UPDATE 1-Instagram furor triggers first class action lawsuit

SAN FRANCISCO, Dec 24 (Reuters) - Facebook's Instagram photo

sharing service has been hit with what appears to be the first

civil lawsuit to result from changed service terms that prompted

howls of protest last week.

In a proposed class action lawsuit filed in San Francisco

federal court on Friday, a California Instagram user leveled

breach of contract and other claims against the company.

"We believe this complaint is without merit and we will

fight it vigorously," Facebook spokesman Andrew Noyes

said in an e-mail.

Instagram, which allows people to add filters and effects to

photos and share them easily on the Internet, was acquired by

Facebook earlier this year for $715 million.

In announcing revised terms of service last week, Instagram

spurred suspicions that it would sell user photos without

compensation. It also announced a mandatory arbitration clause,

forcing users to waive their rights to participate in a class

action lawsuit except under very limited circumstances.

The current terms of service, in effect through mid-January,

contain no such liability shield.

The backlash prompted Instagram founder and CEO Kevin

Systrom to retreat partially a few days later, deleting language

about displaying photos without compensation.

However, Instagram kept language that gave it the ability to

place ads in conjunction with user content, and saying "that we

may not always identify paid services, sponsored content, or

commercial communications as such." It also kept the mandatory

arbitration clause.

The lawsuit, filed by San Diego-based law firm Finkelstein &

Krinsk, says customers who do not agree with Instagram's terms

can cancel their profile but then forfeit rights to photos they

had previously shared on the service.

"In short, Instagram declares that 'possession is

nine-tenths of the law and if you don't like it, you can't stop

us,'" the lawsuit says.

Kurt Opsahl, a senior staff attorney with the Electronic

Frontier Foundation who had criticized Instagram, said he was

pleased that the company rolled back some of the advertising

terms and agreed to better explain their plans in the future.

However, he said the new terms no longer contain language

which had explicitly promised that private photos would remain

private. Facebook had engendered criticism in the past, Opsahl

said, for changing settings so that the ability to keep some

information private was no longer available.

"Hopefully, Instagram will learn from that experience and

refrain from removing privacy settings," Opsahl said.

The civil lawsuit in U.S. District Court, Northern District

of California, is Lucy Funes, individually and on behalf of all

others similarly situated vs. Instagram Inc., 12-cv-6482.

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