LONDON (AP) _ Mohamed Al Fayed fabricated a story that he paid for an engagement ring for Princess Diana and his son, an appeals court said Thursday, but ruled that a tabloid should not have used copyright photos to cast doubt on his account.

The pictures, purchased by The Sun newspaper, were taken by a security camera hours before Diana and Dodi Fayed died in a 1997 Paris car crash. Timed and dated, the photos showed they spent much less time at Al Fayed's Villa Windsor than he claimed.

A three-judge Court of Appeal panel overturned a High Court ruling holding that the pictures were published in the public interest as part of ``fair dealing'' by the news media. The judges ruled The Sun should not have used ``misappropriated material.''

Al Fayed's spokesman gave the media an accurate account of the half-hour visit to the villa, but ``Mr. Al Fayed fabricated and gave wide publicity to a different version in a book entitled `Death of a Princess,''' Lord Justice William Aldous said.

In the book, Aldous said, Al Fayed claimed it was the couple's second visit to the villa, that they stayed for two hours, that they were preparing for a new life together and that a conspiracy existed to kill them in order to prevent their marriage.

``To those falsehoods must be added the fabricated story that Mr. Al Fayed had paid for a ring to mark the engagement of the princess and Mr. Dodi Fayed, that he saw the bodies and that he was informed of the princess' last words,'' Aldous wrote.

The newspaper contended it had printed the stills _ part of a story headlined ``Video That Shames Fayed'' _ to help disprove Al Fayed's claim that his son and the princess planned to marry and set up house there.

Lord Justice Jonathan Mance wrote that the ``transparent absurdity'' of Al Fayed's allegations was a factor in reaching the conclusion that The Sun had no basis for disregarding the Harrods owner's copyright.

The judges ordered Reuben Murrell, the security man who sold the stills to The Sun for $64,000, to give the court $32,000 in case Al Fayed seeks damages.

The Sun was ordered to pay $72,000 in legal fees.

``We have attempted to fight the good fight to bring to the notice of the public the lies being peddled by Al Fayed,'' said Tom Crone, The Sun's legal manager.

Al Fayed professed himself delighted with the judgment.

``The Sun was vicious and utterly disreputable in trying to capitalize on my grief and profit from the criminal activities of my dishonest former bodyguard,'' he said.

Separately, Al Fayed's spokesman, Laurie Meyer, said the Egyptian-born billionaire had won the right to challenge a decision by Home Secretary Jack Straw denying him a British passport because of questions about his honesty and his admission that he put legislators on his payroll.