JRR Tolkien, author of the Lords of the Rings trilogy, died in 1973
A judge in Los Angeles has stopped the estate of Lord of the Rings author JRR Tolkien from seeking punitive damages against film studio New Line Cinema.
However, it has been permitted to seek compensatory damages based on breach of contract, fraud and other claims.
Tolkien's heirs claim the US company failed to pay any royalties from the estimated $6bn (£3.26bn) made by the three films based on his trilogy.
A trial has been scheduled for October 2009, the Associated Press reports.
The legal action claims New Line sent millions of dollars to AOL, a division of parent company Time Warner, improperly claiming they were for advertising expenses.
It also claims New Line listed production offices and facilities built in New Zealand as expenses, even though they are now allegedly being used for other New Line projects.
New Line's legal team successfully argued that Tolkien's heirs had to demonstrate a "public wrong" had been committed to claim punitive damages should they win at trial.
The studio, which was absorbed into Warner Bros Entertainment in February, has 10 days to respond to the action, brought by the Tolkien estate, in conjunction with British charity the Tolkien Trust and publisher HarperCollins.
The action is one of a number of legal disputes to have followed the huge success of the Lord of the Rings film trilogy.
Director Peter Jackson settled out of court with New Line last year in a dispute over profits, while 15 of the films' New Zealand cast sued the studio over money from the merchandise sales.
Jackson is producing and co-writing The Hobbit, a prequel to the Rings trilogy set for release in 2011.
Mexican director Guillermo del Toro will direct both that film and a follow-up that will draw from other works in the Tolkien canon.