Why am I part of a Facebook class action in the first place?

The social network got sued for using you as a product pitchmen for “Sponsored Stories” without your permission. For instance, if I “Liked” Justin Bieber’s page, my Facebook friends might have seen a big ad saying “Jeff likes Beeb’s new eyeliner.” Today, Facebook can still do that because it changed its privacy terms — it’s the earlier ads it’s on the hook for.

How do I collect?

Go to the settlement page and fill out the claim form by May 2.

So how much will I get?

Facebook is paying $20 million all-in to make this go away. Under a revised deal (the judge rejected the first one), Facebook users are eligible for up to $10 each — so long as there’s enough money to go around.

Oh, and that $20 million isn’t just for Facebook users. The lawyers are asking for nearly $8 million. Then there are people like the “escrow agent” and the “settlement administrator” who get a cut too. If the judge okays all this, it will be more like $10 to $12 million to go around.

To look at it another way, if there is $12 million left after the lawyers, there is enough money left to pay 1.2 million Facebook users.

Well, what if more than 1.2 million people make a claim?

You have to share. If 2 million Facebook users sign up, everyone would get about $6. If 2.4 million sign-up, it’s $5. If more people than that sign up, everyone gets nothing.

So what are my chances to get some money?

There are about 165 million Facebook users in America. If even 2 percent decide to make a claim, you’re likely out of luck.

Well, that doesn’t seem fair. Who gets the money then?

The class action says it’s not very efficient to cut $4.99 checks to everyone. So, if too many people are eligible, they’re just going to give the money to your friends at Harvard, Stanford, Berkeley and the EFF instead. These groups will then use your money to advocate for privacy.

Well, damn it. It was my privacy that was violated — don’t I even get to be involved?

That’s a good question. This keeps happening again and again — Google, Facebook, etc. violate everyone’s privacy and the money from the resulting lawsuit goes to lawyers and a bit of it goes to “charity.”

To be fair, this isn’t as crazy as it sounds. Many of the privacy advocates do good work and the class action lawyers, even if they’re in it for themselves, do keep the tech companies on their toes.

The bigger problem here is that these legal deals don’t do a good job of involving the people who are affected. Nor do they produce solutions such as a “pay-for-privacy” option. Would you pay $5 a month for an ad-free, non-creepy version of Facebook? I might. But the class action settlement doesn’t allow us to raise these sort of options or to ask Facebook directly about what they’re doing.

If I don’t get any money, does any good come out of this lawsuit?

A bit. The settlement claims it will force Facebook to create a tool to see which products you’re endorsing and to remove your endorsements. But we’ll have to see if this tool will be easy to use in practice.

Consumer Watchdog is jumping up and down because the settlement, which punishes Google for hacking shenanigans, doesn’t require the company to admit wrongdoing.

“Google executives want to buy their way out of trouble with what for them is pocket change, and then deny doing anything wrong,” said Consumer Watchdog’s John M. Simpson, adding the deal “undercuts the regulatory process.”

Baloney. Simpson and friends appear to be seizing on recent comments by FTC commissioner J. Thomas Rosch to stir the pot. Rosch earlier this month dissented in a Facebook privacy case, saying he preferred that companies use the phrase “neither admits nor denies.”

Well, wait a minute — shouldn’t these companies have to fess up and own their wrongdoing? In a perfect world, yes. But, in reality, the current system works because it shames the companies and forces them to pay sizable fines. Companies choose to play this game because it provides them with a partial shield from civil lawsuits.

A source from a big tech company, speaking on the condition of anonymity, told me that firms would fight bitterly if they had to admit liability in the FTC settlements. This would result in many more court cases and higher risk and cost for the government. The current “name, shame and pay” tactic used by the FTC and other agencies isn’t pretty but it’s largely effective.

Which brings us back to Consumer Watchdog. Critics say the company is a playground for trial lawyers.  And, unlike the Electronic Frontier Foundation and other groups that post reports, Consumer Watchdog’s funding and operations are a black hole.

Consumer Watchdog’s latest hysterics smell all the more in light of its recent anti-Google crusade (remember that ad in Times Square?) and the presence of the indefatigable Gary Reback, a former Microsoft lawyer who is currently representing a shopping site that is suing Google.

All of this doesn’t mean Google deserves less scrutiny. The company has many, many sins to atone for and there are few signs it plans to get privacy religion anytime soon. Courts and activist groups also deserve blame for creating privacy settlements that pay lawyers but do little to involve the consumers whose rights have been violated.

The privacy scene is a mess but Consumer Watchdog’s decision to demagogue the regulatory process won’t help.

