Facebook Settlement Legal Implications and the Worth of Publicity

Facebook Settlement Legal Implications Credit: yaulaw.com[/caption]

Facebook settled a major class action lawsuit with its users earlier this month concerning their right of publicity under California law. Millions of Facebook users across the nation recently received e-mails entitled “Re: LEGAL NOTICE OF SETTLEMENT OF CLASS ACTION.” While the e-mail provides class members with a number of options and notifies them of their eligibility in claiming ten dollars from the settlement pool, it does not articulate the underlying issue of the litigation: California’s right of publicity.

Facebook members initially filed suit in March 11, 2011, because they believed that the website’s advertising practices infringed on their right of publicity by using their likenesses in advertisements without their permission. Facebook had been using  “Sponsored Stories,” or paid advertisements consisting of a member’s name and photo, paired with an assertion that the person “liked” a particular advertiser.

The advertisements would appear on the Facebook pages of the members’ friends, thus alluding that the member was endorsing a particular advertiser.  The “stories,” unbeknownst to Facebook members, were generated any time they “liked” content on the website by clicking on the “thumbs-up” button on an advertiser’s page.

The class members asserted that Facebook’s non-consensual use of their name and likeness for commercial endorsements violated California’s Right of Publicity Statute, and entitled them to compensation. Facebook conceded that it knowingly used members’ identity for its commercial advantage, but sought to dismiss the case for lack of standing due to the class members’ failure to allege commercial injury — a necessary element for a right of publicity claim.

Facebook contended that in order to allege such injury, the class members had to demonstrate some pre-existing commercial value in their name and likeness. In other words, the class members’ non-celebrity status would bar them from protection under the right of publicity statute.

The idea that every person, regardless of their status, has the right to control commercial use of their identity has become widely accepted in jurisdictions such as California that recognize the right of publicity. Facebook’s defense, however, was not completely baseless.

Although the statutes would seem to include the right of publicity for non-celebrities, up until recent years, most have been unable to enforce these rights due to their inability to establish commercial value in their identity.

However, the tide has turned in favor of right of publicity applying to lay people, as the rise of social media networks such as Facebook have allowed content to be more freely distributed than ever before. As a result of this, notions of “celebrity” and “commercial value” have evolved from their original meanings.

Consistent with this turn in case law, the court agreed with the class members, ruling that pre-existing notoriety was not an absolute prerequisite in a right of publicity claim and the class members had met their burden for sustaining a cause of action alleging injury as a result of Facebook’s conduct. The court appeared to accept the class members’ argument that Facebook users maintained a celebrity-like status within their own social circles.

This case is a paradigm of social media’s impact on publicity rights. While the class members did not have pre-existing commercial value in their identity, they were able to show that its use in advertisements was a lucrative tactic on Facebook’s behalf. The website’s marketing data showed that personal endorsements “[we]re worth two to three times more than traditional advertisements on Facebook.”

In fact, Facebook admitted that the success of this marketing scheme is due to the perception that members are “public figures” within their own Facebook social networks. The website further stated that “[n]othing influences people more than a recommendation from a trusted friend,” and therefore, Sponsored Stories are the “Holy Grail” of advertising.

Unfortunately for Facebook, the “Holy Grail” is costing them $20 million in settlement fees- and then some. As part of their court-approved settlement, the website agreed to revise its advertising and commercial practices in order to give members more control over the use of their personal information.

Going forward, members will be able to see stories they’ve been sponsored in, and opt out of those they don’t want in advertisements. Essentially, this lawsuit is not only costing Facebook a huge chunk of change, it is stripping them of the marketing autonomy they’ve worked so hard to establish.