The High Court dismissed an appeal by lawyers acting for US authorities against an earlier decision granting Kim Dotcom access to the evidence that will be used against him if he is forced to face a US court.
Judge Helen Winkelmann said that without access to the evidence, Dotcom's defence would be "significantly constrained" at the extradition hearing, scheduled for March next year, giving prosecutors an advantage.
"To attempt to control (evidence disclosure) by severely constraining the information available to the person sought (Dotcom) is to use a very blunt instrument and risks an unfair hearing," she said in a written judgement.
Dotcom is free on bail in New Zealand while he awaits the extradition hearing.
He was arrested in January when armed police cooperating with a US copyright investigation into his Megaupload file-sharing business raided his Auckland mansion.
The raid was subsequently found to be illegal by a New Zealand court, a ruling that prosecutors are also appealing.
The US Justice Department and FBI allege Megaupload and related sites netted more than $175 million in criminal proceeds and cost copyright owners more than $500 million by offering pirated copies of movies, TV shows and other content.
They have indicted Dotcom and three co-accused on charges of money laundering, racketeering, fraud and online copyright theft. The accused, who deny any wrongdoing, face up to 20 years jail if convicted in a US court.
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