ADVERTISING, MARKETING & PROMOTIONS >> ALERT JULY 2012 FACEBOOK SETTLES “SPONSORED STORIES” SUIT Facebook agreed to pay $10 million to settle a lawsuit brought by plaintiffs who claimed that Facebook’s “Sponsored Stories” service used their name and likeness without their consent in violation of their right of publicity. Five Facebook users (including one minor) sued Facebook in California within weeks of Facebook’s announcement on January 25, 2011 of its new Sponsored Stories service, which allows advertisers to incorporate a user’s name, posts, page “likes” and other Facebook activity into an advertisement displayed to some or all of that user’s friends. One plaintiff claimed that three days after Facebook launched the program, and eight weeks after he had clicked on the “like” button for Coca-Cola, he began appearing in Sponsored Stories about Coca-Cola that were shown to his friends, and at no point did Facebook obtain his consent or pay him for his appearance. The proposed settlement is scheduled for court approval on July 12, 2012. If approved, it will result in changes to Facebook’s platform (for at least two years) that will lead to Facebook notifying users and the parents or guardians of minor users that Sponsored Stories are advertisements and that a user’s content, including a user’s name and likeness, may be featured in Sponsored Stories. Moreover, users will be able to see and control the actions they take that lead to their content being featured in Sponsored Stories – and will be able to limit further use by Facebook in connection with the service. Notably, the proposed settlement also requires that Facebook pay $10 million dollars – not to the plaintiffs, but to online advertising, privacy, and/or safety organizations. RISKS REMAIN The proposed settlement may make advertisers more inclined to participate in the Sponsored Stories service, but there are still risks. For example, a consumer’s message that is incorporated into Sponsored Stories might be deemed the advertiser’s message, with the same legal and regulatory rules applying to that message that apply to other advertisements, including whether the message is accurate and able to be substantiated. There also are potential copyright and trademark law issues to keep in mind, as well as potential privacy concerns. To help mitigate these risks, advertisers that seek to benefit from Facebook’s Sponsored Stories service should consider taking a number of protective steps, including: >> limiting Sponsored Stories to “likes” and not other information about users; THE BOTTOM LINE Advertisers that believe that there is value in Facebook’s Sponsored Stories service should consider the implications of the proposed settlement and the proposed changes to the Facebook platform and terms. Doing so might help avoid legal issues for an advertiser participating in Sponsored Stories or other similar advertising campaigns or promotions. >> continues on next page Attorney Advertising