Apple is waging war on several fronts against Google, whose Android software powers many of Samsung's devices.
The ruling on Thursday from the U.S. Court of Appeals for the Federal Circuit is not expected to have an outsized impact on the smartphone market, as the Nexus is an aging product in Samsung's lineup. Apple's stock closed down nearly 2 percent at $628.10.
However, the court's reasoning could make it much harder for companies that sue over patents get competitors' products pulled from the market, said Colleen Chien, a professor at Santa Clara Law school in Silicon Valley.
Such sales injunctions have been a key for companies trying to increase their leverage in courtroom patent fights.
"The Federal Circuit has said, 'Wait a minute,'" Chien said.
Apple declined to comment, while Samsung did not immediately respond to requests for comment.
Apple scored a sweeping legal victory over Samsung in August when a U.S. jury found Samsung had copied critical features of the hugely popular iPhone and iPad and awarded Apple $1.05 billion in damages.
The Nexus phone was not included in that trial, but is part of a tandem case Apple filed against Samsung earlier this year.
U.S. District Judge Lucy Koh issued a pretrial injunction against the Nexus in June, based on an Apple patent for unified search capability. The appeals court then stayed that injunction until it could formally rule.
In its opinion on Thursday, the Federal Circuit reversed the injunction entirely, saying that Koh abused her discretion.
Apple failed to prove that consumers purchased the Samsung product because of the infringing technology, the appeals court ruled.
"It may very well be that the accused product would sell almost as well without incorporating the patented feature," the court wrote. "And in that case, even if the competitive injury that results from selling the accused device is substantial, the harm that flows from the alleged infringement (the only harm that should count) is not."
The court considered a single patent one which allows the smartphone to search multiple data storage locations at once. For example, the smartphone could search the device's memory as well as the Internet with a single query.
The appeals court has sent the case back to Koh for reconsideration. A separate pretrial sales ban Apple had managed to win against Samsung targeting the Galaxy Tab 10.1 was dissolved earlier this month after Samsung won at trial on that patent.
Beyond the Nexus, Samsung also has a collection of new tablets and smartphones intended for launch before the holidays.
On Wednesday, Google executive chairman Eric Schmidt called the intensifying struggle between Apple and his company a "defining fight" for the future of the mobile industry.
The case in the Federal Circuit is Apple Inc vs. Samsung Electronics Co Ltd et al., 12-1507.
Copyright Thomson Reuters 2012
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