The news that Thus, owner of Demon Internet, has settled out of court in an online libel case will send shockwaves through the UK's internet industry.
Lawrence Godfrey had alleged that Demon failed to remove defamatory material from a discussion forum hosted on its servers in 1997. The message, posted to the soc.culture.thai newsgroup, purported to have been sent by Dr Godfrey, and contained damaging personal allegations against him. After Demon refused to delete the message, it was copied to other Usenet servers around the world.
The court battle - the first of its kind in the UK - was important because it would establish whether internet service providers (ISPs) were subject to the same laws of defamation as other broadcasters. If a full case had found they were, they would have been held responsible for every one of millions of messages to forthright, often rude, sometimes obscene, internet newsgroups.
A full hearing will not now go ahead, as Dr Godfrey dropped his case against Demon after it agreed to pay him £15,000 in damages, plus legal costs to be decided at a later date.
Thus said today that the settlement allowed it to "draw a line under this issue and focus on serving our customers", adding that it would continue to fight for a change in the law to prevent similar cases being brought in the future. "Thus remains convinced that the law has not kept pace with the development of the internet."
Under threat is the continued availability of the hugely popular discussion forums run through Usenet - a network older than the world wide web - and other public areas, including News Unlimited's talk forums.
ISPs and website owners say it would be impossible to monitor every one of the millions of postings made daily, from around the world, to newsgroups and talkrooms, to ensure sure nothing defamatory was posted. They have been lobbying for a change in the law, which would mean they could not be considered publishers of the material placed on their servers. If that change in law does not come, they may remove the forums from their servers rather than attempt to censor them.
The first warning that they would be considered publishers, like any broadcaster or print publication, came last year in the high court when Mr Justice Morland dismissed Demon's defence of "innocent dissemination".
He ruled that Demon was responsible because it had refused to remove the allegedly defamatory posting when requested by Dr Godfrey.
Demon, along with many other ISPs, now says its policy is to remove "defamatory or unsuitable material" posted to Usenet.
But the fear for ISPs, and free speech advocates on the web, will be that it is not a big step from ruling that ISPs must remove postings if requested to ruling that they must censor messages to all online forums before they are posted.
That would be almost impossible, and cause outrage among netizens who have long believed the net to be a worldwide bastion of free speech.
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