(Image courtesy of Shutterstock 3445128471)

UPDATE: The vote was originally scheduled for Friday but took place Thursday evening instead. It passed 248 to 168 on largely partisan lines. (Read our account here)

Here’s a plain English guide to the polices and politics driving the Cyber Intelligence Sharing and Protection Act:

So is this SOPA all over again?

Not really. The ill-fated Stop Online Piracy Act was about Hollywood trying to force tech companies to become copyright cops. CISPA, on its face, is about giving those same companies tools to confront cyber-attacks.

Isn’t that the same thing?

Critics said that an earlier version of CISPA was a stalking horse for the copyright industry — they worried that companies would dress up anti-piracy initiatives as security complaints. New language makes this unlikely and emphasizes that the bill is indeed about cyber-security.

Well, what cyber-security concerns are we talking about?

Major U.S. companies and government agencies have suffered hacking attacks in which intruders have stolen classified files, trade secrets or source code. The attackers include criminal gangs and state-sponsored (read: China) cyber espionage teams. Security experts warn that cyber-attacks lead to economic loss for companies and military vulnerabilities for the country.

Sounds scary. What does CISPA do to address this?

One of the bill’s main goals is to improve the sharing of information between companies and the government. In theory, it will be easier for the government to warn companies about security threats. In turn, the companies will have more ability to alert the government about suspicious activities or attacks.

So why do we need a law new for this?

CISPA wants to update existing laws like the National Security Act of 1947 to require authorities to share information about cyber-attacks as well as conventional military threats. There are also laws like the Wiretap Act and the Electronic Communications Privacy Act that limit what private companies can do with information about their customers. CISPA would help companies avoid getting sued under those laws when they share information about cyber-security.

Sounds reasonable. Everyone’s got to do their part to prevent a cyber-attack, right?

The problem, as you may have guessed, is that CISPA may be a lot broader than what is needed to get the job done. Critics worry that companies will be cavalier about passing data around if they don’t have to fear privacy lawsuits. Companies like Facebook, Amazon, Google and Netflix (many of which are supporting CISPA) are facing dozens of privacy-related lawsuits — CISPA might be a way to sidestep some of these in the future. Also, the government could invoke CISPA as a pretext to override civil liberties. From this perspective, CISPA is not so much SOPA but instead a new form of the Patriot Act.

Uh, oh. Is the law actually going to pass?

The bill passed the House amidst Democratic grumbling. Politico reports that Sen. Joe Lieberman expects a Senate version will see floor time as soon as next month. This does not, of course, mean that the bill will become law anytime soon — the approach of the November election is likely to put Congress into its semi-annual state of paralysis. Also, there are competing bills from the White House and also from people like Lieberman who want stronger measures to protect infrastructure like dams and utilities.

What about the veto threat?

The White House issued a strong statement on Wednesdays that attacked CISPA for trampling privacy and civil liberties. It said the bill should include a provision obliging the government and companies to minimize the amount of personal data that passes between them. The statement stressed the “civilian nature of cyberspace” and warns of a veto. But veteran political types noted the veto threat contains a hedge — it says advisers would recommend a veto, not that the President will veto it.

Where can I learn more about all this?

The Electronic Frontier Foundation has its usual top-rate privacy analysis here. CNET’s Declan McCullagh has a worthy overview of the lobbying forces here and GigaOM’s Derrick Harris has a cool-headed look at the bill here. And the non-partisan Congressional Research Service has the bill and a summary here.

The response of Judge Roger Hunt, who is overseeing the case, indicates he’s none too impressed with Righthaven’s latest moves.

Righthaven was told to pay the fine two weeks ago for not disclosing its financial relationship with Stephens Media before filing its hundreds of copyright lawsuits. By not disclosing, Righthaven had violated Nevada’s local rules of litigation, the judge found.

The controversial copyright enforcer was also told to give all the defendants it is still suing a transcript of the July 14 hearing. It’s during that hearing when Hunt said that Righthaven should pay $5,000 as a sanction, and had made statements to the court that were “intentionally untrue.”

Instead of paying its fine, Righthaven filed more paperwork on Friday-a day after the deadline for payment-indicating that it has “additionally researched potential grounds to appeal the monetary sanction imposed by the court.” That research “has taken a significant period of time” and Righthaven wants to ask for a stay of the fine until it can appeal, which may not be until after final judgment is entered in the Democratic Underground case.

