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It's looking like onetime Canadian dot-com darling StumbleUpon's short trip to the top may be followed by a long fall from grace.

The company was founded in 2001 by a group of Canadian whiz-kids who thought they had hit pay dirt last year when they sold their hip little Internet startup to online auction house eBay Inc. for $75-million (U.S.). But the brains behind StumbleUpon are now finding themselves on the losing end of a two-front war: In the courts and in the rumour mill.

With financial markets in turmoil and technology companies looking to shed non-essential assets, eBay is rumoured to be looking to dump StumbleUpon after owning it for just 19 months. But analysts say eBay will be hard-pressed to find a buyer willing to pay the $75-million asking price.

“It was hard to understand why eBay bought it because it wasn't really related to their business,” said Jeffrey Lindsay, senior Internet analyst for Sanford C. Bernstein in New York.

At the time of the sale, industry observers believed eBay was planning to use StumbleUpon to build a recommendation feature, similar to the technology used by Amazon.com Inc. which analyzes a user's online browsing and buying habits to suggest products they may want.

“If that hasn't worked, and eBay doesn't seem to have implemented anything like that, then [StumbleUpon] really doesn't have any fit with their business, and they need to lighten the load,” Mr. Lindsay said.

To make matters worse, earlier this year a British man filed an $8-million lawsuit against StumbleUpon – which now boasts about 6 million users – claiming he was cut out of the company before the mega-payday. Now, the founders have shot back with a $10-million (Canadian) counterclaim alleging that the man never did any of the work that he promised.

“Especially for a company still looking to grow, having this kind of thing hanging over their heads can be very, very detrimental,” said Michael Geist, a professor specializing in Internet law at the University of Ottawa.

The lawsuits, which have been filed in Alberta's Court of Queen's Bench, are complex. The parties involved either did not return requests for comment or politely declined to talk. “They would be more comfortable commenting when the court had rendered a decision,” said Robin Camp, the Calgary lawyer who represents the founders of StumbleUpon.

StumbleUpon had a fairytale start. Conjured up in Calgary in 2001 by Garrett Camp, Geoff Smith, Justin LaFrance and Eric Boyd who aimed to help computer users find cool things on the Web – videos, photos, sites – that they didn't know they were looking for. They created a software tool that once downloaded, allows users to click a button on their Internet browser that effectively does for the web what the remote control did for television.

“Stumbling is the Internet equivalent of channel surfing, but more informative, entertaining and addictive,” Mr. Camp once explained.

They banged on doors in Canada, but nobody was really interested until they looked south of the border. In 2006, they attracted a reported $1.5-million in seed capital from a group of angel investors in Silicon Valley, which included people linked to high-tech luminaries including Google Inc., Lotus Inc. and Facebook.

This new-found cash prompted the company's move to San Francisco. By 2007, eBay grabbed it. Mr. Camp is now the chief product officer with StumbleUpon under the eBay umbrella, Mr. Smith is the chief technical officer and Mr. LaFrance is the chief strategy officer.

But plaintiff Neil Hart seemingly counts himself as one of them.

Mr. Hart, who lives in London, filed his lawsuit against all three men, as well as Mr. Boyd, and the company earlier this year alleging that in 2004, he struck a deal to advise them in matters of business planning and attracting investment as well as pay the nominal fee of $1 in exchange for an 8 per cent stake in the company.

“I am not at liberty to discuss this matter at all really,” said Mr. Hart's lawyer, Ian MacDonald.

“What is going in is all confidential. We are not going to be airing that with the press.”

In his 11-page statement of claim, Mr. Hart alleges that the company's founders “clandestinely” diluted his shares some time before the angel investors swooped in and as the structure of the company changed. It also alleges that the company did not inform him of the eBay transaction.

He alleges the men “knowingly and deliberately” misled him, and also accuses them of “conspiracy” and hiding “secret profits.”

“The defendants acted in bad faith and in manner: which was oppressive, which unfairly disregarded the plaintiff's interest,” the lawsuit states.

StumbleUpon's founders shot back recently with a 13-page statement of defence as well as a counterclaim. In essence, the men allege that the agreement with Mr. Hart was never concluded because he never paid the $1 fee to seal the deal. What's more, they alleged, even if there was an agreement, Mr. Hart neither offered his business and technology expertise to the company nor found investors.

“The plaintiff has no legitimate claim to any of the amount paid by eBay,” the court document notes. The StumbleUpon founders claim Mr. Hart actually owes them millions. “Had the plaintiff made good on his representations and fulfilled his obligations … the increase in business and revenue would have occurred six months earlier than it did,” the counterclaim alleges.

Prof. Geist has seen these sorts of lawsuits before from investors, people who claim to be founders or those who think they have some intellectual property rights to a company.

“Any number of different things that come up when there's a big payday and people try to jump in,” said Prof. Geist. “It's a little odd though to see them jump in so late in the day, especially since there have been reports that eBay is looking now to unload StumbleUpon.”