UPDATE: As of 4:02PM EST, I've received the following note:
Here's an official response from Rebecca Ward, Senior Product Counsel for Google Chrome:"In order to keep things simple for our users, we try to use the same set of legal terms (our Universal Terms of Service) for many of our products. Sometimes, as in the case of Google Chrome, this means that the legal terms for a specific product may include terms that don't apply well to the use of that product. We are working quickly to remove language from Section 11 of the current Google Chrome terms of service. This change will apply retroactively to all users who have downloaded Google Chrome."
One thing that's different in the software engineering world from the legal world is that in software engineering, we deal in discretes -- anyone can test algorithms and instantly get absolute answers (I was a software engineer before I got into IP law). But in the legal realm, a lot of what goes on is interpretation, argument, and lots of grey areas. So you can call this conspiracy theories or a mistake if you want, but I'd rather think of it as misunderstanding between what we were reading and what Google was trying to say. I wasn't trying to induce some conspiracy theory or promote any ill will towards Google (I'm a faithful google search, gmail, analytics, and adsense user), but I wanted the record straight. When we hear back from Rebecca Ward, I have full faith in the Google legal team that this will be a non-issue.
Google has updated the ToS and it now states11. Content license from you 11.1 You retain copyright and any other rights you already hold in Content which you submit, post or display on or through, the Services. 12. Software updates
The questionable language has been removed entirely. I didn't think it was necessary for Google to step that far back, but it's definitely more in line with the mantra of "Do No Evil."