• When your dog meets someone that he sniffs inappropriately, give your dog the "no" command as you gently tug at his leash. If this behavior is happening in your home and your dog isn't on a leash, you can gently pull him back by his collar. Next, give him the "sit" command. When he responds correctly, reward him with praise and, perhaps, a treat.
• If your dog sniffs at you in this way, don't back away from him, as this gives him the message that you are submissive and that he's in control. To properly train your dog, you need to reinforce your role as leader of the pack. Instead, give him the "no" command and move forward toward your dog. As a result of doing this, he will back away from you. Be sure to reward him when he behaves appropriately.

Consistency is key. Never allow any behavior from your dog that you don't want to see again, and make sure that everyone in the household is sending your dog the same messages. Be sure everyone in your family understands the difference between appropriate sniffing and overzealous, embarrassing sniffing.

Source: http://www.pedigree.com/02All-Things-Dog/Article-Library/fetch.aspx?artId=762&catId=1&sCatId=12&catName=Puppy&sCatName=Socialization
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An Intimate Sniff Not an Assault if Performed by a Dog, Judge Rules

By Les Kennedy
November 29, 2002

Sydney, Australia - If a police drug sniffer dog nuzzled a person's crotch it could be interpreted in the animal kingdom as a friendly gesture and not an assault, a Supreme Court judge said yesterday.

Also, the use of a police sniffer dog could be likened to an extension of the nose of a police officer, just as their flashlight enhanced their eyesight at night, Justice Barry O'Keefe said in dismissing a magistrate's decision to quash drug charges against a Sydney man.

Justice O'Keefe was hearing an appeal by police against a decision last year by Deputy Chief Magistrate Mary Jerram to dismiss two drug possession charges against Glen Darby, 22. Darby was detected carrying cannabis and amphetamines by police sniffer dog Rocky outside an Oxford Street nightclub on February 25, 2001.

Ms. Jerram ruled Rocky intruded on individual rights when it allegedly sniffed out the drugs and put its nose on his pocket.

But Justice O'Keefe said Rocky's "olfactory sense merely enhances that of a police officer in the same way that a flashlight enhances the officer's sight."

Clive Steirn, SC, for Darby, had submitted that the search by the dog was a result of a trespass to him. But Justice O'Keefe said what Rocky had done did not constitute a search and the act of sniffing involved no trespass.

Mr Steirn had said: "If Your Honor were to do as this dog did and nuzzle the defendant's genitals, it would be an indecent assault."

But Justice O'Keefe, while struggling to keep a straight face, replied: "It is unnecessary for the purposes of this decision to resolve that question.

"Acts that might constitute an indecent assault if perpetrated by one human being on another, may well be characterized quite differently if performed by one dog on an other, or by a dog on a human.

"When a 'crotch nuzzle' ... is performed by a dog in relation to a human being, it may be no more than a conventional, friendly, social gesture with no hostile intent, and unlikely to constitute an assault," he said.

Darby's charges will be resubmitted to the Local Court.