According to its filing, Righthaven has 78 cases still pending based on the original copyright agreement it reached with Stephens Media. Remarkably, Righthaven discloses that it still hasn’t sent copies of its lawsuits to the defendants its is suing-a step that is usually required by law. The company writes that “service of process has not been made in a significant number of these cases.” The disclosure suggests Righthaven was much more focused on squeezing defendants for quick settlement cash than complying with legal formalities.

Righthaven also said it wasn’t able to get a copy of the transcript until July 26-even though it was publicly filed in another case on July 20 and became available to the public at that time.

Lawyers for the Democratic Underground, from the Electronic Frontier Foundation and Fenwick & West, objected [PDF] to the extension, saying that Righthaven should have to pay its sanction immediately, and noting that the company didn’t file until late Friday-”a day late and $5,000 short of complying with the Court’s Order.”

In any case, Hunt today issued an order [PDF] clearing up Righthaven’s questions, although he adds that “the Court does not believe that clarification is necessary.” He also granted the delay Righthaven asked for, giving the company’s lawyers until Monday August 8 to comply with the sanctions.

But even in granting the extension, Hunt indicates how fed up with Righthaven he is, writing. “If counsel does not have time to do all that he needs to in Righthaven’s dozens of cases, the Court kindly suggests that he or Righthaven obtain additional help, not complaint to the Court about time constraints,” writes Hunt in today’s order. He adds that there will be no further extension on the $5,000 fine, and “suggests Righthaven not waste its time on a motion requesting any further relief from the sanction.”

This is the second time a Righthaven attorney has made excuses for being a day late on filing a motion in Hunt’s court. The first time was a month ago, when Righthaven attorney Shawn Mangano said that an automatic software update to his web browser made his computer suddenly incompatible with the court’s electronic filing system.

In November, Google agreed to a settlement of that class-action suit under which it would pay $9.5 million to online privacy advocacy and research groups. The idea behind the settlement is to disperse the money among non for profit groups that work on online-privacy issues. See our chart below on which groups stand to gain from the settlement.

While the $9.5 million is pocket change for Google, it’s a serious chunk of cash for some of the non-profits that stand to get a piece of the pie-and now those groups are fighting over the spoils. The Electronic Privacy Information Center (EPIC), a prominent Washington, D.C., privacy group, has filed court papers objecting to how the cash was split, as Reuters (NYSE: TRI) was first to report.

In a motion [PDF] filed earlier this week, EPIC, which was cut out of the settlement entirely, complains that six of the twelve groups that stand to get money already receive funding from Google “for lobbying, consulting, or similar services.” The implication by EPIC is that Google is giving the settlement cash to its favored research groups, when that money is supposed to ultimately benefit a much broader group of people — every single Gmail user affected by the Buzz fiasco.

In an email to paidContent, EPIC Executive Director Marc Rotenberg offered some additional explanation of why his organization deserves to be one of the beneficiaries of the settlement. It was EPIC that filed a complaint with the FTC over Buzz shortly after it launched, which provided both the basis for the recent FTC-Google agreement, and “the legal theories and factual record for the private litigation,” wrote Rotenberg.

EPIC also sent Google a letter in 2008 that it says led the search giant to put a link on its home page to its privacy policy. Rotenberg says that letter was “a big deal… We managed to get Google to comply with the California state statute requiring a privacy link on a commercial web site homepage. As a result, every person who goes to a Google web site has a direct link to the Google privacy policy.”

Other privacy groups that have signed on to EPIC’s motion and say they’re being left out include the Center for Digital Democracy, Consumer Action, Patient Privacy Rights Foundation, Privacy Activism, Privacy Rights Clearinghouse, U.S. PIRG and World Privacy Forum.

For a look at who stands to get what in the settlement over Google’s Buzz privacy missteps, see our chart below.

»  EPIC’s objection [PDF]
»  Proposed settlement [PDF]
»  Information about groups benefitting from settlement [PDF]

In the case decided today, Los Angeles music re-seller Troy Augusto was in a copyright duel with Universal Music Group. Augusto makes his living buying and re-selling music, including the promo CDs sometimes issued by record labels such as Universal that are marked “for promotional use only.” Universal sued Augusto and his company back in 2007, arguing that anyone distributing those CD’s without its permission was violating its copyright.

Not so, ruled a U.S. District Court in Los Angeles, which held in 2008 that just because Universal said it retains ownership of the compact discs doesn’t mean it actually does. UMG’s handing out of the promo CDs had all the aspects of a gift-the record label never required the return of the CDs, and didn’t impose any conditions with distribution.

