Even as its founder Mark Zuckerberg has ascended to #785 on the Forbes List, the company has been dooged by questions -- and a lawsuit -- about its origins.

Cameron and Tyler Winklevoss, who are twins and founders of the site ConnectU, accused the Facebook founder of stealing their idea, and sued him for fraud, copyright infringement and misappropriation of trade secrets. Facebook denied the allegations, but the litigation cast somewhat of a shadow of the company.

Now the New York Times is reporting that "a person briefed on the status of dueling lawsuits between Facebook and the competing site ConnectU said on Sunday that Facebook was finalizing a settlement with the founders of ConnectU ... A Facebook spokeswoman said the company would not comment on legal matters. But the person briefed on the status of the negotiations said motions to dismiss the cases are expected to be filed "within weeks."

Google's (NASDAQ: GOOG) recently lost its director of social media to Facebook, and the company's IPO is one of the most anticipated events in Web 2.0, although the company has not yet made any moves to take itself public. The resolution of this lawsuit, a source of some uncertainty, is an important step in moving toward a public offering.

Facebook is facing a nasty lawsuit alleging the the source code for the company's service was stolen by its founder while he was at Harvard. The legal action has been brought by classmates that have a small rival service called ConnectU. They claim that their code for that project was taken by Mark Zuckerberg to start the Facebook service, according to the FT.

In the most extreme case, a court could find that the code was stolen. In the event of such a ruling, ConnectU could ask that Facebook be shut down or that they take ownership of the code and the company.

The suit comes at a particularly critical time for Facebook. Industry estimates have put the value of the service at as high as $8 billion. Most internet measurement services show the social network site growing more quickly than its larger rival, MySpace.

Facebook must also consider whether its wants to seek a large buyer. Yahoo! (NASDAQ: YHOO) has already been in negotiations with the company, but its offer was too low. Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) are seen as potential buyers.

Facebook's other two alternatives are to have an IPO or remain private.

But, none of these solutions work if the company does not own its own intellectual property.

Douglas A. McIntyre is a partner at 24/7 Wall St.