Reuters is reporting that Facebook has agreed to pay $10 million to settle a lawsuit brought by people whose faces and images were used in Sponsored Stories ads. The settlement, however, will not be going to the five Facebook users who brought the lawsuits — it will instead be donated to charity.

VentureBeat covered this story before, and the lawsuit is not new. However, the settlement amount was not released previously. It was released this weekend in court documents that were finally made public.

Sponsored stories are ads created by companies out of users’ interactions with their products or brands. The example that Facebook gives is a user liking a company’s page, which is then used to market that company to the user’s friends. Sponsored stories are extremely successful compared to other Facebook ad types — they can have between 20 percent and 46 percent higher click-through rates.

The most egregious example of a user becoming the inadvertent spokesman for a less-than-squeaky-clean brand, of course, is Nick Bergus, who became the leading pitchman for Passion Natural Water personal lubricant — in 55-gallon allotments. Bergus’ mother may not have found the ad as amusing as his friends did, and therein lies the rub.

The bigger issue, of course, is legality: As Reuters states, California law recognizes the right of individuals to their name and likeness, so companies cannot use people in ads without their consent.

It’s a lesson that will impact how Facebook runs sponsored stories in the future.

But given the fact that, as VentureBeat’s Sean Ludwig mentioned previously, this could have become a class action lawsuit involving a third of the population of the United States as plaintiffs, $10 million seems a fairly small price to pay.

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