Yahoo settles lawsuit with jailed Chinese journalists

UPDATE: 11:30 a.m. PT Adds background on proposed Smith law prohibiting U.S. companies from cooperating with governments to censor the Internet.

Yahoo listened.

A week after being excoriated by lawmakers over supplying information to the Chinese government that landed two journalists in jail, Yahoo has settled the lawsuit filed by the journalists.

Shi Tao and Wang Xiaoning, both serving 10-year prison sentences, sued Yahoo in April alleging that Yahoo Hong Kong willingly provided their e-mails, IP addresses, and physical addresses to the Chinese government. The men were arrested for allegedly leaking state secrets, code language that should have tipped Yahoo off to the fact that the government was attempting to repress free speech for political reasons, said Morton Sklar, executive director of the World Organization for Human Rights USA, which filed the lawsuit on behalf of the men.

Yahoo had denied responsibility, saying it was merely complying with Chinese law, and had asked the federal court in San Francisco to dismiss the lawsuit.

The jailed men and their families are happy with the settlement, Sklar said. A lawsuit could have taken as long as five years to conclude, he added. Terms of the settlement are sealed by the court.

"The settlement provides more immediate help for the detainees and their families, but also provides a precedent making clear that U.S. companies have to do much more than just follow the orders of their host governments; that they have to look to U.S. laws and U.S. human rights standards when they make their decisions abroad," Sklar said.

In addition to providing financial support to the families, Yahoo will provide a humanitarian relief fund to support other political dissidents and their families, the company said in a statement.

"After meeting with the families, it was clear to me what we had to do to make this right for them, for Yahoo, and for the future," Chief Executive Jerry Yang said in the statement. "Yahoo was founded on the idea that the free exchange of information can fundamentally change how people lead their lives, conduct their business, and interact with their governments. We are committed to making sure our actions match our values around the world."

In a hearing before the U.S. House of Representatives Foreign Affairs Committee last Tuesday, Rep. Chris Smith (R-N.J.), urged Yang and Yahoo General Counsel Michael Callahan to settle the lawsuit.

"Settle it, and I would say settle it generously in their favor," Smith said. "That would be one way you could convey to the committee, to shareholders, and especially (to) the victims that you recognize there are true victims because of this complicity."

Smith sponsored the Global Online Freedom Act of 2007, which would prohibit U.S. Internet companies from cooperating with repressive regimes on censoring the Internet and using Internet user account data to track down and punish pro-democracy activists.

Sklar speculated that Yahoo decided to settle the case because of the hearing, at which the Yahoo executives were called moral "pygmies" by a lawmaker, and because Yahoo would have been forced to disclose in court information about its involvement in other Chinese investigations.

"It's clear they could not tolerate any longer being on the wrong side of this case," he said. "It was causing too much embarrassment and too much public exposure."

There are more than 200 documented cases of Internet users being jailed in China as a result of disclosures of their user ID information, many of them Yahoo users, according to Sklar.

Sklar hopes those cases will be addressed by Congress, which has asked Yahoo to provide information on other Chinese investigations in which the company has cooperated.

Congress has held several hearings on the matter of tech companies cooperating with China, including one in February 2006 at which Callahan said Yahoo didn't know the nature of the investigation when it gave information to Chinese authorities.

Callahan said last week that he learned approximately six months later what the details of the investigation were and apologized for not providing that updated information to Congress.

The settlement was first reported by The Associated Press.