The video posted by students at a school in Turin in 2006 showed them bullying a teenager with Down's Syndrome. Although Google took the video down within hours of being notified by the Italian police, three Google employees were charged for failing to comply with the country's privacy code.
The employees in question, David Drummond, George Reyes, Peter Fleischer, have been handed a six-month suspended sentence, with the prosecution claiming they were criminally responsible for the content uploaded by users. Google says it will appeal.
Google said it worked with the local police to help identify the people responsible for uploading the video. The students were subsequently sentenced to 10 months community service by a court in Turin.
Andy Millmore, head of litigation at City media and entertainment law firm Harbottle & Lewis, said that the ruling had "major implications" for internet freedoms across Europe.
He said: "ISPs and service providers should not be responsible for their users' behaviour. This case depends on local Italian law, but the safe harbour provisions come from an EC wide Directive, that you would have expected to provide a defence in this case. The decision attaches liability on a broader basis than we would have predicted."
Google has said the decision "attacks the very principles of freedom on which the Internet is built" and if every social network and any community bulletin board is held responsible for vetting every single piece of content that is uploaded to them then the "web will cease to exist and many of the economic, social, political and technological benefits it brings could disappear".
In a blog posted last night Google's vice president and deputy general counsel – Europe, Middle East and Africa – said: "We will appeal this astonishing decision because the Google employees on trial had nothing to do with the video in question. It is outrageous that they have been subjected to a trial at all."