Facebook has agreed to dish out a whopping $10million to charity to settle a lawsuit that accused the site of violating users’ rights to control the use of their own names, photos and likenesses, according to court documents made public this weekend.
The lawsuit, brought by five Facebook members in California, alleged that the social networking site violated state law by publicizing users’ ‘likes’ of certain advertisers on its ‘sponsored stories’ feature without paying them or giving them a way to opt out, the documents said.
The blockbuster settlement could potentially allow millions of other Facebook users to pursue similar legal action.
A ‘sponsored story’ is an advertisement that appears on a user’s Facebook page and generally consists of another friend’s name, picture and an assertion that the person ‘likes’ the advertiser.
The ads were started in early 2011. The settlement, which was reached last month but made public this weekend, puts a question mark over a major source of ad revenue for the company.
Facebook declined to comment on Saturday.
Boss: Facebook founder and CEO Mark Zuckerberg had been quoted as saying that that a trusted referral from a Facebook friend was the ‘Holy Grail’ of advertising
The proposed class-action suit, filed in federal court in San Jose, California, could have included nearly one of every three Americans, with billions in damages – another potential black eye for a company that has struggled since its disastrous initial public offering last month.
In the lawsuit, Facebook Chief Executive Mark Zuckerberg was quoted as saying that a trusted referral was the ‘Holy Grail’ of advertising.
Facebook’s chief technology officer, Bret Taylor (pictured), is departing ‘sometime this summer’ to start his own company, in the first exit of a high-profile executive since the social networking company’s IPO on May 18.
Taylor said he will be starting up a new company with Kevin Gibbs, a senior Google engineer, according to his Facebook profile.
The news was first reported by AllThingsD.
Some investors had speculated that Facebook would have trouble holding onto key talent following its IPO, which created many millionaires among its ranks.
Facebook executive Mike Vernal will take over the platform division, one of Taylor’s key jobs.
Cory Ondrejka will take over mobile, a source familiar with the situation confirmed.
In addition, the lawsuit cited comments from Facebook chief operating officer Sheryl Sandberg, saying 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 without a friend endorsement.
U.S. District Judge Lucy Koh said the plaintiffs had shown economic injury could occur through 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 is known as a cy-pres settlement, meaning the settlement funds can go to charity. A judge still needs to approve the settlement.
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.
Facebook shares closed at $30.01 on Friday, down 21 per cent since the company’s initial public offering last month.
Dozens of lawsuits have been filed against Facebook from disgruntled shareholders.
Posted by MJ