Google has settled a US lawsuit for $8.5 million in relation to its Buzz social networking site.

It has proposed a lump sum, of which 30 per cent will be used to pay legal fees, while seven Gmail users who brought the case will get $2,500 each and the remainder will be shared among organisations that promote online privacy.

The settlement has yet to win approval from the federal judge in charge of the case, however a Google spokesman told the Wall Street Journal that it was satisfied with the agreement and was glad to move forward.

The service was previously criticised by the Electronic Privacy Information Centre and from a collection of information and privacy commissioners from the UK, France, Germany, Israel, Italy, Ireland, the Netherlands, New Zealand, Spain and Canada.

The service was criticised upon its launch for exposing the most emailed contacts, poor default settings, the lack of a central control panel and the ability of people to hide themselves – providing an opportunity for stalkers, bosses to spy on their employees or random internet trolls watching their victims.

It revamped its settings four days later moving from an automatic-following feature, where Buzz automatically set users up to follow the people they email and chat with most, to an auto-suggest model. It also made the checkbox for choosing not to display personal information publicly more prominent.

It no longer connected a user's public Picasa web albums and Google Reader shared items automatically. A Buzz tab was also added to Gmail settings so users were able to hide Buzz from Gmail or disable it completely.

However two months later it revamped once again, asking users to confirm or change their privacy settings to disclose aspects of their profile and allows them to view and edit the people that they are following and the people following them and whether they want those lists appearing on their public Google profile.