In a major defeat for Google, a federal judge has refused to dismiss a lawsuit alleging that its Gmail service violates federal wiretap laws by scanning emails in order to surround them with contextual ads.

U.S. District Court Judge Lucy Koh in the Northern District of California specifically rejected Google's argument that people who send or receive email consent to the automated scans. “The Court finds that it cannot conclude that any party — Gmail users or non-Gmail users — has consented to Google’s reading of email for the purposes of creating user profiles or providing targeted advertising,” Koh wrote in a 43-page decision issued on Thursday.

The ruling allows the consumers to proceed with their lawsuit.

The lawsuit dates to 2010, when users accused Google of violating federal and state laws by intercepting people's emails in order to serve them ads that match keywords in messages. Google argued that the case should be dismissed for several reasons, including that users consent to the scans by accepting the company's terms of service.

Koh flatly rejected that argument, ruling that Google didn't clearlyexplain to users that it might send ads based on email content. She said that even though the terms of service in effect before March 2012 reserved the right to “pre-screen” content, Google implied that it would only do so in order to filter out objectionable material — as opposed to serving targeted ads.

A separate section of Google's terms said the company might target ads based on information “stored” on the service. But Koh wrote that Google's wording of that clause didn't alert people that their emails might be scanned for ad purposes. “The language suggests only that Google’s advertisements were based on information 'stored on the services' … not information in transit via email,” she wrote.

Google revised its privacy policies in March of 2012, but Koh found that even the current policies “are no clearer than their predecessors in establishing consent.” She added: “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.”

Google also said that even non-Gmail users “implicitly” consent, arguing that everyone understands that email is processed by third parties. Koh also disagreed with Google's contention on that point. Google said in a statement that it is “disappointed” in the ruling, and is considering its options.

Internet law expert Venkat Balasubramani said Koh's ruling reflects a “very consumer-friendly view of the privacy policy.”

He adds that Google could have explained its Gmail policies more clearly than it did. “If they really wanted to be explicit, they would just say, 'We scan the content of emails, chats, etc. and target ads based on that,'” he says.

Some privacy advocates cheered the ruling. “This is a great day for Internet privacy. Google will have to stop peering inside of everyone's email,” Marc Rotenberg, executive director of the Electronic Privacy Information Center, says in an email to Online Media Daily. “Email users don't expect to be routinely profiled based on the content of their messages, and Google never obtained meaningful consent to do this.”

Consumer Watchdog, which frequently criticizes Google, praised the ruling. “The court rightly rejected Google's tortured logic that you have to accept intrusions of privacy if you want to send email,” John Simpson, Consumer Watchdog’s privacy project director, stated. “Companies like Google can't simply do whatever they want with our data and emails.”