attempt. His attempt was apparently illegal and fraudulous but Ceglia counted on the unwillingness of Facebook and its CEO to undergo trial again. Nevertheless, the company faced the lawsuit and accused Ceglia of the fraud attempt.

Risk management

The management of Facebook could hardly prevent the case because the fraud attempt from the part of Paul Ceglia. In fact, companies are not protected from frauds. Facebook could just employ well-qualified lawyers to protect from false allegations.

At the same time, Mark Zuckerberg could prevent such problems, if he registered his trademark, Facebook, immediately after its creation. Hence, there would be no ownership rights’ disputes and intellectual property rights issues. In fact, registering trademark from the beginning of its operations could have prevented many disputes over the intellectual property right, ownership rights and many other legal issues that have already arouse or may arise in the future.

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