When Google Buzz launched in February, Gmail users' email contacts were automatically added as followers. (Google)Google has settled a privacy class-action lawsuit over the way it automatically set up Google Buzz social networking accounts for its Gmail users.

The company emailed Gmail users Tuesday to let them know about the settlement. Under it, Google will create an $8.5-million US fund that will fund organizations that deal with policy and education related to internet privacy, the company said.

A group of Gmail users launched the lawsuit after Google incorporated Buzz into Gmail in February. Like Facebook or Twitter, the service allows people to share text updates, links, photos and videos with their friends or "the world."

Canadian Privacy Commissioner Jennifer Stoddart spoke in February about the "storm of protest and outrage" received by her office over alleged violations of Canadian privacy law by Google Buzz. (Canadian Press)When launching the service, Google automatically added users' frequent email contacts as "followers" to receive users' shared updates and media.

The rollout prompted the lawsuit, along with complaints to privacy watchdogs around the world, including Canada's.

The lawsuit alleged that Google automatically enrolled Gmail users in Buzz and that Buzz publicly exposed data such as users' most frequent Gmail contacts, without enough user consent. Google denied the allegations and denied that it violated any laws or caused any harm through its launch of Google Buzz.

Blocking ability given

Google said the settlement acknowledges the changes that Google made days after its launch of Buzz. Those included:

• The ability to block followers.
• A more visible option not to show followers on the user's public profile.
• Suggesting people to follow, instead of automatically setting users up to follow their email contacts.

In April, Google also encouraged Buzz users to check and verify their privacy settings.

The lawsuit settlement received preliminary approval by a U.S. federal district court judge in October and the court will consider final approval on Jan. 31, 2011.

Google told users they are automatically included in the settlement unless they opt out by Dec. 6. They will not be able to launch their own lawsuits unless they opt out.

According to the Electronic Privacy Information Center, a privacy think-tank based in Washington, D.C., part of the settlement will also compensate the lead plaintiffs and pay the lawyers involved.

Canada's privacy commissioner, Jennifer Stoddart, issued a statement shortly after the launch of Google Buzz, saying her office had seen a "storm of protest and outrage" over alleged violations of Canadian privacy law. She chastised Google for not consulting her office and asked the company to explain how it met the requirements of Canadian privacy law.

Meanwhile, the Electronic Privacy Information Center filed a complaint with the Federal Trade Commission, asking it to compel Google Buzz to make changes to improve users' privacy.