We asked John Battelle at the Web 2.0 Conference last fall what he thought could hurt Google, what event or action could ultimately get in the way of the company’s meteoric rise. Battelle, who wrote the book The Search, said that if Google got emeshed in a privacy controversy, where it was revealed that private user data was abused or got in the wrong hands, Google’s tenuous compact with its users could be severely damaged.

This case may not be turn out to be that watershed moment, but as colleague Howard Mintz points out in a story he wrote today, Google is now embroiled in an interesting privacy battle with the government

From Howard’s story:

The Bush administration on Wednesday asked a federal judge to order Google Inc. to turn over a broad range of material from its closely guarded databases.

The move is part of a government effort to revive an Internet child protection law struck down two years ago by the U.S. Supreme Court. The law was meant to punish online pornography sites that make their content inaccessible to minors.

In court papers filed in U.S. District Court in San Jose, Justice Department lawyers revealed that Google has refused to comply with a subpoena issued last year for the records, which include a request for one million random Web addresses and records of all Google searches from any one-week period….

The government argues that it needs the information as it prepares to once again defend the constitutionality of the Child Online Protection Act in a federal court in Pennsylvania. The law was struck down in 2004 because it was too broad and could prevent adults from accessing legal porn sites….[T]he government has subpoenaed search engines to develop a factual record of how often Web users encounter online porn and how Web searches turn up material they say is “harmful to minors.”

Google is fighting the subpoena.

Many of the details of this case are unclear, such as the extent of the information the government is requesting and its legal reasoning behind its request. The government is also asserting that other search engines complied with similar requests. But it doesn’t name them.

Many privacy experts have been waiting for a case like this. As Battelle points out in his book, search engines are aggregating massive amounts of information about their users – their searches and clickstreams reveal a lot about who they are and what they care about. What happens when that information gets out into the wilds or into the hands of the government? Can it, would it be tracked back to named individuals? What will that do to users’ confidence in search engines?

We talked briefly with noted privacy expert Lauren Weinstein tonight. He was hesitant to say too much about the case without knowing more details. But he applauded Google for refusing to comply with the subpoena.

“It’s interesting and disappointing that other search engines would provide this material. It’s what we’ve been worried about all along. The fact that Google is refusing the subpoena…my initial reaction is three cheers for Google.”

“But there is a sidebar to this,” he added. “Part of the reason these problems come up is because this data is being retained in the first place.”

Weinstein pointed to new rules adopted by European lawmakers that require ISPs and other companies to retain certain types of data for up to two years as a way to help fight terrorism.

This is not just a privacy fight. Google has apparently argued to the court that releasing the information would reveal company secrets.

Ray Everett-Church, a Silicon Valley privacy authority, said this case appears to be an “atypical use of subpoena power” because the government is not targeting an individual as part of a criminal investigation, but rather collecting data to make a point in another case.

“It certainly sets a dangerous precedent for the government to say, ‘We need this to make a point, so cough up your log data.’ It’s a remarkable leap for the government, and not one I’ve seen before.”