Analysis: Google's private data grab means big legal trouble

Not only are there investigations in Europe, Australia, Canada and Hong Kong, but the U.S. Federal Trade Commission is looking at Google's data collection methods, lawmakers are demanding more information and more than 30 state attorneys general have launched their own probes.

The online behemoth's biggest problem is that its Street View product -- launched in 2007 -- was controversial from the start because its mobile teams drove down streets, took pictures of buildings and put them online.

But in the past, the debate about Street View was focused on discomfort with having homes posted online for anyone to see, not on Google capturing unencrypted Wi-Fi from the very same homes to determine location. No one complained because no one knew about Google collecting snippets of email and other personal data.

Google has said it also did not know it was gathering the data, but the FTC will probably question whether Google violated reasonable expectations of privacy, according to Pamela Jones Harbour, a former FTC commissioner.

"I know that when I was there, if the commission were to look at that, they would run it through the prism of the FTC Act, which prohibits unfair and deceptive practices," she said. "Did it violate consumers' reasonable expectation of privacy?"

Deception does not have to refer to what Google said about the project, but could also mean what it omitted, said Harbour, now a partner at Fulbright and Jaworski LLP.

Harbour acknowledged that Google's argument it had no intention of collecting the data could help. But she added: "Why were they developing code in the first place that was collecting that information?"

Harbour pushed for tougher privacy protection while she was a commissioner and this flap could be the incident that finally gets privacy legislation passed.

Or Google could find that its users have become less trusting and go elsewhere for information, said Eric Goldman, who teaches at Santa Clara University School of Law.

RISKING TRUST AND MARKET SHARE

"Google is the biggest data pack rat around. So long as we trust that Google has our best interest at heart, we might choose some kind of willful blindness," he said. "If people stop trusting Google, their market share will start to dip."

Google first revealed that Street View cars were collecting wireless data in April, but said no personal data was taken. After an audit requested by Germany, Google acknowledged it had collected samples of "payload data," essentially any email or personal information passing through the network at the time the Street View cars passed by. But it insists that was "a mistake."

"Google did nothing illegal and we look forward to answering questions," the company has said in a statement it repeated late on Wednesday.

Marc Rotenberg, head of the Electronic Privacy Information Center, said Google could have broken laws against wire- tapping, monitoring electronic communications or accessing a wireless network without permission.

"The big question out there is did Google violate any laws and if they did, what will be the consequences?" said Rotenberg, who was skeptical of Google's defense that the data collection was unintentional.

"They wrote the code, they collected it, and they downloaded it," he added.

Despite the anger of privacy advocates, law professor Eric Goldman, a former general counsel of an Internet firm, said Google had a decent chance of prevailing in court, as long as no proof ever surfaced it was being dishonest.

"There are plenty of engineers that don't understand their legal obligations," he said.

Nevertheless, he did not believe Google would emerge unscathed.

"This is the one that will cause regulators to drop the hammer on Google," he said.

There has already been talk on Capitol Hill of a bill aimed at preventing a repetition, according to a Senate staffer familiar with the matter.

Goldman forecast legislation would be passed specifically to rein in Google.

"The fact that they were capturing private communications, even if they didn't capture very much, is a toxic brew," he added.

(Reporting by Diane Bartz; editing by Andre Grenon)