The US government in 2008 threatened to fine Yahoo US$250,000 (A$277,451) a day if it failed to turn over customer data to intelligence agencies.
Documents unsealed late last week shed new light on how the government dealt with US internet companies that were reluctant to comply with orders from the secretive US Foreign Intelligence Surveillance Court, which rules on government requests to conduct surveillance for national security issues.
Yahoo lost the battle, which experts say helped pave the way for the PRISM surveillance program revealed last summer by former National Security Agency contractor Edward Snowden.
"It’s always been a little bit behind the curtain as to what internet companies do when they actually receive these requests. Now we have evidence that Yahoo did in fact fight this battle and looked at considerable fines as a consequence of not disclosing the data," Marc Rotenberg, executive director of the Electronic Privacy Information Centre, said.
"It tells us how very serious the Bush administration was about trying to get the internet firms to turn over this data. Until the disclosure, it was mostly hearsay that they were willing to impose these penalties."
A filing to the secret court by US government asked that Yahoo be made to pay a minimum fine of US$250,000 for each day it refused to comply with a court order to turn over user data, with the fine to double each successive week.
US internet companies want to disclose as much as they can about the little-known procedure through which federal agencies request their user data in secret courts, in part because of concerns about the impact on their business.
Yahoo late last week said it would begin to make public some 1500 previously classified pages documenting a lengthy tussle with the government.
"Despite the declassification and release, portions of the documents remain sealed and classified to this day, unknown even to our team," Yahoo general counsel Ron Bell said in statement.
The Foreign Intelligence Surveillance Court, whose members are appointed by the US Supreme Court chief justice, has never held a public session and generally hears only from the US Justice Department and intelligence agency lawyers.
Privacy advocates said the release of the Yahoo documents, even in their heavily redacted form, provided important information about the controversial surveillance practices.
"It fills in more gaps than what we knew about the challenge," Mark Rumold, a staff attorney with the Electronic Frontier Foundation said.
"The bottom line is these are federal court opinions and they are interpreting federal law in the constitution in really significant and substantial ways and they’re being withheld from the public."
Earlier this year, Facebook, Microsoft, Yahoo and Google began publishing details about the number of secret government requests for data they receive, hoping to show their limited involvement in controversial US surveillance efforts.