The case began with a civil lawsuit filed in France against Yahoo! in 2000 by two civil liberties groups, La Ligue Contre le Racisme et l'Antisemitisme and L'Union des Etudiants Juifs de France. A Paris court ordered Yahoo! to block internet users in France from accessing its auction sites selling Nazi memorabilia.
The court reasoned that French law prohibits the display or sale of anything that incites racism. It was the first time a French court had issued such an order on a foreign company.
The court also imposed fines of around $13,300 per day upon the company for non-compliance.
Yahoo! did not appeal the French court's decision in France; instead, it sought a declaration from a federal court in California. It claimed that the order to ban French users from accessing certain auction sites affected the operations of its US servers, and was therefore unenforceable under the First Amendment provisions on free speech.
Yahoo.fr was not the issue; the company already tried to ensure that its French site complied with French law. But the French court's concern was that yahoo.com could still be accessed by French users. Yahoo! did not continue the fight because it wanted to sell Nazi memorabilia from yahoo.com. Instead, Yahoo! wanted to fight the point of principle: that a French court should not control the content of its US site.
In 2001 the federal court accepted Yahoo!'s arguments and ruled that the French court could not regulate the company's speech on the internet. The two French groups then appealed the decision to the 9th US Circuit Court of Appeals, arguing that the First Amendment cannot prevent the order from being enforced. They also argued that Yahoo! had made no attempt to comply with the order before suing in the US.
In August 2004, a divided Court of Appeals reversed the lower court decision, ruling that the District Court did not have jurisdiction to hear the case.
"Yahoo! cannot expect both to benefit from the fact that its content may be viewed around the world and to be shielded from the resulting costs", wrote Judge Warren J Ferguson, delivering the majority opinion.
"Yahoo!," Judge Ferguson continued, "must wait for LICRA and UEJF to come to the United States to enforce the French judgment before it is able to raise its First Amendment claim. However, it was not wrongful for the French organisations to place Yahoo! in this position."
In effect the Court did not really consider the First Amendment arguments put forward by Yahoo!, except to say that these could be raised if the French government ever tried to enforce the French ruling in the US.
In a dissenting ruling, Judge Melvin Brunetti said that the Court did have jurisdiction because the two French civil liberties groups had targeted Yahoo!'s US web site, and subjected the company to "significant and daily accruing fines".
A brief ruling issued last Thursday instructs both sides to argue their cases again in front of an 11-judge panel, expected this spring. No reasons were given.
Yahoo! executives are quoted by Associated Press saying that the decision presents a new opportunity for a courtroom victory that could benefit all ISPs and anyone who publishes content on-line. But a lawyer for the French organisations said there is no reason to believe that the new panel will vindicate Yahoo!