Clearview AI used Americans’ faces. They may now get a share in the company.

In a class action lawsuit, a facial recognition startup accused of invading privacy has settled with a twist. Instead of cash payments, the company will give 23% of its shares to Americans who have their faces in its database.

Clearview AI in New York scraped millions of photos off the Web and from social media sites like Facebook, LinkedIn, and Instagram to create a facial recognition application used by thousands of law enforcement agencies, the Department of Homeland Security, and the FBI.

In 2020, after The New York Times announced the existence of the company, lawsuits across the nation were filed. The lawsuits were consolidated into a class-action in federal court Chicago.

Court documents indicate that the litigation was costly to Clearview AI. The company would have gone bankrupt before it could even reach trial. In a court filing, lawyers for the plaintiffs claimed that the company and the people who sued it had been “trapped on a sinking boat”.

The lawyers from Loevy + Loevy, Chicago, said that “these realities led both sides to seek an innovative solution by obtaining a percentage of Clearview’s future value for the class.”

The class could include anyone in the United States with a publicly posted photo. This would be almost everyone. According to court documents, the settlement would give members a collective 23% stake of Clearview AI valued at US$225mil. (RM1.06bil). Twenty-three percent would equal about US$52mil or RM245.12mil.

If the company is taken public or acquired, the claimants will receive a share of the proceeds. The class can also sell its shares. The class can also choose to receive 17% of Clearview’s revenue after two years.

They said that they would not ask for more than 39%. (39 percent of US$52mil is approximately US$20mil, or RM94.28mil.)

Jim Thompson, partner at Lynch Thompson Chicago, the firm’s attorney, said: “Clearview AI was pleased to reach an agreement on this class-action settlement.”

Judge Sharon Johnson Coleman of the U.S. District Court of Northern District of Illinois must still approve the settlement. The settlement will be announced in online ads, on Facebook, Instagram and other social media sites such as Tumblr and Flickr, and also through Facebook, Instagram and X.

Samuel Issacharoff is a law professor at New York University. He said that although it may seem like an unusual legal remedy there have been similar situations. In a 1998 settlement, tobacco companies were required to pay billions in health care costs over a period of decades.

Issacharoff explained that the money was paid from their future revenues. “States were beneficial owners as the companies moved forward.”

Jay Edelson is a class action lawyer who advocates “future stakes” settlements in cases where startups have limited funding. Edelson, along with the American Civil Liberties Union and Clearview AI, sued Clearview AI in an Illinois state lawsuit that settled in 2022. Clearview agreed not to sell their database of 40 billion images to businesses or individuals.

Edelson said that this proposed settlement had an “ick factor”.

He said: “Now, people who have been injured by Clearview’s infringement of their privacy rights are financially interested in Clearview coming up with new ways to violate them.”

Evan Greer was also critical. He is the director of Fight for the Future. This privacy advocacy group.

Greer stated that “if mass surveillance is harmful then the remedy should not be paying pennies to those who are hurt, but stopping them from doing it.” The New York Times

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