Microsoft Germany has recently lost a court battle, game, set and match, to tennis ace Steffi Graf.

An appeals court upheld the decision that Microsoft was responsible for fake nude photos of the sports star which appeared on a site hosted, but not moderated, by Microsoft.

Graf served up the court case against Microsoft Germany last October when the photos, created by pasting Graf's head onto another woman's body, appeared on a Microsoft website.

The site in question was an unmoderated forum, which allowed users to post content as they pleased.

Graf asked Microsoft to remove the photos, which it did, but the Redmond giant would not sign an agreement confirming that the photos would not appear again, prompting Graf to take legal action.

A similar case in Germany in 1998, which involved an internet service provider that was found to be unknowingly hosting child pornography, laid down the ruling that hosting providers could not be held responsible for content on unmoderated sites.

A safeguard on this ruling is that offensive material must be taken down if the host is notified of its presence.

Although Microsoft Germany complied with the request to remove the material, it was forced by a court last October to comply with the agreement that the pictures would not reappear. The company would be fined if the agreement was broken.

Microsoft appealed against this decision, but the Appeals Court in Cologne upheld the lower court's decision in a ruling at the end of May.