Clearview AI used your face. Now you could get a stake in the company.

A facial recognition start-up accused of violating privacy in a class-action lawsuit has agreed to a settlement, with a twist: Instead of cash payments, it would give a 23% stake in the company to Americans whose faces are in its database.

Clearview AI, which is based in New York, collected 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 national and the FBI. The New York Times revealed the company's existence in 2020, and lawsuits have been filed across the country. They were consolidated in federal court in Chicago as a class action.

The litigation proved costly for Clearview AI, which would most likely have gone bankrupt before the case reached trial, according to court documents. The company and its plaintiffs were “trapped together on a sinking ship,” the plaintiffs' lawyers wrote in a court filing proposing the settlement.

“These realities have led the parties to seek a creative solution by obtaining for the class a percentage of the value that Clearview may receive in the future,” added attorneys at Loevy + Loevy of Chicago.

Anyone in the United States who has a photo of themselves posted publicly online – so almost everyone – could be considered a member of the class. The deal would collectively give members a 23% stake in Clearview AI, valued at $225 million, according to court filings. (23% of the company's current value would be about $52 million.)

If the company went public or was acquired, those who submitted an application form would get a cut of the proceeds. Alternatively, the class could sell its interest. Or the class could opt, after two years, to collect 17% of Clearview's revenue, which would be kept aside.

The plaintiffs' lawyers would also be paid from any sale or collection; they said they would not ask for more than 39% of the amount the class received. (39% of $52 million would equal about $20 million.)

“Clearview AI is pleased to have reached a settlement in this class settlement,” said the company’s attorney, Jim Thompson, a partner at Lynch Thompson in Chicago.

The settlement still must be approved by Judge Sharon Johnson Coleman of the U.S. 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, similar situations have occurred, said Samuel Issacharoff, a New York University law professor. The 1998 settlement between tobacco companies and state attorneys general required the companies to pour billions of dollars over decades into a fund for health care costs.

“This was being paid for out of their future revenue streams,” Issacharoff said. “States have become beneficial owners of companies going forward.”

Jay Edelson, a class action lawyer, is a proponent of “future share regulation” in cases involving start-ups with limited funds. Mr. 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.

Mr. Edelson, however, said there was a “yuck factor” in this proposed solution.

“Now you have people hurt by Clearview's trampling of their privacy rights who become financially interested in Clearview finding new ways to trample on them,” he said.

Evan Greer, director of Fight for the Future, a privacy organization, was also critical.

“If mass surveillance is harmful, the remedy should be to stop them from doing it, not to pay a dime to the people who are harmed,” Greer said.

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