David Fincher’s new film, The Social Network, could be subtitled “The Unauthorized Biography of a Startup.” Based on the book ‘The Accidental Billionaires’ by Ben Mezrich, The Social Network tells the story of Facebook’s founding and rise to fame through the lens of the lawsuits that arose around it almost from the beginning.

While critics contend that the movie is as much fiction as truth, it’s based on an all-too-typical scenario: business founders get started without a clear understanding of the legal implications of partnerships, intellectual property, and non-compete agreements, and are then surprised when complications arise.

Whether or not you’ve seen The Social Network yet, we found some great lessons any startup should take away from the movie.

Business ideas aren’t protected
Central to the storyline of the film is a misunderstanding about what constitutes intellectual property.

The facts: In late 2003, Cameron and Tyler Winklevoss and Divya Narendr asked fellow Harvard student Mark Zuckerberg, already known as a genius programmer, to write some code for a social networking site for students. Their oral agreement with Zuckerberg later created disputes as to whether they hired him, contracted with him for a portion of the profits, or what, but Zuckerberg admits to doing about 6 hours of work for them on the project, and claims he never committed to completing the project, but just that he was “helping out” some fellow students. At some point, he stopped answering their emails and in February 2004 launched his own social networking site, “Thefacebook.”

The basis of the resulting lawsuit was that Zuckerberg had “stolen their idea” and used it for his own profit.

But, as our own Tim Berry points out, “Business ideas aren’t protected. In 30 years of business and consulting, I’ve never heard of any laws to protect business ideas. Laws protect inventions with patents, creative works with copyright, and trade names with trademarks.”

If they had alleged instead that he had stolen their original code, that would be protected by copyright, so long as:

  • they, and not Zuckerberg, had actually created the code, or
  • they had an enforceable contract with Zuckerberg as an employee or contractor that gave them rights to anything he created while in their employ.

Alternatively, if they had made Zuckerberg sign a non-compete agreement before beginning work, in which he agreed not to create his own social networking site, or not to do related work for a certain period of time, they would have had a legal basis for the lawsuit.

Spoiler alert:
On Monday, we’ll talk about partnership agreements, and how they could have saved Eduardo Saverin and the Winklevoss twins a lot of time in court.

Sara Prentice Manela

P.S. Speaking of Facebook – Have you joined our fanpage?