Legal Lessons From "The Social Network"

25 February 2011 Publication
Authors: Kevin A. Chumney

Texas ACG Capital Connection

Finally, there is a movie that recognizes the often unspoken truth that corporate lawyers truly are the most important people in a capitalist society! That may be an exaggeration, but the Golden Globe-winning best film, The Social Network, provides some excellent lessons to entrepreneurs and business partners about the need to hire an experienced corporate lawyer when starting, structuring and developing new ventures.

For those who have not seen The Social Network, the movie chronicles the founding of Facebook by two Harvard undergrads, Mark Zuckerberg and his so-called "best friend", Eduardo Saverin.  The move focuses on the legal battles that ensue over ownership of the Facebook idea and company, battles that could have been avoided had the participants sought the advice of a capable corporate attorney.

Always Get an NDA. One of the first legal lessons presented by the movie highlights the necessity of protecting your business idea.  After learning of Mark Zuckerberg's computer programming genius, two Harvard upperclassmen (Winklevoss twins) approach Mark and ask that he help build their social networking website.  Mark takes the twins' idea, improves it, and uses it to develop the initial Facebook site.  When the twins discover the Facebook website, they are outraged that Mark has "stolen" their idea and eventually turn to lawyers to help them get it back. The twins' lawsuit has problems, of course, because rarely are business ideas alone (absent some patentable device or copyrightable material) protectable under the law. Their lawsuit would have stood a much better chance had they simply required Mark to sign an "NDA" (a non-disclosure agreement) preventing Mark's use and disclosure of the idea.  NDAs are quick and inexpensive and entrepreneurs should always use them, even in the most casual of circumstances. Because, who knows, the most casual of circumstances can be the precursor to the next billion dollar business!

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