On September 26, 2013, a California federal judge allowed a class action to move forward challenging Google's scanning of emails and targeted email advertising, rejecting Google's claims of express and implied consent in its Terms of Service and privacy policy disclosures, and adopting a broad construction of wiretapping injury that will likely be cited by plaintiffs in future cases against online and Internet service providers that create user profiles or deliver targeted ads.  Judge Lucy Koh's 43-page opinion does not impose liability on Google for its actions because it is only a denial of parts of Google's motion to dismiss.  However, the opinion governs further proceedings in the case and may well impact how other cases are litigated.  On that score, the opinion finds language in Google's privacy policies and Terms of Service inadequate, and stretches the reach of older laws to new technologies.

In its motion to dismiss, Google argued that there was no interception because there was no "device"—the scanning of the emails was done as part of its normal course of business.  Judge Koh compared Google to NebuAd (an oft-sued and now defunct purveyor of targeted ads), and applied a narrow reading to the "ordinary course of business" exception.  She found that to qualify for that exception, an interception must either "facilitate" the transmission of the communication at issue or be "incidental" to the transmission of such communication.  In this instance, the court found that Google's alleged provision of targeted advertising and creation of user profiles did not "facilitate" the transmission of the emails and that Google's alleged interception was not "incidental" because it used 2 separate systems—one for facilitating the transmission of emails and another for creating user profiles and targeted ads. The court also found that plaintiffs sufficiently alleged that Google violated its own service agreements and internal polices with regard to privacy, which precluded the application of the ordinary course of business exception.

Judge Koh also rejected Google's claim that users and non-users consented to Google's reading of email for creating user profiles and for providing targeted advertising.  She ruled that Google's Terms of Service and privacy policies were either vague or misleading, and "those policies did not explicitly notify Plaintiffs that Google would intercept users' emails for the purposes of creating user profiles or providing targeted advertising," holding that Google did not clearly explain that it would review email content, only that it could do so. Google's Terms of Service fared no better.  The TOS stated that "advertisements may be targeted to the content of information stored on the Services, queries made through the Services or other information."  The court found this notice defective in demonstrating consent because (1) "it demonstrates only that Google has the capacity to intercept communications, not that it will;" (2) it implies that Google would only access information stored on or queried through the services, not information in transit via email; and (3) it only disclosed advertising, not the creation of user profiles.

Similarly, the court found that Google's privacy policies did not demonstrate explicit consent, stating that "a reasonable Gmail user who read the Privacy Policies would not have necessarily understood that her emails were being intercepted to create user profiles or to provide targeted advertisements."  The Court also rejected Google's claim of implied consent for non-Gmail users who sent and received emails to Gmail users because to rule otherwise "would eviscerate the rule against interception."  Moreover, because many of the state law claims mirrored those in the federal Wiretap Act, Google's motion to dismiss was largely denied for the same reasons.

Judge Koh also rejected Google's defense that Plaintiffs did not suffer an "injury" required by Article III to confer standing.  The court adopted the view that if a statute establishes privacy rights, the invasion of those rights creates standing.  Because both the Wiretap Act and the California state law equivalent create private rights of action and authorize awards of statutory damages, she found that allegations of a Wiretap Act violation alone, without showing actual damages, is sufficient to establish standing, thus adding to the split among courts on this issue.  The court also rejected Google's argument that the California state wiretap law did not apply to email, but was limited to interception of content on telephone and telegraphic wires, lines or cables.  Judge Koh followed the California courts' approach to "updating obsolete statutes in light of emerging technologies."

While this ruling is not final, and Google has moved the court to certify the decision for interlocutory appellate review, the language of Judge Koh's opinion may be cited by plaintiffs in other proceedings against online and Internet service providers. Companies should review their privacy policies to ensure they clearly articulate their data collection, use and marketing practices.