Privacy experts have warned of the "chilling" effect on free speech of a court order forcing AOL to reveal the identity of one of its subscribers.
The decision by the Virginia Supreme Court upholds an earlier ruling that AOL must reveal the identity of the subscriber to Nam Tai Electronics.
The Hong Kong-based manufacturing company has been fighting AOL through the US courts for nearly two years, after it alleged that 51 people were posting defamatory and libellous messages about it on the internet.
One of the posters was identified as an AOL subscriber, and Nam Tai Electronics acquired a subpoena requesting that AOL disclose the subscriber's identity.
AOL then filed a motion to quash the subpoena, contending that the disclosure would "infringe upon the well-established First Amendment right to speak anonymously".
This defence was quashed by a California court, prompting AOL to appeal. Today's decision to uphold the earlier ruling leaves AOL with just 10 days in which to hand over the information.
AOL said that it is disappointed and has asked the court to reconsider its position. If this appeal fails the case will probably go to the US Supreme Court.
But privacy experts are worried that, if AOL is unsuccessful, it could lead to mass litigation. The fact that a foreign company has successfully gone to the US courts means that anyone, anywhere could file similar motions.
David Sobel, general counsel at the Electronic Privacy Information Center, said that if AOL is eventually forced to reveal the identity of its subscriber, people will view free speech online in a very different light.
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