(Reuters) - A federal appeals court rejected Google Inc's bid to dismiss a lawsuit accusing it of violating federal wiretap law when its accidentally collected emails and other personal data while building its popular Street View program.
The 9th U.S. Circuit Court of Appeals refused to exempt Google from liability under the federal Wiretap Act for having inadvertently intercepted emails, user names, passwords and other data from private Wi-Fi networks to create Street View, which provides panoramic views of city streets.
"It's a landmark decision that affirms the privacy of electronic communications for wireless networks," said Marc Rotenberg, executive director of the Electronic Privacy Information Center in Washington, D.C.
"Many Internet users depend on wireless networks to connect devices in their homes, such as printers and laptops, and companies should not be snooping on their communications or collecting private data."
Writing for a three-judge panel, Circuit Judge Jay Bybee said Wi-Fi communications did not qualify as a "radio communication," or an "electronic communication" that was "readily accessible to the general public," such that Google deserved an exemption from the Wiretap Act.
"Even if it is commonplace for members of the general public to connect to a neighbor's unencrypted Wi-Fi network," Bybee wrote, "members of the general public do not typically mistakenly intercept, store, and decode data transmitted by other devices on the network."
A Google spokeswoman said: "We are disappointed in the Ninth Circuit's decision and are considering our next steps."
Elizabeth Cabraser, a lawyer for the plaintiffs, said she is pleased with the decision, and "reassured that our courts continue to uphold personal privacy as an important value."
The lawsuit arose soon after the Mountain View, California-based company publicly apologized in May 2010 for having collected fragments of "payload data" from unsecured wireless networks in more than 30 countries.
Google was accused of having collected the data while driving its vehicles through neighborhoods from 2008 to 2010 to collect photos for Street View.
In June 2011, U.S. District Judge James Ware in San Francisco allowed plaintiffs in several consolidated private lawsuits to pursue federal Wiretap Act claims against Google, while dismissing California state law claims.
Upholding that ruling, Bybee said Google's "expansive" view of the Wiretap Act's exceptions would have produced the "absurd" result that the law's protections would depend on whether a recipient of communications was using a secure network.
He said this could, in theory, allow someone to park outside the home or office of a person using an unsecured network, and without penalty use a "packet sniffer," a device that captures data being transmitted over a network, to intercept an email intended for that person because it was readily accessible.
"Surely Congress did not intend to condone such an intrusive and unwarranted invasion of privacy when it enacted the Wiretap Act 'to protect against the unauthorized interception of electronic communications,'" he said.
Eighteen individual plaintiffs are named in the appeal.
In March, Google agreed to pay $7 million to settle a probe into the matter involving 38 U.S. states and the District of Columbia. As part of that settlement, Google agreed to destroy data collected in the United States.
The Electronic Privacy Information Center is a nonprofit that in court papers urged the upholding of Ware's ruling.
The case is Google Inc v. Joffe et al, 9th U.S. Circuit Court of Appeals, No. 11-17483.
Reporting by Jonathan Stempel in New York; Editing by Bernadette Baum and Carol Bishopric