Demon vowed to appeal the decision of Mr Justice Moreland as the champion of the ISP community but the deadline for this appeal passed on Monday with no action from Demon. Despite claims from Demon director David Furniss that the ISP may lodge a late appeal, it became clear on Monday this would not happen. Although this raises questions about how Demon is handling this case, the more important question is what effect the judgement will have on the freedom of the Net. To put the case in context, the judgement ruled that ISPs cannot claim innocent distribution -- an Amendment to the 1996 Defamation Act intended to protect online publishers -- if they are given notice of defamatory postings by complainants. Demon's failure to challenge the decision means the judgement will stand as a dangerous precedent for ISPs faced with similar actions. The Demon case is the first time online publishers have been spotlighted in this way and realisation that the Defamation Act is no defence has left ISPs and trade bodies reeling. Internet Service Provider Association (ISPA) warned that the ruling will force ISPs to block anything which may possibly be defamatory. ISPA council member and AOL lawyer Clare Gilbert claimed the Demon case opens up deficiencies in the 1996 Defamation Act. "[The amendment] purports to give a defence to network providers for the vast volume of content passing over their service. The problem is that it then makes the defence disappear as soon as the provider receives ‘notice' of infringing content, even if the ISP has no effective control over the content," she said in a statement. What constitutes notice is not defined under the Act, so theoretically an email could be enough to render an ISP liable. ISPA believes the holes in the Act will opens up the floodgates for litigations against ISPs and forces them to become censors. "Potentially we are damned if we do and we are damned if we don't," said Gilbert. ISPA is calling for a change in the law. It is not just the risk of individual action that is worrying Internet experts. Yaman Akdeniz, founder of the Cyber-rights organisation thinks the precedent could close down the smaller ISPs. "AOL and Demon may be in a position to fight such actions but there are 300 ISPs in the UK and many are not in a financial position to do so. ISPs do not want to be challenged in court and are likely to remove content, whether or not they think it is defamatory, as an easy solution," he said. Akdeniz believes the Morland judgement could also have more sinister implications. "If I published a critical report about Intel, lets say, it could write to my ISP asking them to take it down, rather than give a public response," he said. The idea of companies using the law to clean-up the Net to critical information is compounded by how the system could be open to fraud by individuals keen to make a quick buck. IDC analyst James Eibisch agrees the Morland judgement and the Defamation Act are minefields for "fraudulent actions" by individuals and could potentially "bring down an ISP". Eibisch believes the precedent makes a mockery of the ethos of newsgroups. "Newsgroups are full of flames," he said. "They are like real life conversations. A text version of a pub. If someone gave their opinion in a pub and someone took against it, would the landlord be liable?" Demon is hoping the long-awaited e-commerce bill will provide the antidote for the Morland judgement and the ISP has submitted recommendations to the DTI. The bill is due to be released next week and sources close to the government told ZDNet News today it was "very unlikely" the bill will deal with the issue of ISP liability. With both the legal system and the government seemingly refusing to back the ISP community's concerns, Internet watchers will be holding their breath and waiting for the next case.