Facebook Settles Sponsored Stories Lawsuit

Posted May 23, 2012

Facebook has made an agreement to settle a lawsuit involving “Sponsored Stories.” Sponsored Stories is a feature that publicized the “likes” of users without compensation or the ability to opt out. The class action lawsuit was filed at a federal court in San Jose, California. The settlement terms are unknown.

A Sponsored Story is an ad that appears on a member’s Facebook page that consists of a friend’s name, profile picture, and shows that the person likes the ad. Five people sued Facebook last year alleging that “Sponsored Stories” violated their right to publicity under California law.

Facebook CEO Mark Zuckerberg said that a trusted referral is the “Holy Grail” of advertising. Facebook COO Sheryl Sandberg said that a “Sponsored Story” is at least 3-4 times the value of a Facebook.com ad without a friend’s endorsement.

Last year, Judge Lucy Koh rejected Facebook’s attempt to dismiss part of the lawsuit. Judge Koh said that the plaintiffs articulated a coherent theory of how they were injured economically by the use of their names, photos, and likenesses.

“California has long recognized a right to protect one’s name and likeness against appropriation by others for their advantage,” wrote Koh.