Fraud claims against Facebook Inc (NASDAQ:FB) for allegedly disclosing user data in violation of privacy agreements have been revived by the US Court of Appeals in San Francisco after previously being thrown out by a lower court. The appeals court upheld a lower court’s finding that Facebook did not violate federal privacy lows in its dealings with social gaming company Zynga Inc (NASDAQ:ZNGA).

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“[Other] courts have rejected breach-of-contract claims,” said Kassra Nassiri, who represents a group of Facebook users, reports Karen Gullo for Bloomberg. “This is a very important decision.”

The lawsuit claims that Facebook Inc (NASDAQ:FB) was secretly distributing user data to advertisers whenever someone clicked on an advertisement, even though Facebook had explicitly said that it would do no such thing. The specific claims being made in the lawsuit relate to policies that are no longer in effect, but the general feeling that Facebook doesn’t respect its users remains.

Facebook often at odds with privacy advocates

Facebook Inc (NASDAQ:FB) has repeatedly come under fire for its approach to user privacy, frequently changing privacy policies and the interface the controls privacy settings in ways that critics say are confusing and don’t give people control over their own information. Last September Facebook quietly claimed the right to use any user’s personal information and profile picture for advertising, including user’s under 18, since there parent’s supposedly consent to the use of Facebook. Privacy advocates attacked the policy and Facebook eventually walked the policy back.

Now its reputation is so bad that privacy advocates have tried to block Facebook Inc (NASDAQ:FB)’s acquisition of WhatsApp to prevent it from gaining access to another 450 million people’s data (even with plenty of overlap between services, having multiple ways to gather and mine information is still valuable).

User data is Facebook’s main asset

This tension between wanting to keep users happy while trying to monetize their personal information isn’t going away because it’s central to Facebook Inc (NASDAQ:FB)’s business model. Like any business, Facebook Inc (NASDAQ:FB) wants to deliver great products to its customers, who in this case are the companies that pay for advertising. That means that its top priority is trying to innovate new ways to make money with the information it already has at its fingertips. While we may not like to think of it this way, and Facebook isn’t going to point it out, people with a Facebook account are the product.