Yesterday, we had a story about how the Winklevoss twins had finally realized that they had no chance to get a Supreme Court appeal of their own attempt to back out of a "settlement deal" with Facebook that made them at least $160 million richer (probably more by now). Like most people who read that story, we assumed that the Winklevii and partner Divya Narendra, had simply decided to take their millions and sulk. Instead, it looks like they are simply trying again with a different legal strategy.
Yes, a day after admitting that they wouldn't file a Supreme Court appeal, they instead made a new filing in the district court in Boston, once again attacking the settlement agreement (which they had agreed to), asking the judge to investigate if Facebook "intentionally or inadvertently suppressed evidence."
It is true that some instant messages that Zuckerberg wrote while he was supposed to be working with the Winklevii emerged after the settlement had been agreed to. The Winklevii didn't focus on those in their original attempt to back out of the settlement, instead claiming that Facebook had mislead them about the value of Facebook shares. However, now it appears they're starting again using the instant messages as evidence, and claiming that Facebook withheld the relevant evidence, and saying that they wouldn't have settled if they'd seen that evidence.
The thing is, while the evidence does make Mark Zuckerberg look like a jerk, I'm not sure it actually helps the Winklevii's overall argument. And, frankly, the whole thing remains totally pointless. The Winklevii failed to build a serious competitor, but we're talking about what was effectively the first few months of both companies (Facebook and ConnectU). Nothing about that means that they should get any credit whatsoever for what Facebook became. The fact that they already got $160+ million out of this is more than enough for their own failure to build a successful company. They should drop this effort, and maybe spend some time -- and maybe some of their piles of money -- looking into ways to deflate their massive sense of entitlement for something they had nothing to do with.
When the Winklevoss twins lost at the appeals court for the second time, I had hoped that someone would sit them down and explain to them that there was simply no freaking way the Supreme Court would bother to hear an appeal on their case, in which they complain about how they settled for "only" $160 million for building a company that wasn't Facebook and wasn't very popular. And yet, they still insisted that they would appeal. I'm not sure who did it, but it appears that someone finally sat them down and explained to them how the Supreme Court works, what kinds of cases it takes, and how it would almost certainly react to a petition to hear their case... and it's finally dawned on them that this would be a good time to take the money (which is probably worth even more now thanks to Facebook's continued growth) and say, "thank you." Yes, it's true, the Winklevii have finally realized what the rest of the world realized a while ago: the case is done and there will be no appeal to the Supreme Court. I guess that storyline is now out of the running for the sequel movie to The Social Network. Thankfully, we've still got Paul Ceglia running around, and his story is a lot more entertaining anyway.
Glyn Moody points us to a website put together by Microsoft, Philips and DSM -- three giant companies that have relied heavily on intellectual property laws to fend off upstart competitors and disruptive innovation -- called Ideas Matter - the value of intellectual property. As you can tell from the title, the website focuses on two key points, which they then try to conflate as a single point: (1) Ideas matter and (2) because of that, intellectual property is important.
Of course, there's a huge problem with this: while ideas do matter, that has nothing to do with intellectual property. As people are quick to point out in our comments any time we suggest that ideas are being blocked or censored by intellectual property laws, such laws are not supposed to apply to ideas. In fact, it's explicit with both copyright and patent law. In copyright law, protection is supposed to be applied to expression, not ideas, and the difference is supposed to be key -- even if it isn't always observed. Similarly, with patents, protection is supposed to be applied to inventions, not ideas -- again even if that isn't regularly observed in practice.
To be honest, I find this particularly nefarious and disingenuous, in that any time people point out that ideas are being censored, defenders of IP laws insist that there's a split and "ideas" are not covered. Yet, when these same folks seek to push forth a propaganda campaign in support of greater protectionism, they use the claim that "ideas matter" to support those laws. Not surprisingly, given the nature of the site's name and premise itself, the rest of the site is filled with ridiculous and unsupported propaganda, such as this laughably misleading video that seems to assume that because certain things are protected by intellectual property laws, they wouldn't exist without them. It also tosses out ridiculous debunked industry figures on "losses" due to infringement. This is extreme propaganda.
Well, that didn't take long at all. We noted that the tone deaf Winklevoss twins would probably appeal their latest legal "loss," which "only" entitles them to the $160 million or so from their original settlement with Facebook and Mark Zuckerberg. Even while I said I expected them to appeal since they'd already gone this far, there was still a little voice in the back of my head saying they couldn't possibly think that the Supreme Court could see a Constitutional issue to consider in their case. And yet... hours later, the Winklevii lawyer has announced plans to appeal to the Supreme Court. And I will announce plans to not laugh out loud when the Supreme Court turns them down.
