The purse strings have been opened at Facebook again, as the social media giant has agreed to pay $10 million to charity to bring to a close a lawsuit that accused the site of violating users’ rights to control the use of their own names, photographs and likenesses. Considering the potential ramifications that Facebook could have been facing, $10 million is essentially a drop in the bucket.
The lawsuit, orchestrated by five Facebook members, alleged the social networking site violated California law by publicizing users’ “likes” of certain advertisers on its “Sponsored Stories” feature without paying them or providing them a way to opt out, according to court documents.
A “Sponsored Story” is an ad that shows up on a member’s Facebook page and typically consists of another friend’s name, profile picture and an assertion that the individual “likes” the advertiser.
The proposed class-action lawsuit, filed in federal court in San Jose, could have included close to one of every three Americans, with potentially $15 billion dollars in damages, according to prior court documents.
In the lawsuit, Facebook CEO Zuckerberg was quoted noting that a trusted referral was looked upon as the “Holy Grail” of advertising.
Also, the lawsuit referred to comments from Facebook COO Sheryl Sandberg, claiming that the value of a “Sponsored Story” advertisement was at least twice and up to three times the value of a standard Facebook.com ad minus a friend endorsement.
Facebook’s defense has focused on the argument that its users are thought to be celebrities among their network of friends, and, therefore, they are not protected by a number of privacy laws that protect non-celebrities. However, a recent piece in The Stanford Law Review indicated that treating ordinary individuals as “celebrities” within their social networks would have a negative impact when it comes to privacy rights:
According to U.S. District Judge Lucy Koh, the plaintiffs had demonstrated economic injury could occur via Facebook’s use of their names, photographs and likenesses. “California has long recognized a right to protect one’s name and likeness against appropriation by others for their advantage,” Koh wrote.
The settlement arrangement, known as a cy-pres settlement, means the settlement funds can be directed to charity.
Facebook has had its share of disappointments in the last month since its initial public offering (IPO) in May.
Going back to when Facebook was floated on the stock market exactly a month ago, Zuckerberg has watch nearly $5 billion from his personal fortune go by the wayside.
Don’t feel too sorry for him, however, as he is reportedly still worth a mere $14.5 billion.
As for those individuals looking to possibly cash in on a likewise lawsuit down the road, don’t exactly start counting the money just yet.
The case in U.S. District Court, Northern District of California is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc., 11-cv-1726.
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