Facial Recognition Start-Up Settles Privacy Lawsuit with Unique Twist: Offering Stake in Company to Americans
A facial recognition start-up, Clearview AI, has found itself in hot water after being accused of invasion of privacy in a class-action lawsuit. However, the company has taken a unique approach to settle the matter – offering a 23 percent stake in the company to Americans whose faces are in its database.
Based in New York, Clearview AI garnered billions of photos from various web and social media platforms like Facebook, LinkedIn, and Instagram to develop a facial recognition app used by numerous law enforcement agencies, including the Department of Homeland Security and the F.B.I. The company came under scrutiny after its existence was revealed by The New York Times in 2020, leading to a wave of lawsuits across the country that were consolidated into a federal class action in Chicago.
The legal battle has proven to be costly for Clearview AI, with court documents indicating that the company was at risk of going bankrupt before the case could even reach trial. In a court filing proposing the settlement, lawyers for the plaintiffs described the situation as both the company and the suing parties being “trapped together on a sinking ship.”
In a bid to find a resolution, the parties agreed on a creative solution that would grant the class members a percentage of Clearview’s future value. As part of the settlement, anyone in the United States with a publicly posted photo online – essentially almost everyone – could be considered a member of the class and collectively receive a 23 percent stake in the company, valued at $225 million.
The terms of the settlement allow class members to benefit from Clearview AI’s future success, whether through a public offering, acquisition, or revenue sharing. The plaintiffs’ lawyers would also be compensated from the eventual sale or cash-out, with a cap set at 39 percent of the amount received by the class.
While the settlement still awaits approval from U.S. District Court Judge Sharon Johnson Coleman, the proposed agreement has sparked mixed reactions. Some legal experts have likened the approach to past settlements involving future revenue streams, such as the tobacco companies’ agreement to pay into a fund for health care costs over decades.
However, critics like class-action lawyer Jay Edelson and privacy advocate Evan Greer have raised concerns about the implications of financially tying individuals harmed by Clearview’s privacy violations to the company’s future operations. Despite the controversy, Clearview AI’s lawyer, Jim Thompson, expressed satisfaction with the settlement agreement.
As the case continues to unfold, the outcome of this groundbreaking settlement could set a precedent for future privacy-related lawsuits involving tech companies and the protection of individuals’ personal data.
