In the past few months, you’ve probably seen an increase in “Sponsored Stories” when you’re browsing Facebook. If that term doesn’t ring a bell, Sponsored Stories are basically advertisements, promoted by a brand, based on your activity that you’ve already put out there for the world to see. Let’s say that you posted a status update, checking-in at Starbucks and talking about how you finally got your morning cup of coffee and it saved your day. Facebook might display that “Story” prominently on a friend’s News Feed under the heading of “sponsored.”

The whole point of Sponsored Stories is to mix the core experience of Facebook with advertising. If the “ad” is actually just a promotion of an already written status update, or “like” of a particular page, it’s going to feel more organic to the user that sees it in their feed. After all, if your friend said that they just had the new Frankenstein Frito-Dorito-creation from Taco Bell and they loved it, that naturally serves as a better advertisement than one from Taco Bell themselves. Or at least that’s the thought.

That crucial personal link between the likeness of someone a user knows and the advertisement is being challenged by a Vancouver woman. Debbie Douez has filed a class action lawsuit in British Columbia courts that claims Facebook was in violation of privacy laws when they used her image and name in a Sponsored Story.

What do you think about Sponsored Stories? Do you think that there’s anything wrong with Facebook promoting actions that you’ve already taken? Let us know in the comments.

For Douez, the problem stems from a particular Sponsored Story that Facebook promoted. Earlier this year, the lawsuit states that “Facebook authored a Sponsored Story which displayed the plaintiffs name and portrait to least one of her Friends in the following format: Debbie Douez likes Cool Entrepreneurs.” Obviously, Douez liked a page on the site and that action was eventually promoted by Facebook to her friends. Douez argues that she did not consent to Facebook’s use of her name and “portrait” (profile pic) in any type of advertising for Cool Entrepreneurs.

Here’s the crux of the argument, straight from the filing:

Facebook does not give notice to Members that their names or portraits are being used in connection with a Sponsored Story or that Facebook is depicting that Member as endorsing a particular good or service.

In other words, other Members may view advertisements, including Sponsored Stories, purportedly endorsed by a Member who is unaware that his or her name or portrait is being used in connection with that advertisement.

Facebook does not advise, inform or compensate Members when it uses their names or portraits to endorse a Sponsors goods or services or otherwise displays Members’ names or portraits in Sponsored Stories.

Facebook does not allow Members to either limit or altogether block the appearance of their names or portraits in connection with a Sponsored Story.

Since the introduction of Sponsored Stories, Facebook has not sought or obtained Members’ consent to use Members’ names or portraits for the purpose of advertising or promoting the sale of Sponsors’ goods or services.

And the lawsuit goes on to complain that Facebook fails to compensate users for using their image and name to promote these particular brands, saying “Facebook did not compensate the Class members for the use of their names of portraits in Sponsored Stories advertising or promoting any goods or services notwithstanding that such use generated advertising revenues for Facebook.”

Put all of this together, and you can sum up the complaint in this way: You didn’t tell us, you didn’t pay us, and we can’t opt out.

The suit finally says that in doing all of this, Facebook has violated statutes in the Canadian Privacy Act, and:

Facebook’s use of the plaintiff and Class members’ names or portraits without consent was high-handed, outrageous, wanton, reckless, callous, disgraceful, willful and entirely without care for the plaintiffs and Class members’ statutory right to control the use of their own names or portraits, and as such renders Facebook liable to pay punitive damages.

While Facebook is absolutely transparent in terms of how Sponsored Stories work, Douez is right in saying that users don’t receive notice when one of their actions is promoted as a Sponsored Story. She’s also right in saying that users can’t opt-out of Sponsored Stories – as to say they can’t stop Facebook from promoting all of their activities on the site.

At this point, it might help to discuss the differences between Facebook’s social ads and the Sponsored Stories.

Both Facebook ads and Sponsored Stories have a social element. You’ve probably seen ads all over Facebook for goods and services, or for particular brands in general that show your friends’ “likes.” For instance, an ad for McDonalds might appear in the right hand column on your Facebook dashboard that reads “The McRib is back.” Under that, it might also read “Jack Smith likes McDonalds.” This is an ad that is paired with a social action after the fact.

Facebook explains adding social elements to ads by saying “everyone wants to know what their friends like. That’s why we pair ads and friends—an easy way to find products and services you’re interested in, based on what your friends share and like.”

Sponsored Stories, like I mentioned before, are just a little bit different. They take pages you like, apps you use, or statuses you make and promote them after the fact. It’s a story built from a story that a user’s friends can already see. For instance, I might see that my pal Jacob liked Mountain Dew earlier in the day, and then see it as a sponsored story later in the day.

The main difference between the two, however, is the ability for users to opt-out. You can edit your privacy settings to read “pair my social action with ads for no one.” If you do this, that hypothetical ad for McDonald’s McRib won’t have the addendum that shows you like that particular brand.

Making this privacy change won’t affect Sponsored Stories however. Users can’t opt-out of having their actions appear as Sponsored Stories, bascially because Facebook says that Sponsored Stories are nothing more than your own real stories, re-promoted. Sponsored Stories are organic, and don’t contain any additional message from the sponsor:

We sometimes allow businesses or anyone else to sponsor stories like the ones that show up in your News Feed, subject to the audience set for that story. While these are sponsored, they are different from ads because they don’t contain a message from the person that sponsored them. Your friends will see these stories even if you have opted out of the Show my social actions in Facebook Ads setting.

All of this is in Facebook’s fine print, but the suit claims that it’s not enough. “If you’re going to be using somebody’s name or somebody’s portrait for advertising purposes, you need to obtain their consent,” Douez’s lawyer told CBC News.

As far as Facebook’s ability to use your intellectual property (i.e. photos), they do give a pretty succinct explanation in their terms of service:

For content that is covered by intellectual property rights, like photos and videos (IP content), you specifically give us the following permission, subject to your privacy and application settings: you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook (IP License). This IP License ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it.

We’ve seen the use of Facebook photos question by miffed parties before, when some Boston high-schoolers were upset after pictures they posted to Facebook wound up as advertising on porn sites.

Facebook is Facebook. That might sound meaningless, but what I’m trying to say is that people log on to Facebook, knowing that they are participating in a public forum. Even if you have your privacy settings cranked up to 11, and only a select few friends can see most of your activity, that still qualifies as public (just not as public as some people).

Sponsored Stories take an action that you’ve already taken, and allows brands (or anyone else for that matter) to re-promote it on the user’s friends’ News Feed. They don’t make any new information available. If you “liked” Starbucks earlier in the day, your friends could go to your “About” page and see it there with all of your likes.

But for brands, Facebook is providing some really high quality advertising. Making sure that a user’s friends see that he’s playing a certain game or checking-in at a certain restaurant seems like a much better strategy than a generic ad on the side of the page.

Should Facebook require consent before using a user’s activity in a Sponsored Story? Should users be able to opt-out, in the same way they can with social ads? Do you even care if your activity is used as a sponsored story? Let us know what you think in the comments.