Class Action Alleging Violations of Facebook Users’ Right of Publicity in “Sponsored Stories” Survives Motion to Dismiss

Since January 25, 2011 when Facebook launched its “Sponsored Stories” advertising service, you may have noticed the perimeter of your newsfeed populated with ads featuring your friends “liking” a particular brand or product. This innovative advertising scheme capitalizes on trusted referrals, or what Mark Zuckerberg calls the “Holy Grail of Advertising.” Facebook COO Sheryl Sandberg supplements that by making facebook’s customers its “marketers” in this way, the value of a Sponsored Story is worth 2-3 times more than a traditional facebook advertisement without a friend endorsement, keeping in mind that a user has an average of 130 friends. Fraley v. Facebook, Inc., 2011 WL 6303898, at *9 (N.D. Cal. Dec. 16, 2011). Not amused, in Fraley v. Facebook, the plaintiffs are currently bringing a class action suit on behalf of all facebook users in the United States who have been registered members of the site since January 24, 2011 and have been featured in a Sponsored Story Advertisement. The claim is seeking injunctive and compensatory relief.

Thus far, this claim is faring better than a strikingly similar class action dismissed on October 27, 2011 where the promotion of Facebook’s “Friend Finder” feature, which encouraged using this service by identifying friends that had done so, was instead the subject of dispute. Cohen v. Facebook, Inc., 2011 WL 5117164 (N.D. Cal. Oct. 27, 2011). In Cohen it was acknowledged that while facebook does not directly profit from the addition of users, it does garner revenue from advertisements that at least depends in part on the number of users it reaches. Id. ft. 4. Nevertheless the original complaint was dismissed for failure to state a claim because the plaintiff’s failed to show a “cognizable harm.” After amending their complaint to more particularly allege a right of publicity violation under California’s §3344, which provides a minimum relief of $750 for unquantifiable damages, the court was still not persuaded. A showing of injury was still required, which the complaint failed to demonstrate after omitting conclusory allegations. (Twombly-Iqbal standard).

However, the court in Fraley boldly distinguished the present “Sponsored Story” class action from Cohen, mainly based on the two quotes from Zukerberg and Sandberg, above. “Plaintiffs here have furthermore identified a direct, linear relationship between the value of their endorsement of third-party products, companies, and brands to their Facebook friends, and the alleged commercial profit gained by Facebook. Thus, Plaintiffs have alleged facts showing that their personal endorsement has concrete, measurable, and provable value in the economy at large.” Fraley v. Facebook, Inc., 2011 WL 6303898 at *10.

The court also distinguished a slew of cases cited by facebook, In re iPhone Application, Specific Media, In re Doubleclick, and Low, where economic damages where insufficient when plaintiff’s personal information was misappropriated to third-party data-compilation companies. By contrast, in this case the plaintiffs’ are claiming a misappropriation of their right of publicity in the form of their names and likenesses used for commercial advertising.

Integral to their complaint is that users are enticed to click the “Like” button on a company’s facebook page to access special offers, event photographs, support social causes, or enter a contest. Plaintiff’s are unaware that this action would be interpreted and publicized as their “liking” or endorsing a company. Moreover, while facebook attempted to demonstrate that users can limit their visibility and are not required to use their own photographs as their profile pictures, it still remains that one cannot completely opt-out of the Sponsored Story feature. If the sponsored story is noticed, then the user can delete it by clicking on an “x”, but these instructions are buried in facebook’s Help section and cannot be accessed through any page detailing Sponsored Stories. The feature was only incorporated on January 25, 2011 after many users had already registered a facebook account, and was not subject to acceptance.

The judge denied Facebook’s defense under §230 of the Communications Decency Act, which exempts service providers from tortious conduct by users. Facebook was deemed a content provider by surpassing an acceptable editorial role when it transformed users actions into a commercial advertisement by re-arranging user’s profile pictures with third-party logos and the “likes” and “sponsored story” header.

Nor was facebook’s attempted defense under subsection (d) of §3344 for “newsworthy” stories successful. According to facebook, its users are “public figures” among friends and their expressions of consumerism are newsworthy. The problem wasn’t whether users can be considered celebrities or public figures –in California statutory right of publicity protection extends to celebrities and non-celebrities alike (KNB Enterprises, 78 Cal.App.4th at 373 n. 12, 92 Cal.Rptr.2d 713) – but whether this use was journalistic or commercial in nature. Because the sponsored stories are used for commercial advertising rather than “any news, public affairs, sports broadcast, or political campaign,” the newsworthy exception does not apply.

While the court did dismiss Plaintiff’s unjust enrichment complaint, that was only because it could not be a separate cause of action and was already embedded in their right of publicity complaint. Therefore, it seems like Facebook’s best defense is the consent issue. The Terms of Use notify users that their profile pictures may be associated with “commercial, sponsored, or related” content, subject to the limitations placed by the users. The story appears only to confirmed friends and there is no requirement to “like” companies. Since the complaint was only being scrutinized under 12(b)(6) standards for failure to state a claim, the court did not provide further guidance on this question, but commented that whether consent was obtained was at least a question of fact.

