Ever heard of ConnectU?

Neither had I until I read about the lawsuit that they’re bringing against Facebook in today’s New York Times. It’s an interesting addition to the cloning vs. innovation debate, as it shows that both European and American start-ups “borrow” innovations from their competitors. Technology companies exist within a free marketplace of ideas. Facebook, the current media darling, is perhaps an exaggerated demonstration of this reality.

Here are the facts that no one disputes:

• In 2002, Cameron and Tyler Winklevoss, twin brothers at Harvard, wanted to start a social networking site called HarvardConnection.
• In November 2003, they “hired” Mark Zuckerberg, a computer science student at Harvard, to develop the software and database for their site. They never paid him anything but told him that they’d compensate him if the project ever became successful.
• In January 2004, Zuckerberg registered the name “thefacebook.com” (Zuckerberg didn’t invent the name. The “facebook” is what students at Ivy League schools call their student directories.)
• In February 2004, Zuckerberg abandoned the Winklevoss brothers’ project. By the end of the month, he had registered half of Harvard’s student population for his project, and by April his success had spread to other Ivy League schools.
• ConnectU (the Winklevoss brothers’ project) eventually launched in May 2004. They claim that Zuckerberg purposely delayed delivering their technology so that he’d gain a competitive advantage over them.
• Today, Facebook has 30 million users, lots of buzz and is worth upwards of $900.000.000 (the price that Yahoo was willing to pay last year); ConnectU has 70.000 users and the only buzz that it’s generated is largely because of its lawsuit against Facebook.

So the Winklevoss brothers came up with the idea. They trusted Mark Zuckerberg to implement it (at least with the regard to the technical elements). He told them that he would but never actually delivered the promised technology, all while secretly plotting to use the Winklevoss brothers’ concept to create a competitor website.

It sounds like the Winklevoss brothers have a good case, right?

Wrong.

As famed intellectual property professor (and noted proponent of diminished intellectual property protections) Larry Lessig notes:

“The general rule is that ideas are free unless strapped down by contract or patent.”

In other words, the free market — and not the courts — tend to determine who owns a great idea, unless there is a very clear intellectual property protection (like a patent) in place.

No one disputes that Zuckerberg got the idea from the Winklevoss brothers. Morally speaking, he should probably give them something. Without them, Facebook never would have happened, and he’d probably be working as a junior programmer at Google. But he wouldn’t be on the verge of becoming mind-numbling rich before he turns 25. Why can’t he just give them a few million dollars? It seems wrong to say that the Winklevoss brothers are entitled to nothing.

That’s just tacky.

And it certainly makes me reflect a little bit more on the moral implications of “Greed is Good” argument.

But the US legal system is clear: without a binding contract between the Winklevoss brothers and Zuckerberg, the brothers don’t have a case. As the judge hearing the case advised the brothers before giving them 2 weeks to come back with a stronger argument, “Dorm-room chitchat does not make a contract.”

Say what you will about Zuckerberg. He might not be the most morally upright person. But he knew how to spot a great idea and run with it, regardless of who he had to stab in the back to achieve his goals. His cut-throat actions remind me of the best and the worst of the US business culture.

The Winklevoss brothers’ problem is that they were too trusting with what turned out to be literally a billion-dollar idea. If they had gotten Zuckerberg to sign a non-disclosure with a non-compete clause, the case would be entirely different. But telling someone your trade secret — and forgetting to get them to sign a non-disclosure agreement — means that your trade secret is no longer legally protected.

Likewise, if the Winklevoss brothers had paid Zuckerberg for his work — if he had been their employee — they would have some claim to it. But given the lack of compensation and/or employee status, Zuckerberg’s work all belongs to him.

Bottom line: If you have a good idea, don’t trust anyone. People are funny when it comes to money. Try to put everything in writing. Get all of your service providers to sign NDAs with non-compete clauses, or you might find that today’s collaborator is tomorrow’s competitor.

I know that most start-ups think that lawyers are a waste of money, and money is often tight, but as the old saying goes, an ounce of prevention is worth a pound of cure. In other words, it’s better to pay a lawyer a few dollars today, than end up like the Winklevoss brothers, watching a former collaborator make billions of dollars off of your idea.