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If Yahoo Inc. prevails at the Ninth Circuit U.S. Court of Appeals, it’ll be a squeaker. On Thursday, the Sunnyvale-based Internet portal company asked an en banc panel to protect it from a French court’s judgment that eventually could mean millions of dollars in fines. Two anti-racism groups obtained the judgment in 2000 because Yahoo users were selling and discussing Nazi memorabilia, which is against French law. Although the French groups have not tried to collect on the judgment — and say they won’t as long as Yahoo abides by French law — Yahoo went to U.S. court to obtain pre-emptive relief. Yahoo wants U.S. federal courts to assert personal jurisdiction over the French groups to prevent them from ever trying to collect the fines. Robert Vanderet, a partner in O’Melveny & Myers’ Los Angeles office, told the judges that the potential liability of the fines has cast a pall over the popular company’s future business. The French groups “want to have a Damoclean sword,” Vanderet said, referring to the Greek legend of the sword hanging by a hair over Damocles’ head. “The danger is not that it falls, but that it hangs.” But E. Randol Schoenberg, of Los Angeles’ Burris & Schoenberg, said Yahoo started the trouble itself by directing its business into France. “The First Amendment doesn’t forbid foreign countries from making judgments on American companies,” Schoenberg said. It was tough to read the court Thursday. Although the questioning was lively, judges repeatedly asked whether there was even an actual controversy requiring their attention. Several implied that it would be better to wait for the French groups to try to collect. “Where’s the beef?” asked Judge Ronald Gould. “Why are we here?” Yahoo had won before U.S. District Judge Jeremy Fogel of San Jose, but his decision was reversed by a three-judge Ninth Circuit panel. The grant of a rehearing petition is usually good news to a litigant in Yahoo’s position. But luck struck back in the selection of en banc panelists. The two judges who formed the majority in the three-judge ruling, Senior Judges Warren Ferguson and A. Wallace Tashima, also made it onto the larger panel. And Ferguson, for one, made clear that he hasn’t changed his view of the Internet company. “Why does Yahoo desire to make a profit over anti-Semitism? Why do you continue to advertise if you know that they’re bad?” Ferguson demanded near the end of Vanderet’s turn at the podium. Ferguson’s comments appeared to surprise many of his colleagues, as well as members of the audience. Other judges sounded sympathetic to Yahoo. Regarding the duty to obey French law, Judge Carlos Bea asked, “Does that mean Yahoo has to put a V-chip into every French person’s computer?” The case isn’t just a fight over Yahoo’s financial liability. It’s also charting unknown First Amendment territory. Free speech and Internet advocates say it’s dangerous to ask Internet service providers to police the activities of their members. They’re afraid that companies won’t want to put themselves on the line to protect free speech. “This is a very important issue. Without being able to turn to the courts, all of the incentives are to cave in rather than to risk allowing free speech on the Internet,” said Ann Brick, staff attorney at the American Civil Liberties Union in San Francisco. The ACLU joined with other free-speech advocates to file an amicus curiae brief in the case. “As much as all of us might dislike the underlying speech at issue here, we have to remember that we must protect the speech we hate in order to protect the speech we love,” Brick said.

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