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Judge in Facebook-ConnectU case to open sealed transcripts

After listening to arguments made by CNET attorneys, judge agrees to release redacted copies of a June 23 closed hearing.

SAN JOSE, Calif.--The public will be allowed a peek at some of what was said last week during a settlement hearing in the long-running legal dispute between ConnectU and Facebook.

James Ware, a U.S. district court judge, barred reporters and the public from attending the June 23 hearing in San Jose, Calif. He also put many of the documents in the case under seal. CNET Networks filed an objection to Ware's decision last week.

On Wednesday, Ware said he would release a redacted copy of the transcript from the June 23 hearing and allow a magistrate judge to decide on whether some of the other sealed documents should be released. What was redacted is still unclear, according to CNET lawyers who were at Wednesday's hearing.

Facebook has agreed to pay ConnectU's founders cash and stock as part of the terms of the settlement, but the exact amounts have not been released.

The case began in 2004, when ConnectU's founders alleged in a lawsuit that the idea for Facebook was originally theirs, and accused Facebook founder Mark Zuckerberg of ripping off their business plan and their code while they all attended Harvard.

Zuckerberg denied the allegations. The case dragged on until the two sides reached a settlement earlier this year that called for Facebook to pay cash and stock to ConnectU's founders. ConnectU later tried to back out after it said it had obtained important new information.

Some of that information was unearthed by a computer forensics expert hired by ConnectU who located instant-message logs belonging to Zuckerberg.

But Ware decided there was no reason to throw out the settlement. The purpose of Wednesday's hearing was to figure out how the settlement would be paid and take care of other legal loose ends.

Prior to the judge's decision about releasing some of the sealed documents, Facebook's lawyers objected, arguing that some of the information included Facebook's source code, proprietary trade secrets, financial information, and communications between Facebook employees and their family and friends.

Roger Myers, the attorney representing CNET, told the court that before documents should be sealed in this kind of legal proceeding, the parties had to prove that they would suffer a "competitive harm."

"They have the burden of proof," Myers told the court.

Ware said he wanted to protect the privacy enjoyed by parties who are in mediation. He said he had promised ConnectU and Facebook that their discussions would not be part of the public record and he would have to go back on his word: "The integrity of the court is an issue," Ware said.

Myers, from the San Francisco law firm of Holme Roberts & Owen, wasn't altogether happy with the judge's decision to redact information from the transcript.

"It's not clear what he's going to redact," Myers said later. "Whether we think the redactions go too far, it's going to be hard to say until we see them. I think he's going to redact what was said in the mediation...In the documents that were filed with respect to the proposed judgment that includes a copy of the term sheet of the settlement, the only thing that was redacted was financial information: how much money was going to be paid and how much stock was going to be given.

"It sounds like he's (going to redact more than that) in the transcript," Myers continued. "We think that goes too far...There's hundreds of documents filed under seal. We think that most of them should not have been sealed. There's some things that (Facebook) can keep confidential, like their source code and trade secrets but they've gone way overboard here."

As for Zuckerberg's IM logs, Myers said: "Those should not have been sealed. There's been no showing made that would justify keeping that information under seal, so those should be released."

After the discussion about unsealing documents ended, Ware turned to address a third-party claim on some of ConnectU's settlement money. Before ConnectU co-founders Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra can pocket the money and stock Facebook agreed to pay to settle the case, they have to pay off their former lawyers.

Lawyers representing Quinn Emanuel, the law firm that once represented ConnectU, made every attempt to persuade the judge not to disperse the settlement money and stock before they've been paid.