Well, this is hardly a surprise. A month ago, Judge Kozinski told the Winklevoss twins (the "Winklevii") that they couldn't back out of their settlement agreement with Facebook and Mark Zuckerberg, which was worth "only" $160 million, saying, "At some point, litigation must come to an end. That point has now been reached." However, the Winklevii apparently couldn't just take their money and cry all the way to the bank, but asked the court for an en banc hearing (basically a rehearing of the appeal with all of the judges, rather than just a panel of three). As I stated at the time, I thought it would be a surprise if the court accepted this... and that was an easy call. The court has rejected the request without comment, meaning the only thing left to do is to appeal to the Supreme Court (well, or just take their $160 million...). Given how the Winklevii have acted up until now, it wouldn't surprise me at all to see them try to take this to the Supreme Court, though I can't fathom a situation under which the Supreme Court would care. This case was over a long time ago. It's just the Winklevii who haven't realized it yet.
We've discussed before how whenever there's a successful TV show or movie, people come out of the woodwork to insist that they actually came up with the idea. Usually, these claims go nowhere, in large part, because you can't copyright an idea. There are, of course, a few famous exceptions, but those are cases where there was a clear ongoing and detailed working relationship beforehand.
However, a new ruling in the 9th Circuit appeals court (which has a reputation for somewhat wacky rulings on intellectual property issues) may open the floodgates on these kinds of lawsuits. The ruling is an en banc ruling (meaning heard by all of the judges in the court), and it overturned the earlier ruling from the same court that was just done by a three judge panel. That means the only place to go from here is the Supreme Court, and it's not at all clear that the Supreme Court would be that interested in the case (as of now, I don't think there's a real split between circuit courts, which is often a key determining factor for the Supreme Court).
The ruling itself is on some rather specific and slightly technical aspects of copyright law vs. contract law. You can also watch the video of the one hour hearing that was held for this case earlier this year, which is also a good way to grasp some of the finer points:
However, a simple way of explaining it is this: federal copyright law is clear that it overrules any state copyright law or equivalent state law. This was to make sure that there was a single unified copyright law, and people didn't have to deal with the vagaries and differences found in 50 different state copyright laws. Part of the (quite reasonable) fear was that states would be pressured to make even more draconian copyright laws, and that would harm the true intent of copyright law.
Now, copyright law (again) does not cover ideas. You only get a copyright on the expression, but not the idea. However, there is a California state law that creates an implied contract in certain cases, and that's where this lawsuit hinges. The question is whether or not in presenting the idea for a TV show slightly similar to what is now Ghost Hunters, an implicit contract was formed, which meant that the SciFi Channel (now SyFy) couldn't make Ghost Hunters without working with the plaintiffs. While I have all sorts of issues with "implied" contracts in cases like this, the earlier rulings had thrown out the case based on the fact that this was really a copyright claim in disguise, and copyright law preempts the state contract laws, and then the case goes nowhere because this is really about an idea, which is uncopyrightable. Clean, simple and sensible.
Unfortunately, the majority here twists itself into contortions to claim that this is different. It claims that the specific argument is not about rights covered by copyright law, and thus it is a contractual dispute, where there is an implied contract. As the dissenting judges point out, this doesn't make much sense. The specific complaints by the plaintiffs are rights that are clearly provided under Copyright Law.
But the real issue here is that this will open the floodgates for similar lawsuits. We already see plenty, but they're usually quickly dismissed. Now there will be more such cases, where the focus will be on whether or not there's an "implied contract," when someone shows a studio a script or an idea. In the end, that's really only going to make it more difficult for people who have ideas, because studios aren't going to want to hear them for fear of future liability. If multiple people come up with similar ideas, studios shouldn't be forced to pay them all due to some bizarre implied contract...
This kind of ruling really seems to undermine the whole point of ideas not being copyrightable...
As was widely expected, the Winklevi have decided not to listen to Judge Alex Kozinski on the 9th Circuit appeals court, who told them that the "time is now" to end their ongoing lawsuit against Facebook, and that they should just be happy with the approximately $160 million they ended up with for totally failing to compete in the market place with Zuckerberg. Frankly, even if Zuckerberg really had "copied" their idea, $160 million seems like more than ample compensation. It wasn't the Winklevoss's idea that made Facebook successful (not by a long shot). It was the specific ways in which Zuckerberg and his team executed (combined with an element of luck). In fact, with a reward so ridiculously high for failing, all this sort of lawsuit does is encourage more silly lawsuits from other competitors who failed in the marketplace.
