The 2nd US Circuit Court of Appeals on Thursday reversed a June 2010 lower court decision in favor of YouTube, which had been considered a landmark in setting guidelines for how websites could use content uploaded by users.

“It’s hard to characterize this as anything other than a loss for Google, and potentially a significant one,” said Eric Goldman, director of the High Tech Law Institute at Santa Clara University School of Law. “It has given new life to a case that Google thought was dead.”

The original $1 billion lawsuit filed by Viacom in 2007 went to the heart of a major issue facing media companies, specifically how to win Internet viewers without ceding control of TV shows, movies and music.

It was seen as a test of the Digital Millennium Copyright Act, a 1998 federal law making it illegal to produce technology to circumvent anti-piracy measures, and limiting liability of online service providers for copyright infringement by users.

Writing for a two-judge panel of the 2nd Circuit, Judge Jose Cabranes concluded that “a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website.”

A YouTube spokeswoman said in an e-mailed statement: “All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago removed from YouTube. Nothing in this decision impacts the way YouTube is operating.”

Viacom, in a statement, said the appeals court “delivered a definitive, common sense message to YouTube: intentionally ignoring theft is not protected by the law.”