updated 2/10/2005 8:37:58 PM ET 2005-02-11T01:37:58

Free speech activists and Yahoo Inc. declared a small victory Thursday in a dispute over whether the e-commerce giant can host auctions for Nazi memorabilia on its U.S. sites.

The 9th U.S. Circuit Court of Appeals said it would rehear some arguments in a 5-year-old lawsuit against Yahoo by two French human rights groups, which are trying to ban the sale of Nazi-related items on any Internet site viewable in France.

France's Union of Jewish Students and the International Anti-Racism and Anti-Semitism League sued Sunnyvale, Calif.-based Yahoo in 2000 and won a French court order requiring the company to block Internet surfers in France from auctions selling Nazi memorabilia. French law bars the display or sale of racist material.

Yahoo stripped Nazi memorabilia -- including flags emblazoned with swastikas and excerpts from Adolf Hitler's "Mein Kampf" -- from its French subsidiary, yahoo.fr. But to the anger of French Jews, Holocaust survivors, their descendants and other activists, Yahoo kept such items on its vastly more popular site, yahoo.com.

Although that site is run on computer servers in California, it's accessible to Web surfers anywhere in the world.

For failing to take down the offensive items, French courts began levying fines on Yahoo of more than $13,000 per day starting in February 2001. Yahoo theoretically owes more than $5 million today.

In 2002, Yahoo asked the U.S. District Court to rule that the French order violated the U.S. Constitution's First Amendment, arguing that the fines created a "chilling effect" for all Internet service providers.

District Court Judge Jeremy Fogel of San Jose ruled that if Yahoo wanted to continue selling items on a site that could be accessed around the world, the company had to assume the risk that it could violate laws of other countries and was subject to more lawsuits. But in August, the Ninth Circuit Court of Appeals reversed Fogel's decision, saying he had no authority to hear the case.

The two-sentence ruling Thursday does not explain how the judges came to their decision but forces both sides to argue their cases again in front of an 11-judge panel, likely this spring.

The new opportunity for a courtroom victory, Yahoo executives said, could benefit all Internet service providers and anyone who publishes content online.

"If American companies have to worry that foreign judgments entered against them might be enforceable, it could end up with companies censoring their Web sites," said Mary Catherine Wirth, senior corporate council at Yahoo and a professor at University of California Hastings College of The Law.

Attorney Richard Jones, who represented the French organizations, called the decision "meaningless" and said there's no reason to believe the new panel would vindicate Yahoo.

Jeffrey Pryce, a lawyer specializing in Internet and international suits in the Washington office of Steptoe & Johnson LLP, emphasized that decisions to revisit cases are rare, suggesting that the new panel of judges may be inclined to rule that Yahoo needn't comply with French laws on its U.S. sites.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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