However, despite the court and plenty of commentators telling the Winklevi to cry all the way to the bank with their money, the twins and partner Divya Narendra, have in fact filed for an en banc hearing, asking the full slate of 9th Circuit judges to rehear the case, rather than just the standard three judge panel who heard the original. To be honest, I'd be surprised if the court agreed to the rehearing, but you never know. Typically, they'll do a rehearing where there really are serious questions of law, and significant conflict in how the judges view things with the case at hand. I just don't see the specifics of this dispute rising to that level. If that fails, the only choice left will be to appeal to the Supreme Court, who we can also hope will recognize more important issues at hand and pass on hearing the case.
Incredible. After being told to shut up and take their $160 million from Facebook, the Winklevoss twins are apparently still planning to appeal the ruling from the 9th Circuit. They're filing for an en banc hearing (basically asking all of the judges on the court to rehear the case, rather than the typical panel of three). On issues where there is some disagreement among the judges you'll see en banc hearings. Frankly, I'd be pretty surprised if the 9th Circuit is willing to rehear this case. And, at that point, their only resort will be to appeal to the Supreme Court, who I really doubt would find this a pressing matter of Constitutional importance. What's amazing to me is how much these guys seem to be hurting their own reputations here. Seriously, take the $160 million or so and move on.
Could it finally be over? The Winklevoss twins, Cameron and Tyler, along with Divya Narendra, famously sued Mark Zuckerberg, claiming he "stole" the idea of Facebook from them. They eventually sued him and then settled, getting (at the time) $65 million in cash and Facebook stock. You may have heard about it, considering there was a big Hollywood movie based loosely on all of this. Of course, the whole concept was preposterous. There were tons of other social networks at the time, and you can't "steal" an idea. But, in the grand scheme of things, paying off those guys was easier than continuing to fight it. Yet, after the settlement was done, the twins tried to back out of the settlement, claiming their share should have been much higher. Despite a court shutting them down, the twins kept fighting. Hopefully, that's now over. Judge Alex Kozinski is is trying to put an end to the whole thing, saying that the original settlement stands.
The full ruling from Kozinski is, in typical Kozinski fashion, an entertaining read. He points out that the point of the original settlement was so that everyone could "get on with their lives." Kozinski is particularly harsh on the Winklevosses for trying to back out of the agreement over a claim of valuation issues when they clearly knew what they were getting into:
The Winklevosses are sophisticated parties who were
locked in a contentious struggle over ownership rights in one
of the world’s fastest-growing companies. They engaged in
discovery, which gave them access to a good deal of information
about their opponents. They brought half-a-dozen lawyers
to the mediation. Howard Winklevoss--father of
Cameron and Tyler, former accounting professor at Wharton
School of Business and an expert in valuation--also participated.
Kozinski also knocks the Winklevi for being marketplace losers resorting to the courts to sue those who beat them in the market:
The Winklevosses are not the first parties bested by a competitor
who then seek to gain through litigation what they
were unable to achieve in the marketplace. And the courts
might have obliged, had the Winklevosses not settled their
dispute and signed a release of all claims against Facebook.
With the help of a team of lawyers and a financial advisor,
they made a deal that appears quite favorable in light of recent
As Kozinski notes, while they've been arguing about all of this, Facebook has continued to appreciate in value, and their "settlement" is now worth much more than they even thought they would get originally. He concludes it simply:
reason, they now want to back out. Like the district court, we
see no basis for allowing them to do so. At some point, litigation
must come to an end. That point has now been reached.
And so, they "lose." Of course, it's hard to see how getting $160 million for totally failing in the marketplace can be considered "losing."
Well this is getting a little repetitive, but it's always nice to add another voice to the (growing) crowd of people, who recognize that execution is much more important than the idea. We've discussed this many times and have pointed out people, such as Scott Adams, who have made similar points. The latest such example comes to us courtesy of the Capitalist Lion Tamer, who highlights a brief excerpt from Maxim and The Week creator Felix Dennis' new book, in which he makes the identical point about ideas and execution. He notes that an idea is not enough. It may be important, but ideas are more "like Nike sports shoes," in that they can be a tool that can be used by someone to accomplish great things, but in the end it's the actual execution that matters:
I have lost count of the number of men and women who have approached me with their “great idea,” as if this, in and of itself, was their passport to instant wealth. The idea is not a passport. At most, it is the means of obtaining one. In some instances, a fixation on a great idea can prove hazardous, distracting your attention from the perils and pitfalls
you will inevitably encounter on the narrow road.
If you never have a single great idea in your life, but become skilled in executing the great ideas of others, you can succeed beyond your wildest dreams. They do not have to be your ideas — execution is all. When confronted with a great idea, your reaction should be to scrupulously analyze its commercial potential in the context of your own ability to transform that potential into triumph.
Ideas don’t make you rich. The correct execution of ideas does.
Doesn't it seem odd that so many people (and very, very successful people at that) recognize this basic concept... and yet our entire public policy around innovation focuses solely on rewarding the idea, at the expense of the execution?