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Facebook Settles Privacy Lawsuit, Buys Facial Recognition Company

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facebook-graph-zuckerbergFacebook has been ordered to pay $10 million to charity to settle a lawsuit over Sponsored Stories. The proposed class-action lawsuit accused Facebook of violating California law by featuring user “Likes” as Sponsored Stories without compensation or an opt-out option. It was settled last month, though details of the settlement just went public this weekend.

Also just announced: Facebook has acquired facial recognition software company, for an undisclosed sum. Some European companies have already raised concerns about Facebook’s autotagging practice, citing concerns over user privacy.

Facebook to Pay $10 Million Settlement to Charity

In lawsuit documents filed in Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc., 11-cv-1726, Facebook founder Mark Zuckerberg is quoted as calling trusted referrals like Sponsored Stories the “Holy Grail” of advertising.

Sponsored Stories are comments or endorsements left by a user on the Page of a business they have Liked, turned into advertisements by the Page. These particular ads use the name and profile picture of the user who Liked the page. Five Facebook members brought the case forward, though nearly one in three U.S. citizens could have joined in, said related court documents. That may have resulted in billions in damages.

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. Acquisition Brings Long-Time Facebook Vendor In-House

The acquisition of brings their technology in-house for Facebook and gives them control over a domain name similar to the name of the popular social networking site. Facebook released a statement about the deal Monday, but didn't specify whether the site will shut down or continue operating.

"People who use Facebook enjoy sharing photos and memories with their friends, and's technology has helped to provide the best photo experience. This transaction simply brings a world-class team and a longtime technology vendor in house," a Facebook spokeswoman told the San Jose Mercury News.

However, groups in Europe and the United States have long-standing concerns over Facebook’s facial database.

Database Driving Facial Recognition a Massive Risk: Privacy Commissioner

In 2011, the Electronic Privacy Information Center (EPIC) filed a complaint against Facebook with the FTC over their facial recognition capabilities. EPIC claimed that "users could not reasonably have known that Facebook would use their photos to build a biometric database in order to implement a facial recognition technology under the control of Facebook." They warned that "absent injunctive relief by the Commission, Facebook will likely expand the use of the facial recognition database it has covertly established for purposes over which Facebook users will be able to exercise no meaningful control."

Shortly after, the Hamburg Commissioner for Data Protection and Freedom of Information called on Facebook to delete the feature that recognizes user faces in images and prompts friends to tag them. Their issue isn’t necessarily with the feature itself, but with the massive database powering it. The risk of "the world's largest biometric database," with a total of of 75 billion photos in which a total of 450 million people are tagged, is immense, said the Commissioner.

Still, cofounder and CEO Gil Hirsch is happy with the deal. "By working with Facebook directly, and joining their team, we'll have more opportunities to build amazing products that will be employed by consumers – that's all we've ever wanted to do," he said.

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