I wasn't sure how youtube's private videos worked but jlgreco has explained above - further blurring the lines in my view between megaupload et al and youtube.
I think the litigation you mention is evidence of Google's lawyering and lobbying prowess.
(1) They sought to rate-limit DMCA takedown requests
(2) They operated the service with red-flag knowledge of copyrighted content, such as when a user complained that the video quality of the Showtime show "Dexter" was poor, and Kim Schmitz mailed his team to work on improving the quality of that content.
(3) They themselves used the service to exchange copyright-encumbered material, such as the movie "Taken".
(4) They operated a paid incentive program to get users to upload copyrighted content, and in their itemized performance reports for the program acknowledged repeatedly that the content they were paying for was copyrighted.
