A putative class action lawsuit is currently pending against Facebook, Inc., operator of Facebook.com, over their use of “Sponsored Stories,” whereby a product or page that a user “Likes” is displayed on that user’s friends’ newsfeeds along with their name and image. Facebook’s CEO Mark Zuckerberg has commented that “[n]othing influences people more than a recommendation from a trusted friend,” referring to this type of service as the “Holy Grail of advertising.” However, based on this advertising technique, several users have filed suit. It appears that the crux of the case is that users found offensive the use of their names and images in connection with advertisements without their express consent. The case, Fraley v. Facebook, Inc., is currently before Judge Koh of the US District Court for the Northern District of California. Thus far, the only opinion issued has been the judge’s decision regarding Facebook’s motion to dismiss.

In the complaint, the plaintiffs alleged that Facebook violated the California Right of Publicity Statute, their common law right of publicity, the California Unfair Competition Law, and also filed a claim for restitution under the common law doctrine of unjust enrichment. In its motion to dismiss, Facebook made three primary assertions. First, Facebook claimed that the plaintiffs lacked standing to bring their claims. Second, Facebook attempted to claim that it was immune under the Communications Decency Act (CDA). Third, Facebook claimed that the information displayed was “newsworthy” and thus exempt from the Publicity Statute.

With respect to Facebook’s first assertion in its motion to dismiss, while past cases against social media websites have been dismissed for lack of standing, in this instance, the court found that the plaintiffs alleged an adequate injury and remedy. Without looking to the merits of the claims, the court found that there was an injury if it is found that Facebook misappropriated the plaintiffs’ likenesses for commercial gain. The basis for this is twofold. For one, Facebook actually used the images of the Facebook members to advertise the Facebook pages of commercial companies. Two, the court also opined that a numerical value for the remedy may be based on the amount that Facebook charges advertisers to use the “Like” feature. However, the court noted that the plaintiff may have to provide additional evidence to establish this fact at trial.

Next, the court also determined that Facebook is not immune under the CDA and the case, therefore, could not be dismissed based on that argument. The CDA gives immunity to “interactive computer service” providers so long as they are not the publisher or speaker of the content that is at issue. In this regard, the court agreed with the plaintiffs and found that even if the plaintiffs are considered as the publisher or speaker of the “Like” feature, Facebook may be considered as the same because, among other things, “Facebook transformed the character of [the plaintiffs’] words, photographs, and actions into a commercial endorsement to which they did not consent.”

On the issue of consent, Facebook argued that the plaintiffs did consent to their creation of the “Sponsored Stories” and referenced the website’s Statement of Rights and Responsibilities and other policies (“Facebook Policies”). The Facebook Policies included language giving Facebook the right to use the plaintiffs’ content and likeness in this manner. However, the plaintiffs argued that they were not subject to the terms of the Facebook Policies as they relate to “Sponsored Stories” because they joined the website prior to the time that Facebook began promoting this feature. Thus, at the time they joined Facebook, they did not consent to this provision of the Facebook Policies or did not know that the Facebook Policies would eventually encompass such an activity without additional notice. According to the plaintiffs, because Facebook did not ask them to “review or renew” their consent to the Facebook Policies subsequent to Facebook’s introduction of the Sponsored Stories feature, they did not provide their consent and their earlier consent does not apply. Essentially, the plaintiffs believe that even if the Facebook Policies covered the “Sponsored Stories,” their consent was fraudulently obtained because Facebook effectively amended the Facebook Policies by adding a new feature, and treated the users’ earlier consent as valid for the new advertising method. It remains to be seen whether or not this argument will carry the day because the court has elected to save this determination for trial.

The court did, however, determine that the case could not be dismissed based on the information being “newsworthy” under the newsworthiness exception to the Right of Publicity Statute. The newsworthiness exemption can be likened to a First Amendment defense, whereby consent is not required to report information that is considered newsworthy. For example, the “newsworthy” exception would allow a blogger to post a popular YouTube video in order to comment on the video’s content. The court explained that the commercial nature of the use removed Facebook’s actions from the newsworthiness exception.

Although no decisions have been made on the merits of the case, all website operators should be aware of this case as it involves the way that they use information collected on their sites. An operator should think twice before using the name or image of a user in a manner that may be deemed to be commercial in nature. This case is also notable because it may create an obligation for publishers to ensure that their Terms of Use provide them with flexibility to use information such as a user’s name and image in a broad way. Alternatively, website operators may also consider having users affirmatively accept any updates made to the Terms of Use to ensure the changes are enforceable.

Arent Fox is continuing to monitor this case, as well as other cases involving advertising and website Terms of Use. Please contact Anthony V. Lupo, Sarah E. Bruno, or Eva J. Pulliam with questions.