The case was dismissed without prejudice at the request of Fatdoor founder Raj Abhyanker, who said that Benchmark and its EIRs — which in 2007 included Nextdoor CEO Nirav Tolia, as well as current Facebook CTO Bret Taylor, who was also named in the complaint — had stolen his pitch for a local social network with neighborhood-level privacy controls.

Nextdoor VP communications Dabney Lawless said her company felt vindicated that the lawsuit was dropped without a paid settlement. “We’ve always said the lawsuit is completely without merit,” she said.

Abhyanker, though, said his fight was not over. He is currently contesting the Nextdoor trademark, and he is hopeful that he can persuade Google to take up the fight, since it owns the Fatdoor intellectual property through its purchase of a later version of the company called The Dealmap.

Further, it came out over the course of my reporting today that Abhyanker also sued Facebook in January over Fatdoor trade secrets; that case has already been dismissed, as well.

That complaint, filed Jan. 20 and embedded below, said Taylor stole various ideas from Fatdoor for broad concepts related to Facebook’s news feed, “Like” button and other products.

Abhyanker told me that the lawsuit and quick dismissal was all part of his litigation strategy to enlist Google to pursue the Fatdoor patents.

I asked Google for comment on the matter, but I doubt it will have much to say.

Abhyanker framed the cases as a fight between a lone entrepreneur and the “incestuous old boys club” of Silicon Valley. “People are afraid to stand up. We stood up and I’m proud of that,” he said.

Making a lay judgment on this particular battle was harder than usual because of the people involved. Tolia and Benchmark had somewhat infamously been sued, and settled with shareholders in a previous start-up, Epinions, after the shareholders were mostly left out of an acquisition deal. Meanwhile, Abhyanker is an intellectual property lawyer, and pursuing patents and trademarks is literally his business.

Raj Abhyanker Facebook lawsuit

Raj Abhyanker

Abhyanker alleges that he pitched a neighborhood site to Benchmark in 2007 and said at the time he would call it Nextdoor if he could buy the domain. Benchmark conducted due diligence on the deal and indicated it wanted to invest.

But the prominent Silicon Valley firm then pulled out, according to Abhyanker, who filed with the Superior Court of California in San Jose.

At fault, according to Abhyanker, are Benchmark and Nextdoor, as well as Facebook CTO Bret Taylor, who was at Benchmark at the time and had agreed at least informally to advice Fatdoor.

After the Benchmark funding fell through, Abhyanker was fired as CEO and Fatdoor changed focus to eventually become a local deal aggregator called The Dealmap. Earlier this year, The Dealmap was bought by Google, along with its one granted patent and more than 40 patent applications that name Abhyanker as the lead inventor.

Abhyanker — who is now a practicing patent attorney — is faulting Benchmark for getting him kicked out of the company he co-founded, because the VC firm’s failure to invest made Fatdoor’s investors lose confidence in the start-up’s original concept, and because the Fatdoor board used a CEO headhunter to find his replacement that was recommended by Benchmark.

Nirav Tolia

This all came to a head because Nirav Tolia — who was a Benchmark enterpreneur-in-residence later in 2007 — in October launched a local social network called Nextdoor that is funded by Benchmark.

Reached for comment, Nextdoor CEO Nirav Tolia said Abhyanker’s charges are without merit.

“I have never met this person, and the idea and naming of Nextdoor was originated solely by the employees and founders of our company,” he said.

Indeed, Abhyanker’s complaint makes the assumption that Tolia has been working on Nextdoor since 2007. Abhyanker omits any mention of Fanbase, the Benchmark-funded sports directory Tolia started out of his stint as a Benchmark EIR that launched in 2009.

Nextdoor is a pivot of Fanbase, using the company’s remaining funding and the same team, Tolia had told AllThingsD when the neighborhood site launched last month.

Tolia on Thursday said he had received an email from Abhyanker last month after Nextdoor launched, asking to be named to Nextdoor’s founding team.

The email, which Tolia forwarded to AllThingsD, says:

“I am wondering if you would be open to me being in your founding team, in exchange for me filling a part time general counsel, business development vp, and/or board role, and perhaps a small angel investment in cash, resources, and space.”

In addition to Benchmark, Nextdoor and Tolia, Benchmark partners Kevin Harvey, Peter Fenton, Mitch Lasky and Bill Gurley are named in the complaint.

Also named are Bret Taylor and Jim Norris, the FriendFeed founders who helped launch Google Maps and were Benchmark EIRs at the time and had allegedly committed via email before the Benchmark deal fell through that they would be Fatdoor advisors.

