* President sued paper over article about police mutiny
* Says ruling sets precedent, newspaper plans to appeal
QUITO, July 21 (Reuters) - A judge in Ecuador jailed three directors of an opposition newspaper and a former columnist on Thursday and fined them and the paper $40 million for libeling President Rafael Correa in an article about a police mutiny last year.
State media said the judge sentenced three brothers who ran the El Universo newspaper and their former columnist to three years in prison. The paper said its lawyers planned to appeal.
Correa sued El Universo after it published an article in February about circumstances surrounding last September's mutiny, when rebellious police officers briefly took the president hostage at a hospital.
"This sets a precedent that will help them to think a thousand times before using proxies to damage people's reputations," Correa told reporters after the judgment.
Correa, a fiery leftist allied with Venezuelan President Hugo Chavez, denounced September's incident as a coup attempt. The opposition said the claim was used by his government to justify authoritarian measures.
The president rarely shies away from a fight, whether it be with international bondholders, oil companies or local bankers and media companies that criticize his policies.
El Universo rejected the judge's ruling and said in a statement its lawyers planned to file an appeal soon. (Reporting by Santiago Silva; Writing by Daniel Wallis; Editing by Peter Cooney)
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