Facebook Pays $9.5 Million in Privacy Suit

Wired reports: A federal judge on Wednesday approved a $9.5 million settlement to a class action challenging Facebook’s program that monitored and published what users of the social-networking site were buying or renting from Blockbuster, Overstock, and other locations.

The case concerned allegations Facebook’s now defunct “Beacon” program breached federal wiretap and video-rental privacy laws. Terms of the settlement, in which Facebook denied any wrongdoing, require the site to finance what the deal calls a “Digital Trust Fund” that would issue more than $6 million in grants to organizations to study online privacy.

The social-networking site will have a seat on the fund’s three-member board—a fact that was a big bone of contention in the privacy community, but one that U.S. District Judge Richard Seeborg in San Jose said Wednesday was immaterial.

“There has been no pervasive showing that the foundation will be a mere publicity tool for Facebook,” Seeborg wrote.

Seeborg gave preliminary approval to the deal last year, but finalized it Wednesday after reviewing objections.

The attorneys who faced off against Facebook are to receive about $3 million of the $9.5 million pot, as much as $500 an hour in some instances, according to documents lodged in the case. Only a handful of the estimated 3.6 million class members are to receive financial damages.

Video Privacy Protection Act breaches carry fines of not less than $2,500. The judge said the resolution “adequately protected the interests of the settlement class.”

Under the settlement, Facebook agreed to terminate the Beacon program last November.

When the program was launched in 2007, Facebook members’ Blockbuster movie rentals sometimes appeared on their news streams. Lead plaintiff Sean Lane’s wife found out, via Facebook, about a jewelry purchase her husband was to surprise her with. “Sean Lane bought 14-karat white gold 1/5-carat diamond eternity flower ring from Overstock.com,” was announced to all of the husband’s Facebook friends, including his wife.

The new privacy center, according to terms of the deal, shall “fund and sponsor programs designed to educate users, regulators, and enterprises regarding critical issues relating to protection of identity and personal information online through user control, and to protect users from online threats.”