Google Inc. (GOOG:US), the world’s most-used Internet search engine, must face claims in a lawsuit that its Street View feature violated protections against wiretapping, a federal appeals court ruled

The U.S. Court of Appeals in San Francisco upheld a judge’s decision that Google must face the claims. The Wi-Fi network data collected by the company, unlike radio communications, is covered by the privacy protections of the U.S. Wiretap Act, the appeals panel said.

“Payload data transmitted over an unencrypted Wi-Fi network is not readily accessible to the general public,” Judge Jay Bybee said in a unanimous ruling of the three-member panel. “Google cannot avail itself” of exemptions to the wiretap law, he said. The data collected included e-mails, user names, passwords, images and documents.

“We are disappointed in the Ninth Circuit’s decision and are considering our next steps,” Google said in an e-mail.

Google, based in Mountain View, California, said in May 2010 that it had mistakenly gathered information from open wireless networks while it was capturing images of roadways and houses for Street View and that it would stop using Wi-Fi information for the service.

Computer users alleged in lawsuits that their privacy was invaded, and government agencies in the U.S. and countries including France and Germany opened investigations into the company’s data-gathering practices.

Unencrypted Networks

Google argued that under the Wiretap Act it isn’t illegal to intercept radio communications or any “form of electronic communication readily accessible to the general public.” That includes communications over unencrypted Wi-Fi networks, it said.

“This appeals court decision is a tremendous victory for privacy rights. It means Google can’t suck up private communications from people’s Wi-Fi networks and claim their Wi-Spying was exempt from federal wiretap laws,” said John M. Simpson, privacy project director at nonprofit Consumer Watchdog, which is representing plaintiffs in the lawsuit. “Because Google’s Wi-Spy activity was so extensive, the potential damages could amount to billions of dollars.”

The case is Joffe v. Google, 11-17483, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at [email protected]

To contact the editor responsible for this story: Michael Hytha at [email protected]