UMG engaged in a lengthy appeal to keep control of those promo CDs, which today it finally lost. Now that the 9th Circuit has ruled on the case, it’s binding on all judges throughout the circuit, which covers most of the Western U.S. UMG’s only other option is to ask for a re-hearing of the whole 9th Circuit or appeal to the U.S. Supreme Court-and either option would be an extreme longshot in this case.

Joe Gratz of the Durie Tangri law firm, who worked together with the Elecronic Frontier Foundation digital-rights group to represent Augusto, said: “The Ninth Circuit recognized an important principle: that you can’t eliminate consumers’ rights just by claiming there’s a ‘license agreement.’ Once a copyrighted work is freely given, the copyright holder isn’t in charge anymore. The copyright owner can’t stop you from selling it or lending it to a friend.”

Universal Music Group didn’t immediately respond to a request for comment.

A key piece of case law in the Augusto case was the Supreme Court’s 1908 Bobbs-Merrill v. Straus case, in which a book publisher slapped a notice on the inside of a book insisting that any sale of the book for less than $1 would constitute a copyright violation. Department store R.H. Macy & Co. went ahead and sold the book for 89 cents anyhow, and was ultimately vindicated at the high court.

Augusto’s case was part of a group of three copyright cases taken by this 9th Circuit panel that all dealt with the sometimes blurry line between when copyrighted goods are “owned” and when they are “licensed.” The potentially widest-ranging of the three cases, Vernor v. Autodesk, had a very different outcome than the Augusto case. In that case, the same panel of judges ruled that Autodesk’s sale of software to its customers isn’t a sale at all-it actually constitutes a license, as Autodesk had argued, and it cannot be re-sold without violating copyright law. The final case of the triumvirate, MDY v. Blizzard, had mixed results.

While Augusto’s victory confirms that copyright owners can’t simply call a sale or gift a “license” and have it be so, it is balanced out by Autodesk’s earlier win over Vernor, which will uphold most types of licensing for software. That means that for a variety of digital goods, copyright owners will have a strong legal argument that consumers have licensed, not purchased, their content.

One key difference between the (now invalid) promo CD licenses and the (still valid) software licenses: unlike software vendors, UMG didn’t have any evidence that the DJs and reviewers it sent promo CDs out to ever agreed to the supposed license.

The different rulings in these landmark cases could lead to a situation where consumers have strong protections for their rights to use physical copyrighted goods in any manner they choose, but fewer rights when it comes to digital goods.

»  Read the full opinion in UMG v. Augusto [PDF]

In its lawsuits, Righthaven typically asks for attorney’s fees and threatens to take over defendants’ domain names. It has used both of those demands very effectively as a hammer to force its targets to settle the lawsuit. A new motion filed by digital rights group Electronic Frontier Foundation argues that Righthaven doesn’t have the right to demand attorney’s fees or take over defendants’ domains, even if it wins its lawsuits.

Righthaven appears to be the first for-profit effort to file dozens of copyright lawsuits on behalf of newspaper companies. In each lawsuit, it typically demands damages for willful copyright infringement-which can range up to $150,000 per work under U.S. law-as well as attorney’s fees and the forfeiture of the website that hosts the copied article. The settlements it has reached are confidential, but they have ranged from $2,185 to $5,000, according to the Las Vegas Sun.

Righthaven’s founder, Las Vegas lawyer Steve Gibson, says his business model is a sensible way for newspapers to fight against an ocean of infringements of copyrights that have gone unaddressed.” But Righthaven’s “sue first” business model has been criticized, especially since the lawsuits have mostly been filed against individual bloggers and not-for-profit websites.

The heavy damages for copyright infringement have surely helped Righthaven collect quick settlement money. But the company’s style of making big demands and then accepting quick settlements have also led critics, like EFF, to call Righthaven a “copyright troll” with shakedown-like lawsuits.

In the motion, EFF argues that transfer of a domain name is a remedy that is simply not allowed under copyright law. Writing the motion on behalf of their second Righthaven client, Thomas DiBiase, a blogger who writes about murder cases, EFF argues that “the remedy of domain-name seizure… would violate Mr. DiBiase’s First Amendment rights.” The great majority of DiBiase’s site isn’t even accused of copyright infringement, and “because it would cut off public access to Mr. DiBiase’s speech, a domain-name transfer order would be massively overbroad and unconstitutional.”

The second point: Righthaven shouldn’t be allowed to collect attorney’s fees. Unlike domain-name transfer, attorney’s fees are a common award for successful copyright plaintiffs. But because “Righthaven is a made-for-litigation entity that was set up and is run by the very lawyers who are prosecuting cases on its behalf,” EFF argues that the company should be ineligible for such awards.

