Viacom’s US$1 billion copyright infringement lawsuit against Google’s video-sharing site YouTube has been dismissed by the court, ending for now an acrimonious legal battle between the companies that has been going on for more than three years.

On Wednesday, Judge Louis L. Stanton, of the U.S. District Court for the Southern District of New York, granted Google’s motion for summary judgment.

“This is 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 with each other. We’re excited about this decision and look forward to renewing our focus on supporting the incredible variety of ideas and expression that billions of people post and watch on YouTube every day around the world,” wrote Kent Walker, Google vice president and general counsel, in an official blog post.

Viacom hit Google in March 2007 with a $1 billion lawsuit over what it described as widespread and willful infringement of Viacom’s movies, TV shows and other content on YouTube.

Google, which had bought YouTube in October 2006 for $1.65 billion, defended itself by arguing that YouTube complies with the requirements in the Digital Millennium Copyright Act (DMCA) to remove infringing material upon owners’ requests.

Judge Stanton agreed with Google’s argument, noting that when YouTube received “specific notice” of an infringing item, “they swiftly removed it,” he wrote in his 30-page decision. “It is uncontroverted that all the clips in [the] suit are off the YouTube website, most having been removed in response to DMCA takedown notices,” Stanton wrote.

Viacom, unsurprisingly, wasn’t pleased with the ruling, calling it “fundamentally flawed” and at odds with the DMCA, the U.S. Congress and the U.S. Supreme Court. Viacom intends to appeal to the U.S. Court of Appeals for the Second Circuit.

“After years of delay, this decision gives us the opportunity to have the Appellate Court address these critical issues on an accelerated basis. We look forward to the next stage of the process,” reads Viacom’s statement.

The case has been closely followed as a litmus test of U.S. copyright law in the Internet age, and of U.S. courts’ interpretation of the DMCA.

There’s a consensus that the way the case is eventually settled, whether at the appellate level or in the Supreme Court, will be key to how digital content is published and shared on the Internet.

Siding with Viacom are media and entertainment companies that feel that their expensively produced content — articles, books, television shows, movies — is being pirated by and profited from by sites like YouTube.

On the other side are those sympathetic to YouTube, who say that content owners need to adapt to today’s reality of widespread digital sharing and copying, find ways to exploit and benefit from this, and make use of the DMCA’s provisions to exercise their rights.

Eric Goldman, associate professor of law at Santa Clara University’s School of Law, agreed with the ruling but was still surprised with the certainty and clarity with which the judge articulated his decision.

“It was a very clean ruling for YouTube. The court didn’t really waffle very much on YouTube’s lack of liability,” Goldman said. “Some of the other cases we’ve seen in this area have been much more equivocal.”

However, there’s no guarantee that an appellate court will hold the same view, he said. “This court I think got it right, but funny things can happen on appeal, you never really know,” said Goldman, who is also director of the Santa Clara University Law School’s High Tech Law Institute.

In the meantime, this decision is likely to be very influential in other similar cases, because the judge was so unequivocal in his ruling and because the case pitted two very determined and well-funded players battling it out, Goldman said.

Digital pirates shouldn’t find validation for blatant copyright infringement in this ruling, said industry analyst Greg Sterling from Sterling Market Intelligence.

“Some could think that this gives license to copyright violators to steal with impunity and I don’t think that’s true,” Sterling said.

In fact, Google has become quite strict and vigilant about infringement on YouTube, developing tools that automate and expedite the flagging of copyright video and music, he said. “Rightsholders are protected in ways they may not have been in the early days,” Sterling said.