• by Wendy Davis  @wendyndavis, September 7, 2010

Google has agreed to pay $8.5 million to settle a privacy class-action lawsuit stemming from the company's February launch of the social networking service Buzz.

The tentative settlement calls for Google to pay around $6 million to various privacy organizations, and $2,500 to each of seven individual Web users who sued. The class-action attorneys who brought the lawsuit will split up to $2.5 million.

A Google spokesperson said the company was "satisfied with the agreement" and "glad to move forward." The spokesperson added: "We have always been committed to offering users transparency and choice in Buzz and all our products, and will continue to work together with users to provide the best user experience possible."

When Google rolled out Buzz, the company created social networks out of people's Gmail contacts. But in a move that was widely criticized, Google designed the feature so that it initially revealed information about the names of users' email contacts, if users activated Buzz without changing the defaults. Observers quickly pointed out that this set-up meant that a host of confidential information could inadvertently become public, including the names of Gmail users' doctors, lawyers or coworkers.

Google revised the service significantly after it was launched. The settlement agreement calls on the company to "disseminate wider public education about the privacy aspects of Google Buzz" and to consider further suggestions about the issue.

The agreement, if approved by U.S. District Court Judge James Ware in San Jose, will resolve private litigation resulting from Google's botched launch of Buzz, but it might not end all fallout from the program. The advocacy group Electronic Privacy Information Center filed a complaint in February about Buzz with the Federal Trade Commission.

The proposed Buzz settlement appears to be similar to Facebook's settlement of litigation stemming from the defunct Beacon program, which told Facebook users about their friends' e-commerce activity. In that case, Facebook agreed to pay $9.5 million, with approximately $6 million devoted toward a privacy foundation and much of the rest going to the lawyers.

But one key difference between the settlements is that Facebook intends to create a new privacy foundation. That provision has resulted in legal wrangling about whether the agreement will give Facebook too much control over the new organization. U.S. District Court Judge Richard Seeborg in San Jose recently approved the settlement over the objection of privacy advocates, but that ruling was appealed recently to the 9th Circuit by an opponent of the deal.

The Buzz lawsuit, like the Beacon litigation, appears to be part of a wave of new class-actions alleging privacy violations. In the last two years, privacy lawsuits also have been filed against Classmates.com, defunct behavioral targeting company NebuAd, SpecificMedia and others. In addition, Google still faces litigation stemming from allegations that its Street View cars intercepted personal data from unsecured WiFi networks.

Internet law expert Eric Goldman says the recent privacy class-action lawsuits indicate that the plaintiffs' lawyers who sue Web companies have become more organized. "Unless you've dotted every i and crossed every t with respect to privacy, the lawyers are going to have a fiesta," says Goldman, a law professor at Santa Clara University. "At this point, pretty much every new product release from one of the new dot-coms is going to be accompanied by a plaintiffs' lawsuit."