Social-networking site Facebook has agreed to pay $10 million to settle a lawsuit filed by five people who had been used in adverts without their permission.

The five Facebook members had brought the lawsuit, accusing the social-networking site of violating California law by featuring them in "sponsored stories" about products they had "liked".

According to the California law, no commercial company can use their personal data, such as images, for commercial activity without seeking their prior permission.

Facebook attorney Michael Rhodes confirmed yesterday that the company would settle the dispute by paying $10 million to charity. To beging with, Facebook had argued that the claimants didn’t show that they were hurt by the practice.

The settlement was hit last month, but it was revealed at the weekend.

US District Judge Lucy Koh said the lawsuit had depicted that economic injury could occur via Facebook's use of users’ names, photos and likenesses.

Speaking on the topic, Koh said, “California has long recognised a right to protect one's name and likeness against appropriation by others for their advantage.”

Stock in Facebook closed at $30.01a-a-share on Friday, down 21 per cent since the social-networking giant launched its initial public offering last month.

Facebook, which was started by the site’s CEO Mark Zuckerberg in 2004, claims to have more than 900 million users worldwide.