A facial recognition startup, accused of invasion of privacy in a class-action lawsuit, has reached a settlement, with a twist: Instead of cash payments, it would give a 23 percent stake in the company to Americans whose faces are in your database.
New York-based Clearview AI scraped billions of photos from the web and social media sites like Facebook, LinkedIn and Instagram to create a facial recognition app used by thousands of police departments, the Department of Homeland Security and the FBI. The New York Times revealed the company’s existence in 2020 and lawsuits were filed across the country. They were consolidated in federal court in Chicago as a class action lawsuit.
The litigation has proven costly for Clearview AI, which would likely go bankrupt before the case went to trial, according to court documents. The company and its suing parties were “trapped together on a sinking ship,” the plaintiffs’ attorneys wrote in a court filing proposing the settlement.
“These realities led the parties to seek a creative solution by obtaining for the class a percentage of the value that Clearview could achieve in the future,” added attorneys at Loevy + Loevy in Chicago.
Anyone in the United States who has a photo of themselves posted publicly online (that is, almost everyone) could be considered a member of the class. The deal would collectively give members a 23 percent stake in Clearview AI, which is valued at $225 million, according to court documents. (Twenty-three percent of the company’s current value would be about $52 million.)
If the company goes public or is acquired, those who have filed a claim form would get a share of the profits. Alternatively, the class could sell its stake. Or the class could opt, after two years, to collect 17 percent of Clearview’s revenue, which it would have to set aside.
The plaintiffs’ attorneys would also be paid with the eventual sale or cash withdrawal; They said they would not ask for more than 39 percent of the amount received by the class. (Thirty-nine percent of $52 million would equal about $20 million.)
“Clearview AI is pleased to have reached an agreement in this class action settlement,” said the company’s attorney, Jim Thompson, a partner at Lynch Thompson in Chicago.
The agreement must still be approved by Judge Sharon Johnson Coleman of the United States District Court for the Northern District of Illinois. Notice of the settlement would be posted in online ads and on Facebook, Instagram, X, Tumblr, Flickr and other sites from which Clearview took photos.
While it seems like an unusual legal remedy, there have been comparable situations, said Samuel Issacharoff, a law professor at New York University. The 1998 settlement between tobacco companies and state attorneys general required the companies to pay billions of dollars over decades into a fund to cover health care costs.
“That was being paid for with their future revenue streams,” Issacharoff said. “States became real beneficiaries of companies in the future.”
Jay Edelson, a class-action attorney, favors “future-stakes agreements” in cases involving startups with limited funds. Edelson also sued Clearview AI, along with the American Civil Liberties Union, in a state lawsuit in Illinois that was settled in 2022, with Clearview agreeing not to sell its database of 40 billion photos to companies or individuals.
Edelson, however, said there was a “ick factor” in this proposed deal.
“There are now people who are harmed by Clearview trampling on their privacy rights, and they have a financial interest in Clearview finding new ways to trample on them,” he said.
Evan Greer, director of Fight for the Future, a privacy advocacy organization, was also critical.
“If mass surveillance is harmful, the remedy should be to stop it from happening, not to pay pennies to the people who are harmed,” Greer said.
