Jackson and Timberlake caused controversy with their half-time show
A US appeal court has thrown out a $550,000 (£275,700) fine against CBS for screening Janet Jackson's "wardrobe malfunction" during 2004's Super Bowl.
Three judges ruled the Federal Communications Commission (FCC) watchdog "acted arbitrarily and capriciously" in levying the fine.
Some 90 million viewers saw a fleeting glimpse of the singer's breast during a performance at half-time.
About 542,000 complaints were received by broadcaster CBS.
Jackson was performing alongside Justin Timberlake when the incident happened.
As he sang the line "gonna have you naked by the end of this song", he reached for Jackson's bra.
She covered herself up before the lights dimmed, during a performance seen by millions of families as part of American TV's highest-rated broadcast of the year.
CBS was flooded with complaints as soon as the footage was screened.
The network, producers MTV and Timberlake all apologised, insisting the move had not been intentional.
But the fine was imposed in September 2004 and was the largest ever handed to a US television broadcaster.
The FCC fined 20 CBS-owned TV stations the maximum penalty for indecency - $27,500 (£13,780) - each.
CBS appealed against the decision, however.
The court said the FCC had traditionally fined broadcasters for indecent material only when it amounted to "shock treatment" for viewers.
In this case, the footage - lasting "nine-sixteenths of a second" - was too brief to merit such a penalty, it added.
"The FCC cannot impose liability on CBS for the acts of Janet Jackson and Justin Timberlake, independent contractors hired for the limited purposes of the half-time show," wrote the chief judge on the panel, Anthony Scirica.
The FCC had argued the move was arranged in advance and said CBS should have been prepared to censor such a graphic image.
No statement on the ruling has yet been issued by CBS or the FCC.