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By Jim Hu, 24 August 2004 09:00

NEWS Yahoo!'s face-off with France over Nazi paraphernalia has taken its latest twist, with a federal appeals court reversing an earlier decision that found that the First Amendment protected the web portal from legal action over the issue in the US.

The ruling by the US Court of Appeals for the Ninth Circuit is part of a four-year-old case brought on by anti-hate-speech groups in France over the sale of Nazi paraphernalia on Yahoo!. In 2000, a French judge ordered Yahoo! to block on its web servers all sales of Nazi items to the country's citizens, citing France's law prohibiting the sale or exhibition of objects associated with racism.

The web portal claimed that the French courts had no authority over material hosted by its servers in the US and then took legal action to prove its point. The company filed a pre-emptive suit with the District Court in Santa Clara, California, in 2000. In November 2001, the court agreed with Yahoo!, ruling that the French court could not enforce its block order in the US. The court went further, claiming that the case would also violate the web portal's First Amendment rights.

In January 2001, Yahoo! agreed to block the sale of Nazi and Ku Klux Klan memorabilia.

In Monday's decision, the court did not side with the arguments involving the Nazi goods of either Yahoo! or the French court. Instead, the ruling had more to do with procedural questions, claiming that the District Court had no right to make a judgment.

"The Ninth Circuit is saying that the California District Court had no business hearing this case," said Joel Reidenberg, a professor at Fordham University School of Law who has written about the case. "It was not fair to haul the French parties into an American court to judge the case."

A US court can rule on the case only if the French decide to seek enforcement in the US, Reidenberg added. Thus far, the French have not taken action stateside.

A Yahoo! representative did not immediately offer comment, saying the company's legal team was examining the ruling.

This case and others highlight the fuzzy line between doing business on the internet and the pitfalls of international law. The internet enables anybody in the world with a connection to buy goods, access information and interact on any website. However, some countries have taken action against sites that violate local norms and rules.

Yahoo! has not always thumbed its nose at foreign rulings prohibiting its content. Two years ago, the company's division in China agreed to sign a "Public Pledge on Self-Discipline for the China Internet Industry," which requires providers to monitor and restrict "harmful" information. The move was condemned by Human Rights Watch, a non-profit organisation.

Jim Hu writes for CNET News.com