Dame Elizabeth Butler-Sloss, the president of the family division at the high court, agreed that the injunction was "inappropriate" as it currently read when applied to ISPs. The court agreed to consider a proposal to clarify the injunction, letting ISPs escape the injunction unless they had been made aware that information about the killers' new identities had been posted and failed to take action about the breach.
Demon had argued in the high court that it should not be held responsible for material posted on its web pages that could be in contempt of the injunction, which is designed to prevent Robert Thompson and Jon Venables from becoming the victims of revenge attacks.
When the parole board decided to free Thompson and Venebles last month, immediate threats were made to post their whereabouts on the internet. The pair - jailed for eight years for the 1993 murder of the toddler - were granted anonymity for life.
There are concerns that if details or their new identities leaked out, foreign press would publish detailed information on their new lives and homes, and that would lead to widespread email and internet discussion of the information.
British ISPs are covered by Dame Elizabeth's injunction, but Demon claimed it could face fines or even jail time for breaching the injunction without knowing about it.
Speaking before the decision was announced, Mike Pullen, a technology lawyer with DLA, said: "It is impossible for an ISP to comply with this injunction. Something can be posted up on a talkboard with the information, and Demon can't monitor everything."
He said that although the judge was right to try and prevent revenge attacks, Demon was right to be concerned because it has no control over what makes it onto the sites it hosts.
Dame Elizabeth's clerk, Roger Smith, said: "The applicants feel the injunction made at the last hearing did not really lend itself to the internet, which we all know is very difficult. The applicants feel that their clients will be in danger of breaching the injunction through no fault of their own."
The Manchester Evening News already has been told it will face contempt proceedings for allegedly breaching the injunction in a June 22 article that appeared in an early edition of the newspaper and on its website.
Demon had particular reason to be concerned, after it became the first ISP to be sued for libel in a case that established the role of ISPs as publishers of information. The company paid £500,000 in damages and legal fees in an out of court settlement with a London lecturer who had complained the company was not quick enough in responding to his complaints about defamatory material published on a Demon-hosted chat room.
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