A real threat to Google's (Nasdaq: GOOG) YouTube played itself out in an Italian courtroom this week.

Back in 2006, schoolkids in Italy videotaped themselves bullying a classmate with Down syndrome and posted it to Google Video (Big G's original video-sharing platform, before it forked over $1.65 billion for YouTube).

Google claims that it took the reprehensible clip down within hours of learning of its existence from the Italian police. Company officials also helped identify the girl who uploaded the video, bringing her and the bullies to justice.

Italian prosecutors then turned their attention to Google Video, charging four Google employees with criminal defamation and failing to comply with the country's privacy code. The criminal defamation charge didn't stick -- the four employees didn't seem to have any knowledge of the clip until long after it was taken down -- but three of the four were convicted this week for violating Italy's privacy laws.

This could set an ugly precedent for video-sharing sites, possibly forcing them to beef up their staffs and preview every upload before it goes live. This could be a backbreaker for the industry. It's hard enough to monetize chunky video files without the legal hoops. Veoh filed for Chapter 7 bankruptcy earlier this month.

Freedom of speech sometimes bears an expensive price. YouTube has grown over the years through the creative -- and primarily unchecked -- juices of its growing community base. It just wouldn't be the same if videos grew stale in a bottleneck of approvals, and even a vetting process may not eliminate the possibility of something similar to what happened on Google Video.

Sites including Hulu -- owned by a group of media giants including General Electric (NYSE: GE) and News Corp. (NYSE: NWS) -- and Apple's (Nasdaq: AAPL) iTunes aren't caught in this web. They are stocked with professional content. Only video-sharing sites including YouTube and Vimeo would be marginalized. News Corp. wouldn't necessarily be immune, because it also operates MySpace's popular video platform.

Google will appeal the decision, and rightfully so. The last thing it needs during its workforce recruiting process is the fear that new hires can be legally tried for a third party's indiscretion.

If Google is wrong, wouldn't it be simply a matter of time before web-hosting giant Rackspace (NYSE: RAX) is brought up on charges based on what clients upload to its servers? It's bad enough that eBay (Nasdaq: EBAY) has had to go through legal fisticuffs with Louis Vuitton and Tiffany (NYSE: TIF) over seller listings. If Google is forced to be proactive with all of its uploads -- in Italy, at least -- YouTube as we know it will be toast.

Is Google or Italy right in this case? Share your thoughts in the comments box below.

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Longtime Fool contributor Rick Munarriz is a "clip culture" fashion victim. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.