Yahoo on Thursday lost its attempt to persuade a US appeals court to intervene in a landmark ruling in France over the sale of Nazi memorabilia on the company’s websites.

The decision by the US court should send a warning to online companies that operate globally that they will have to pay more attention to the local laws of countries in which they operate, said Michael Geist, a law professor at the University of Ottawa.

However, Yahoo said that, based on the deliberations of the appeals court judges, it “believes that free speech rights would prevail if the French court orders were attempted to be enforced in the US” – something that could give it greater protection in future cases where foreign courts try to block material carried on its main website.

The court’s ruling marks one of the most significant judgments yet in a divisive area that has become an important legal concern of the internet era. The ban on sales of Nazi memorabilia in France raised questions about whose laws apply to websites that can be viewed outside their home country, as well as whether courts in one country should be able to assume jurisdiction over the activities of internet companies overseas.

Yahoo had argued in the federal appeals court in San Francisco that the ruling in France contravened its rights to free speech under US law, a position that had already been upheld by the lower court. The French court ruled that Yahoo should remove Nazi material from the website, as well as its local site.

On Thursday, a majority of judges on the appeals court concluded that the US has jurisdiction in the case, potentially bringing similar decisions in internet cases made overseas under the review of the US courts. However, the judges decided not to take up the freedom of speech issue, with three of the eight saying that Yahoo had not proved that the impact from the French case was significant enough for the matter to need taking up in the US, while another three continued to argue that there was no jurisdication.

“First amendment issues arising out of international internet use are new, important and difficult,” the judges said in yesterday’s ruling. “We should not rush to decide such issues based on an inadequate, incomplete or unclear record. We should proceed carefully, with awareness of the limitations of our judicial competence, in this undeveloped area of the law.”

Despite losing its argument, Yahoo claimed some support for its position from the judges’ deliberations. Five of the eight concluded that, had they taken up the case, they would have found against imposing the French ruling, said Mary Wirth, a Yahoo lawyer. That suggested that any other country trying to use local laws to challenge material on – for instance, if China sought a ban on material relating to Falun Gong – would be unlikely to win support in a US court if they tried to enforce the ruling, she added.

Other recent cases in foreign jurisdictions involving US media companies, including a case in Australia involving with Dow Jones and one in Canada concerning the Washington Post, have also raised pressure on US companies to do more to comply with the local law, of countries in which they operate, said Mr Geist. Improvements in geo-location technology have made it easier for companies to target content to at users by geography, he added, something which that Yahoo told the French court it could not do at the time of the original case.

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