How can a studio make a biographic film like The Social Network?

No one owns the story of their own life. It is absolutely legal for people to write unauthorized biographies, make documentaries or dramas about someone without needing their permission. You do not need permission to portray a real person in a work of art such as a book or movie - this happens all the time.

As for accuracy, in most countries you have recourse to the law if you think you have been libeled by someone in a work of art. However the level of proof and the necessity to demonstrate damage to your reputation may be high depending on the country you attempt to do this in - it is for example easier to claim libel in the UK compared to the USA. Freedom of speech is enshrined in law in many countries and works against rights to privacy or being libeled.

Finally it is often simply not worth fighting something like this, the negative publicity of trying to stifle the creator of a work of art can at times be considerable. Taking to the courts to defend your privacy can draw attention to your situation or your discomfort more .. see the Streisand Effect.

The fact that this book and the movie are about a lawsuit, would make any defamation claim that might be brought by Mark Z even bigger news - therefore likely to be worse publicity, even if he could prove libelous damage against him. Given that he is a very successful businessman, it is probably not worth his time and effort pursuing it.

It's possible to libel living people, as Metro­GoldwynMayer discovered in 1934 when Princess Irina Alexandrovna Youssoupoff sued them for defamation over Rasputin and the Empress, claiming "she was clearly recognizable in the film as Princess Natasha, whose intended, Prince Chegodiefl, murders "the mad monk" in a palace on the Moika River." MGMy were found guilty and heavily fined.

After this, film makers began claiming their films were entirely fictional, whether they were or not. Natalie Zemon Davis said on 12 April 1987 at Duke University during the Fifth Annual Patricia Wise Lecture of the American Film Institute:

Since 1934, any number of films have used some version of this disclaimer: "The events and characters depicted in this photoplay are fictitious. Any similarity to actual persons, living or dead, is purely coincidental." Raging Bull has the formula at its end, even though its subject, Jake LaMotta, is listed as a consultant and the film is remarkable in its evocation of the boxing milieu and the constraints of manliness in Italo­American families of the 1950s. Platoon also has the formula at its end; yet it is based on the experiences of the director, Oliver Stone, in Vietnam. It has even been praised by veterans, among them a career Marine writing in the New York Times, for "its authentic portrayal of infantrymen." And Andrzej Wajda's Danton, after the guillotine has done its work and the credits have told who played the various revolutionaries and who served as historical consultant, flashes its final message (or at least it does in the American version): "The characters and incidents portrayed and the names used herein are fictitious and any resemblance to the names, character, or history of any person is coincidental and unintentional."

Clearly, the "coincidence" and "fictitious" disclaimers are in. adequate summaries of the truth status of many films to which they are appended. Nor do they fully protect against a defamation suit, as the makers of the World War II movie They Were Expendable were to learn when sued by Commander Robert Kelly in 1948, and as the makers of The Bell Jar learned when sued earlier this year.

As for The Social Network, Jim Emerson says on the Chicago Sun-Times scanners blog:

So, as with any work of fiction or nonfiction based on historical events, whether it's Arthur Penn's "Bonnie and Clyde" or Bob Woodward's latest book ("The Social Network" was fictionalized from accounts in the "nonfictionish" book "The Accidental Millionaires" by Ben Mezrich), Fincher and Assayas's films are fictions that derive much of their texture from precise observations of time and place, even if the characters' personalities and interactions are matters of artistic license. That's art. (And forget about eyewitness accounts; they're about as likely to be "accurate" as something the filmmakers just made up.)

For legal as well as artistic reasons, there's also this familiar-sounding mantra, quoted from the end credits of "The Social Network":

While this story is inspired by actual events, certain characters, characterizations, incidents, locations and dialogue were fictionalized or invented for purposes of dramatization. With respect to such fictionalization or invention, any similarity to the name or to the actual character or history of any person, living or dead, or any product or entity or actual incident is entirely for dramatic purposes and not intended to reflect on any actual character, history, product or entity.

In other words, the filmmakers are saying: "Yes, we know exactly what kind of beer the real Zuckerberg drank on that particular occasion and what sandals he wore and, no, we don't care that he actually had a girlfriend all through college and is still with her at the time of this movie's release. We have decided to include the former details and not the latter because this is the movie we want to make."