If this case was successful then it would probably mean the end of user content on the Internet in Italy - no comments on blogs or newspaper articles, YouTube would withdraw, social networking sites would block Italian users and so on. They would need to do this because they would have to vet every single contribution from the public, and in YouTube's case it would involve watching 200,000 videos a day.
Luckily for Google, EU Directive 2000/31/EC dealt with this issue in Article 42, which provides an exemption from liability where the service provider's "activity is of a mere technical, automatic and passive nature, which implies that the information society service provider has neither knowledge of nor control over the information which is transmitted or stored." Fortunately for Google Italy transposed that Directive into local law in 2003. Although we'll consider the EU version here, my rough Italian translation suggests the transposed Legislative Decree is even more favourable to Google.
There are a few arguable issues here, since Google does have control in the sense it can take down a video, but Articles 43-44 put things in context.
(43) A service provider can benefit from the exemptions for "mere conduit" and for "caching" when he is in no way involved with the information transmitted; this requires among other things that he does not modify the information that he transmits...
"(44) A service provider who deliberately collaborates with one of the recipients of his service in order to undertake illegal acts goes beyond the activities of "mere conduit" or "caching" and as a result cannot benefit from the liability exemptions established for these activities."
So Article 44 provides a test of "collaboration", and there is no suggestion of anything of the sort by Google. However, the final shot to the collective Polizia foot is Article 46:
"(46) In order to benefit from a limitation of liability, the provider of an information society service, consisting of the storage of information, upon obtaining actual knowledge or awareness of illegal activities has to act expeditiously to remove or to disable access to the information concerned..." which Google actually did.
This matters to us how? There are a few reasons... Australia has some laws relating to the protection of ISPs and other service providers, but there is little case law yet. In relation to copyright law Roadshow Films Pty Ltd & Ors v iiNet Ltd (FCA NSD1802/2008) will probably change that. People have been posting bad things on the Internet for many years, but the ability for search engines to crawl comments, blogs and even audio and video now means others are more likely to find and read that information. And we need to think ahead - the bulk of information on the Internet is no older than 15 years. By the time I die there will be (I hope) 55 years or more of searchable data... and we think there's a lot there now! What will have been said about me in that immense amount of data? It seems likely that information laws will continue to be drafted with an eye to internationalisation, and APEC and treaties will see harmonisation of laws such as these "safe harbour" provisions.