• by Wendy Davis  @wendyndavis, December 19, 2011

Facebook's sponsored stories program potentially violates a California law that gives people the right to control how their names and images are used in endorsements, a federal judge has ruled.

In a 38-page decision issued Friday, U.S. District Court Judge Lucy Koh rejected Facebook's arguments that the case should be dismissed at an early stage. Koh's ruling stems from a lawsuit over a Facebook ad program that publicizes users' “likes” to their friends.

Facebook contended that the lawsuit should have been thrown out for several reasons, including that users consented to the sponsored stories program when they signed up for the site. The ad program is mentioned in the terms of service. But the users countered that they didn't consent; they joined Facebook before it launched sponsored stories.

Koh ruled that whether the users agreed to the program was a contested factual matter and, therefore, needed to be fleshed out with additional evidence.

Facebook also argued that its members had not been harmed economically by the program. But Koh ruled that users could proceed because California's misappropriation statute provides for at least $750 in damages per violation.

That portion of Koh's ruling appears inconsistent with a recent decision by a different judge, who dismissed a similar lawsuit against Facebook alleging that it misappropriated people's images by using them in ads. In that case, U.S. District Court Judge Richard Seeborg in the Northern District of California ruled that Facebook users couldn't sue the company for using their names or likenesses in ads for its Friendfinder feature. Seeborg said that the users hadn't shown any economic injury.

But Koh said that the cases warranted different results, in part because the users suing over sponsored stories presented evidence of “a direct, linear relationship between the value of their endorsement of third-party products, companies, and brands to their Facebook friends, and the alleged commercial profit gained by Facebook.”

Koh's ruling doesn't mean that Facebook will lose the case. The social networking services company could still prevail at trial -- or could forge a settlement.

A Facebook spokesperson said the company was reviewing the decision and continues to believe that the lawsuit is meritless.