An AI startup that doesn’t have enough money to settle a privacy lawsuit is giving plaintiffs a share of the company’s value.
Facial recognition startup Clearview AI reached a settlement Friday in an Illinois lawsuit alleging that its massive collection of facial images violated subjects’ privacy rights, a settlement that lawyers estimated could cost more than $50 million.
But the unique agreement gives plaintiffs in a federal suit a share of the company’s potential value, rather than a regular payout. About $20 million in attorneys’ fees will also come out of the settlement.
Judge Sharon Johnson Coleman, of the Northern District of Illinois, gave preliminary approval to the settlement on Friday.
The case included lawsuits from across the US filed against Clearview, which pulled images from social media and elsewhere on the Internet to create websites that it sold to businesses, individuals and government agencies.
The company settled a separate lawsuit alleging privacy violations in Illinois in 2022, agreeing to stop selling access to its website to private businesses or individuals. That agreement still allows Clearview to work with federal agencies and local law enforcement outside of Illinois, which has a strong digital privacy law.
Clearview does not accept any liability as part of the late payment agreement.
“Clearview AI is pleased to have reached a settlement in this class action settlement,” said James Thompson, an attorney representing the company in the lawsuit, in a written statement Friday.
The attorney for the lead plaintiffs, Jon Loevy, said the settlement was a “reasonable solution” required by Clearview’s financial situation.
“Clearview didn’t have the money to pay the class fair compensation, so we needed to find a solution,” Loevy said in a statement. .”
It is not yet clear how many people will be eligible to join the deal. The language of the agreement is sweeping, including anyone whose photos or data is on the company’s website and who lived in the US as of July 1, 2017.
A national campaign to inform potential plaintiffs is part of the agreement.
Attorneys for Clearview and the plaintiffs worked with Wayne Andersen, a retired federal judge who now mediates legal cases, to develop the settlement. In court documents presenting the settlement, Andersen writes unequivocally that the startup would not pay any legal settlement if the lawsuit proceeds.
“Clearview did not have the cash to pay the multi-million dollar judgment,” he was quoted as saying in the filing. “Indeed, there was considerable uncertainty as to whether Clearview would have enough cash to be able to complete the case, let alone fund the verdict.”
But some privacy advocates and people pursuing other legal actions called the deal a setback that won’t change the company’s performance.
Sejal Zota is an attorney and legal director of Just Futures Law, an organization representing plaintiffs in a California lawsuit against the company. Zota said the deal “validates” Clearview.
“It does not fix the root of the problem,” said Zota. “Clearview will now be able to continue its practice of harvesting and selling people’s faces without their consent, and use them to train its AI technology.”
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