Yahoo Opens Legal Can of Worms

SAN FRANCISCO (07/31/2000) - Will Yahoo Inc. (YHOO) have to pay the price for its global reach?

Forty percent of the Santa Clara, Calif.-based portal's audience is outside North America, according to Heather Killen, Yahoo's senior VP of international operations. An impressive figure, to be sure, and a major reason why the company boasts a $73 billion market cap. But it is also why Yahoo now finds itself stuck in a French court.

Judge Jean Jacques Gomez recently extended to Aug. 1 his order directing Yahoo to block French citizens from accessing selected Nazi-related items on its auction site, in compliance with a French penal code outlawing the trivialization or denial of the Holocaust.

In theory, the company could ignore the French court because it does not have jurisdiction over U.S. businesses. Thus far, however, Yahoo has not missed a court appearance, and it submitted a report Monday from an expert witness who said that a totally effective technology solution allowing Yahoo to block access to its auctions by region could not be implemented. However, as previously reported by The Standard, one New York-based company, InfoSplit, disagrees with that finding.

Aside from the technology question, however, a murkier issue lies at the heart of the lawsuit against Yahoo.

"This case opens up broader issues on Internet jurisdiction - whether one country has the jurisdiction to regulate the content of Web sites in another country - that should be discussed and addressed by representative of governments and the Internet industry around the world," Yahoo stated in a news release.

Yahoo's French legal battle might become a precedent-setting case for any business with a Web site that can be accessed by users around the world. EBay Inc., a Yahoo competitor, is watching the case closely.

"Eventually, countries are going to accept practices on how to do business on the Internet. But right now, nobody really knows what form that will take on," says eBay (EBAY) spokesman Kevin Pursglove.

Pursglove's take on the case points up the fact that there is no federal legislation or international treaty outlining international jurisdiction on the Web, an issue that already has been recognized as a potential quagmire for e-commerce. It was raised earlier this summer at the Hague Conference, an intergovernmental organization of 47 nations on private international law.

Jeffrey Kovar, assistant legal adviser for the U.S. State Department, who has been representing the U.S. in these ongoing negotiations, testified in a June House subcommittee hearing that the "widening gap" between global commerce and individual court systems could inhibit growth in trade.

Vince Garlock, counsel for the Subcommittee Courts on Intellectual Property, agrees that the uncertainty of which business practices are acceptable on the Web is a growing problem. But he fears that unless a major shake-up occurs in the market as a result of an international dispute, Congress would be left without a clear path to take on the matter.

"It is definitely an issue that concerns big companies and mom-and-pop Web sites alike," Garlock says. "The message is to stay tuned."

For now, it seems the best insurance that Internet businesses can buy to avoid a court fight like Yahoo's is a smart lawyer who can decipher the gray areas.

According to Killen, Yahoo recently modified its universal terms of service to include a clause warning users that they might encounter material that is outlawed in their country. But the odds that the lengthy legal document will have any bearing on the company's lawsuit in France are probably as slim as the number of users who read it.

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