Righthaven started off enforcing copyrights it acquired from Stephens Media, the parent company of the Las Vegas Review-Journal, which owns a part of the company. Recently, the company also has signed up an Arkansas newspaper chain, WEHCO Media, owner of the Arkansas Democrat-Gazette, as a client. Righthaven has declined to talk about the financial terms of the deals it strikes with newspaper publishers.

EFF says it has been inundated with requests for help from Righthaven defendants. Right now, the group is representing two. In addition to DiBiase, EFF represents Democratic Underground, a liberal political news site, which was sued for using a five-sentence excerpt of a Review Journal article. DiBiase, on the other hand, was accused of copying an entire R-J article for his site. EFF has said that DiBiase’s use of the R-J article still constitutes fair use because it was non-commercial and transformative in nature.

The disagreement over the 30-second video-a grainy shot of Stephanie Lenz’s son Holden dancing around the kitchen to the Prince song “Let’s Go Crazy,” now viewed more than 1 million times-has turned into a three-year saga. The case is now moving into its final stages.

Universal, which administers the copyrights to Prince’s songs, claims that the “dancing baby” video violated copyright law because of the Prince background music. Lenz, after initially taking down the video, later put it back up on YouTube and called the Electronic Frontier Foundation, a digital rights group, which promptly took her case pro bono and filed a countersuit against Universal in a San Jose federal court. Last week, lawyers from EFF and Universal filed opposing briefs arguing for summary judgment. A decision on those motions could come in a matter of months, and will likely decide the case.

However it turns out, the case will help define the limits of “fair use” in the digital age. Fair use is the doctrine that allows the use of copyrighted material if it’s used for criticism, commentary, or transformed in a meaningful way. If copyright owners have to give greater consideration to fair use before sending takedown notices, it could make it more difficult for them to police sites like YouTube; advocacy groups like EFF say that’s a small price to pay for defending fair-use rights.

The Digital Millennium Copyright Act, or DMCA, is the law that provides a system of notice-and-takedown that allows copyright owners to get their content off user-generated sites by simply sending an email. But a section of the DMCA also creates a provision to win damages from a copyright holder who “knowingly materially misrepresents” that material is infringing. That is what the EFF and Lenz are alleging.

Keker & Van Nest lawyer Michael Kwun, who volunteers for EFF and is representing Lenz, says he’s unaware of any legal judgment holding a copyright owner liable under the DMCA’s misrepresentation provision. EFF lawyers would like to get such damages from Universal, and have found a sympathetic client in Lenz. Because Lenz’s use of the Prince song was “obviously” fair use, the record company’s takedown notice is the kind of misrepresentation that Congress sought to punish, EFF lawyers argue.

The Lenz video was clearly “noncommercial and transformative,” writes Kwun. In addition, the Lenz video uses only a small portion of the original song-the whole video is less than 30 seconds long-and there is “no plausible market harm” to Prince.

In response, Universal first repeats an earlier argument-that there’s no such thing as “obvious” fair use, and copyright holders aren’t required to consider fair use at all before sending a takedown notice. Next, it argues that even if there are “extremely rare” cases where fair use is obvious, the Lenz case is definitely not such a case. Since Lenz and her attorneys at EFF had to discuss whether the post was fair use-if it wasn’t self-evident to them-then it couldn’t be self-evident to anyone, write Universal’s lawyers.

For some large content companies, sending takedown notices removing their content from user-generated-content sites like YouTube has become a routine, frequent activity. A Universal lawyer who testified in the Lenz case said that “at times Universal had to ask YouTube to remove hundreds of videos per week,” and that between June and August of 2007 more than one-thousand videos posting were taken down based on Prince music copyrights alone. Other companies have chosen to leave videos incorporating their content up on YouTube, which typically offers to split ad revenue with copyright owners on videos that incorporate copyrighted music or video. But litigation over takedown notices is rare.

The damages EFF is requesting under the claim — known as a 512(f) — are modest, and vastly outweighed by the legal resources expended on both sides. The organization wants to collect $62.50 to compensate Lenz for the 10 hours she spent on the issue prior to filing suit, and $1,275 for pre-filing legal work done by EFF lawyer Marcia Hoffman.

But winning any damages over a DMCA takedown notice would still be a precedent-setting victory-one which might enable more lawsuits against copyright owners, perhaps by plaintiffs with more significant legal expenses than Lenz.

In any case, Kwun and his colleagues at EFF hope to make copyright owners think twice before sending takedown notices that could be seen as overreaching. “A lot of takedown notices, right or wrong, never get challenged,” says Kwun. “When you get these notices, it can be very intimidating.”