Judge strikes down Facebook asset freeze

By Stacy Cowley, tech editor


NEW YORK (CNNMoney) -- If Facebook wants to buy its imminent 500 millionth user a drink to celebrate, it will be able to: A federal court judge on Friday struck down the restraining order that temporarily bound the company's assets earlier this month.

Wellsville, N.Y., resident Paul Ceglia sued Facebook and its founder Mark Zuckerberg, in a local court late last month, claiming he hired Zuckerberg in 2003 to build a "live functioning yearbook with the working title of 'The Face Book.'" Ceglia says he is now owed 84% ownership of Facebook. To back his claim, he submitted to the court a poorly worded, typo-filled alleged contract and a receipt for the $1,000 Ceglia claims he paid Zuckerberg for his services.

Based on that scant evidence, a local judge slapped Facebook with an unusual and sweeping restraining order preventing the company from transferring or selling any of its assets. Facebook quickly had the case removed to federal court, where it filed motions describing a litany of legal and logical flaws in the plaintiff's case.

U.S. District Court Judge Richard Arcara in Buffalo, N.Y., will hold a hearing on Tuesday on Facebook's motion to dissolve the restraining order, but on Friday he granted Facebook's request for immediate relief. The order appears "impermissibly vague and overbroad," and may have already expired anyway because of how it was written, Arcara said in a written decision staying the state court order.

Facebook's lawyers will return to court next week to fend off Ceglia's claims.

Facebook has faced other, more significant legal challenges to Zuckerberg's ownership of the venture.

The site got its start in 2003 as a Harvard University dorm-room project and hit the Web with the domain thefacebook.com in January 2004. Later that year, several of Zuckerberg's classmates filed a lawsuit against him, claiming he had hijacked the idea -- and some of the code -- from an earlier project of theirs. Facebook later settled the case, reportedly paying $20 million in cash and granting stock worth an additional $45 million. To top of page

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