Google has won a landmark victory today as a Manhattan federal judge threw out Viacom’s $1 billion lawsuit which accused the search giant of allowing copyrighted videos on its YouTube service without permission.

Viacom alleged that copyrighted works uploaded illegally included ‘South Park’, ‘The Daily Show’ and others.

Viacom claimed “tens of thousands of videos on YouTube, resulting in hundreds of millions of views,” had been posted based on its copyrighted works, and that the defendants knew about it but did nothing to stop illegal uploads. However, in a 30-page ruling, US District Judge Louis Stanton said it would be improper to hold Google and YouTube liable under federal copyright law merely for having a “general awareness” that videos might be posted illegally.

“Mere knowledge of prevalence of such activity in general is not enough,” he wrote. “The provider need not monitor or seek out facts indicating such activity.”

Viacom said it plans to appeal to the U.S according to a Reuters report on the matter and indeed the company called Stanton’s ruling “fundamentally flawed”, adding that it reflects neither “Congress’ intent behind copyright laws nor recent US Supreme Court decisions”.

Viacom is controlled by Sumner Redstone and owns cable networks such as MTV and Comedy Central as well as the Paramount movie studio. It alleged that copyrighted works uploaded illegally included ‘The Daily Show with Jon Stewart’, ‘South Park’, ‘SpongeBob SquarePants’ and others. Kent Walker, Google’s general counsel, on called the ruling “an important victory not just for us, but also for the billions of people around the world who use the web to communicate and share experiences.”

Google and YouTube argued they were entitled to “safe harbor” protection under the digital copyright law because they had insufficient notice of particular alleged infringements. Stanton agreed, saying it would “contravene the structure and operation” of the law to “impose responsibility” on service providers to discover which postings infringe copyrights.

An interesting blog on Forbes discusses the copyright lessons that can be learned from this whole debacle. In short the four lessons are…

(1) It doesn’t matter if you know you’re hosting infringing content, so long as you don’t know exactly what infringing content.

(2) Zap infringing content quickly.

(3) Don’t talk publicly about having infringing content. And…

(4)   Institute a three-strikes policy. (This one is down to Stanton lauding Google for tracking which users upload copyrighted content and, after three instances of removing their uploads, banning them from the site, contradicting Viacom’s argument that that three strikes measure let infringing users off easy.)