• by Wendy Davis  @wendyndavis, June 30, 2011

A federal judge has ruled that consumers can proceed with a potential class-action lawsuit against Google for intercepting their WiFi transmissions with its Street View cars.

U.S. District Court Judge James Ware rejected Google's arguments that the case should be dismissed because the WiFi communications it allegedly captured were not password-protected.

The 25-year-old wiretap law prohibits companies from intercepting electronic communications, but only if the material is not accessible to the general public. Google had argued that transmissions sent through open networks were accessible to the public-at-large, and therefore not subject to the wiretap law's prohibitions.

But Ware accepted the consumers' argument, ruling that the material sent over the networks could not be read without "sophisticated technology."

"Plaintiffs plead that the networks were themselves configured to render the data packets, or electronic communications, unreadable and inaccessible without the use of rare packet sniffing software; technology allegedly outside the purview of the general public," Ware wrote. "Thus, the court finds that plaintiffs plead facts sufficient to support a claim that the WiFi networks were not 'readily accessible to the general public.'"

A Google spokesperson said the claims in the lawsuit are without merit and the company is "still evaluating our options at this preliminary stage."

The litigation stems from Google's admission last year that its Street View cars mistakenly collected "payload" data -- including URLs, passwords and emails -- from WiFi networks that were not password protected. Google maintains that it did not violate U.S. law, but did apologize for the interception, and said it intends to destroy the data.

But the company has not been able to quell concerns that the WiFi interceptions violated people's privacy. The company faces probes in several countries abroad as well as in the U.S., where the Federal Trade Commission, Federal Communications Commission and a coalition of state attorneys general launched separate investigations.

The FTC closed its file without taking action, but the FCC and state law enforcement officials continue to investigate.

Although Ware ruled against Google on a key issue, the search giant could still ultimately prevail in the lawsuit, says Internet law expert Eric Goldman, a law professor at Santa Clara University. "There are still a whole bunch of other defenses that Google can mount," he says.

Ware did not hand Google a complete defeat in the case. He also ruled that the consumers cannot proceed with claims that Google violated a California wiretap law because the federal wiretap law trumps all state laws. That portion of the decision could potentially affect a wide range of privacy lawsuits because many states have laws that are broader than the federal wiretap statute.