Abhyanker claims that Taylor and Norris specifically appropriated his idea for neighborhood-level privacy controls, a feature of Nextdoor that Tolia himself attributed to “an early Google Maps employee” in a recent interview with the San Jose Mercury News. Update: Tolia said he was referring to Prakash Janakiraman, his co-founder at Fanbase and Nextdoor who formerly worked at Google on Maps. Tolia also noted he joined Benchmark four months after Abhyanker made his pitch.  

The evidence for that accusation seems a bit vague, but is particularly notable because Taylor is now Facebook’s CTO.

A spokeswoman for Benchmark said the firm does not comment on pending legal matters. Taylor said he was not aware of the lawsuit and he has no comment.

Asked to clarify why the complaint doesn’t mention Fanbase, Abhyanker said through a spokesman: “Upon reason and belief, Fanbase was just a holding company to bid themselves time until everyone forgot about our Fatdoor/Nextdoor.”

Stamped-COMPLAINT – Abhyanker v. Benchmark Capital Et. Al. – FILED-PUBLIC

Even for a hermit like me, it seems evident that there are local social opportunities beyond deals and check-ins. It’s an area ripe for social Web and app development.

Today, a start-up called Nextdoor launches an authenticated network of social networks for neighborhoods. The service is utilitarian and carefully focused on fostering small private communities.

Nextdoor CEO Nirav Tolia pitched his site to me like this: You have Facebook for your friends and family, LinkedIn for your business network, and Twitter for your interest graph. But what about your local community?

Nextdoor itself is kind of like Facebook, which started out requiring student users to authenticate with their .edu email addresses, and still requires real names. The Nextdoor site is built to be a safe haven for sharing personal information with a small, relevant audience, and it verifies that users actually live in a neighborhood, using postcard codes and phone listings.

But do you really want to share so much of your identity with your neighbors? And do you want to depend on a site like Nextdoor reaching critical mass so that you can talk to people who live down the street?

Another local social start-up, Blockboard, is taking a different approach. It’s more like Twitter, where users can represent themselves however they want. It’s also focused on mobile, and has so far only launched in San Francisco.

Blockboard’s authentication is much simpler than Nextdoor’s. The first time someone uses the Blockboard iPhone app, it validates via GPS that they are located in a particular neighborhood. (Once they’re registered to that community, they don’t have to be physically there to post.) Users usually use pseudonyms.

Blockboard CEO Stephen Hood — whose team comes from the laissez-faire community sites Delicious and Craigslist — said he thinks real identities aren’t that important to communicating local information like event postings, apartment listings, and lost and found.

Plus, keeping local information private is a bit of a red herring, Hood argued. “People aren’t interested in pretending to be in neighborhoods they’re not in, because the content is not relevant,” he said.

Hood thinks a successful local social network must start on mobile devices in order to become a resource when people are out and about in their neighborhoods.

And maybe someday, if all goes well, those local social network users may put down their phones and actually talk to each other.

Neighbors have lots of things to talk about — yard sales, crime, recommendations for local service providers, public works projects, safety issues, block parties and lemonade stands, gripes and gossip. There are online places to do that, like email lists, message boards, blogs and newspaper Web sites — but to date there hasn’t really been a successful local social network.

The ambitious Nextdoor has been in tests for the last year and has 176 active neighborhoods throughout the U.S. Spearheaded by Epinions founder Nirav Tolia, it is backed by Benchmark Capital and Shasta Ventures.

Tolia said in an interview with AllThingsD last week that Nextdoor has become essential in some test neighborhoods — for instance, some teachers in Woodside, Calif., apparently told parents this fall to sign up for Nextdoor to receive community updates.

Why won’t Facebook conquer this particular social space? Because, Tolia concluded, answering his own rhetorical question, “your neighbors and friends are different people.” Nextdoor is also built with the assurance that all participation will remain private and trusted (that is, to whatever extent you trust your neighbors).

If you go to Nextdoor today, hoping to sign up in your neighborhood, you may not find much. The company has instituted a high barrier to entry for each new local network, in an attempt to ensure they each get enough members to become active from the start.

Nextdoor communities start when someone who lives in a neighborhood registers, draws the neighborhood boundaries on a map and then gets 10 more people to verify in the next 15 days that they live within the boundaries.

Community members then verify themselves through a variety of methods, including entering the code they receive on a Nextdoor postcard sent to their home address. People outside the community can’t register or view any content.