Personally, I think that the plaintiffs’ claims have legal grounding, but wonder what they hope to achieve as a result of the suit. Facebook does not charge users for its services, and according to an LA Times article about the case, garners 90% of its income from online advertising. If this source is diminished, facebook may have to begin charging users, limit users to certain, approved networks, or cut back on features. Facebook is undoubtedly a valuable commodity and for many people that has become a routine part of their day, not to mention the number of businesses that rely on marketing via social media. Notwithstanding this, there seems to be an undue sense of entitlement to facebook’s services surrounding any of their proposed changes or advertising schemes. If one doesn’t like the way their likeness is being used, then they have several options such as refraining from liking any company’s profile (after all, it’s not like facebook is randomly pairing users with companies that they have never interacted with), or even not joining facebook at all! What will most likely happen is facebook will revise its terms of use and will then burden users with accepting them if they want to continue using the site. And since of course no one reads the fine print, the entire issue may hinge on the typical “click-wrap” licenses dilemma.

“Richard Cheese” Sheds Insight on the Right to Publicity / Right to Privacy Distinction

While the unique “right of publicity” is often, yet understandably, overlooked as being a subset of intellectual property, this classification proved crucial in a fresh Second Circuit decision. On November 1st, the court upheld Hartford Casualty Insurance Company’s refusal to defend independent music label Oglio in a separate suit involving right of publicity allegations.

The other suit was instigated in 2006 by Mark Jonathan Davis, known to his fans as “Richard Cheese,” a comedian/lounge singer whose character performs lounge versions of famous pop and rock songs. He entered into a contract with Oglio from 2000-2003 in which he was to record an album entitled Lounge Against the Machine (LATM) as Richard Cheese, which Oglio would then distribute. In addition to owning the copyrights to the recordings, Oglio also had the right to use the name “Richard Cheese” and his likeness in promoting and advertising the album. In addition, Oglio retained the option. exercisable for two years after execution of the agreement, to require Davis to record a second album with similar terms upon a minimum advance payment of $15,000.

Following the financial success of LATM in 2001, Oglio attempted to exercise its option, but sought to reduce the minimum advance from $15,000 to $7,000. After Davis refused, Oglio threatened to replace him with other singers. Oglio followed through and in 2002 released two lounge-style albums: Diary of a Loungeman by “Bud. E. Love” and Sub-Urban by “Jaymz Bee & Deep Lounge Coalition." According to Davis’ complaint, “the Competing Albums [were] a way to piggyback on [LATM] and to trade on the goodwill and public recognition earned by Davis. […] Both the names of the competing artists and the titles of the Competing Albums were obviously intended by Oglio to attract fans of Richard Cheese's lounge-style versions of songs and to capitalize on Davis's celebrity […] and reduce the value and unique goodwill of Davis's Professional Name throughout the entertainment industry.” Oglio Entertainment Group, Inc. v. Hartford Casualty Ins. Co., 2011 Cal. App. LEXIS 1361, 4-5 (Cal. App. 2d Dist. Nov. 1, 2011). Upon expiration of their three year agreement, Oglio continued to sell and promote Davis’s albums along with the competing albums on its website,

Oglio and Davis eventually settled for $80,000 in September 2006 after Hartford disclaimed coverage in May 2006. Oglio then filed the present suit against Hartford for breach of contract. Oglio claimed that Davis’ alleged injury for appropriation of his name and likeness was included in the policy’s coverage for privacy violations. However, Hartford answered that the right of publicity is not only separate from privacy rights, but falls under intellectual property rights, which were specifically excluded from coverage. The exclusion provision pertained to any advertising injury “[a]rising out of any violation of any intellectual property rights, such as patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity.” Oglio Entertainment Group. LEXIS 1361 at 17.

As a final chance, Oglio attempted to demonstrate that their advertising injury was one, covered by the policy, arising out of “[c]opying, in your ‘advertisement,’ a person's or organization's ‘advertising idea’ or style of ‘advertisement.’” Id. at 20. However, Hartford’s counter that this policy extended only to the style of advertisement, as distinguished from the product being advertised, was sufficient to sustain their demurrer. The court held that, “this does not allege that Oglio copied, in an advertisement, Davis's advertising idea or style of advertisement, but that Oglio sought out artists to copy Davis's product and later sold a competing product, injuring Davis's sales and the value of his professional name.” Id. at 21.

Indeed California’s infamous right of publicity law, codified in Cal. Civ. Code §3344, defines a right of publicity violation as consisting in, “any person who knowingly uses another's name, voice, signature, photograph, or likeness, in any manner, on or in products, merchandise, or goods [emphasis added], or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods or services, without such person's prior consent.