Users can post their email, phone number, photos and names of family members — whatever they feel comfortable sharing. They can put up local reviews, list items for sale, or just spew what’s on their minds. Eventually they will receive local offers, should Nextdoor get to the point that it needs to start making money, Tolia said.

Nextdoor is actually an extension of Tolia’s last company, Fanbase, a “Wikipedia for sports” that grew to 10 million users but didn’t turn out to be as impactful and interesting as he had hoped. That company raised $12 million from Benchmark Capital and Shasta Ventures, which Nextdoor continues to use.

For a comparison between Nextdoor and another approach, see also Will the Local Social Network of the Future Be More Like Facebook or Twitter?

Earlier today, BoomTown posted a video of star venture capitalist John Doerr’s 10 tips to start-ups for surviving the econalypse that he ticked off at a roundtable in Silicon Valley on Wednesday.

Beside the words of wisdom from the Kleiner Perkins Caufield & Byers partner, I also trolled for advice from the panel of well-known entrepreneurs I moderated at VentureBeat’s “How to manage your start-up in the downturn” event.

Thus, here is the i-will-survive take from Jason Calacanis of Mahalo, Toni Schneider, chief executive of Automattic, the company that makes the WordPress blogging software, Nirav Tolia of Web 1.0′s Epinions and Max Levchin of Slide.

As an added bonus, Ram Shriram, one of Google’s first investors, also weighs in. And, of course, the inevitable blogger Robert Scoble gives his two cents (and also freaks me out once again!).

Here’s the video of the entrepreneurs, and below it, for your viewing pleasure, two versions of “I Will Survive” by Gloria Gaynor (the classic) and Cake (the weirdly good one):

Here’s a video of star VC John Doerr reciting his 10 tips for start-ups to follow in the economic downturn.

Doerr gave out the advice at VentureBeat’s “How to manage your start-up in the downturn” roundtable event, which took place at the Stanford Park Hotel in Palo Alto yesterday morning.

The Kleiner Perkins Caufield & Byers VC got a lot of attention for his list, which he culled from a survey of 18 of the companies his firm has invested in.

Doerr didn’t need a massive, noisy PowerPoint like Sequoia Capital to make his quick and clear points, which he delivered in four minutes flat.

Doerr was on an investors panel with Ram Shriram, one of Google’s first investors, Ron Conway, Kittu Kolluri of New Enterprise Associates and Matt Cohler of Benchmark Capital.

I moderated the second panel of entrepreneurs, including: Toni Schneider, chief executive of Automattic, the company that makes the WordPress blogging software; Max Levchin of Slide, Jason Calacanis of Mahalo; and Nirav Tolia of Web 1.0′s Epinions. Video of interviews with them and also Shriram to come later today!

But here’s Doerr reciting his 10 tips:

It will take place at the Stanford Park Hotel in Palo Alto from 8 a.m. to noon.

Toni Schneider, chief executive of Automattic (the company that makes the WordPress blogging software) will join Max Levchin of Slide, Jason Calacanis of Mahalo, O’Melveny & Myers’ Sam Zucker, and Nirav Tolia of Web 1.0′s Epinions.

Along with my group, for whom I am planning all sorts of verbal tortures (“Exactly how much do you make?”), there is also a panel of investors, moderated by VentureBeat’s Matt Marshall, which features: John Doerr of Kleiner Perkins Caufield & Byers; Ram Shriram, one of Google’s first investors, Ron Conway, Kittu Kolluri of New Enterprise Associates and Matt Cohler of Benchmark Capital.

Oh, it is sure to be a festival of Web 2.0 pondering.

Said Marshall in a post about the gathering:

One goal of this event is to provide context and advice for start-up CEOs and founders facing the recession. We’ve handpicked the speakers for their remarkable records and experiences in the previous downturn. …

While the Sequoia [Capital] ‘RIP Good Times’ presentation gave a broad overview of the economic problems facing the tech world, it provided mostly a macro analysis, and a general prescription for companies.

Now is the time to take the analysis one step further, and discuss the variety of situations we see among valley investors and their start-ups: How cleantech companies are different from Internet start-ups, and how under certain conditions, a profitable company may actually be poised for aggressive growth, hiring and M&A–and not necessarily ideal for cost cutting. We intend to explore all of this and more.

Given the fairly predictable ‘Silicon Valley is in circle-the-wagons mode’ story line we’ve been seeing so far in the media, this event is also the Valley’s opportunity to help dispel this myth and explain how the area’s start-ups are actually quite diverse and that there are a mix of strategies at play.”

The event is sold out, but it will be streamed live.

And, as usual, look for a shaky video report of the roundtable from me later!