An American appeals court has rejected the US broadcast regulator's attempts to control the copying of digital TV with an anti-piracy technology.
The entertainment industry is concerned about technology that facilitates piracy
It ruled the Federal Communications Commission (FCC) overstepped its authority in its attempt to control how electronic devices work in the US.
A previous ruling would have required the technology to be in digital TVs and other electronic devices after 1 July.
It would have let the entertainment industry decide what could be recorded.
The "broadcast flag", as the technology is known, is a piece of code attached to shows which tells devices that receive digital signals the level of copy protection on that programme.
"We can find nothing in the statute, its legislative history, the applicable case law, or agency practice indicating that Congress meant to provide the sweeping authority the FCC now claims over receiver apparatus," said the appeals court panel.
Supporters of the flag had argued it would combat the illegal copying and distribution of TV programmes.
But critics were concerned that it would also prevent people from making legitimate personal copies of their favourite shows, or copies for educational or teaching purposes.
It was also feared that the rule would set a precedent, meaning the FCC would have the right to say how future TVs, computers, and other devices which can receive digital signals, are made and used by the people who buy them.
Wendy Seltzer, lawyer for digital rights campaign group the Electronic Frontier Foundation (EFF), told the BBC News website that the decision was a "great victory for consumers and technologists".
"It says the FCC can't regulate everything under the sun, and in particular, that Hollywood can't use the agency to regulate how the public can watch and record television," she said.
"Instead, it leaves our digital television choices with the market, where they belong. The court also recognised the library and educational uses that would be harmed by the flag's restrictions."
The FCC said it had never tried to impose regulations on TV programmes after they broadcast into homes. But it said it was allowed to do so because current legislation did not prevent such control.
It had no comment on the court's decision.
Not flags in Europe
The broadcast flag mandate was proposed after the US entertainment industry's campaign to protect programmes it considers to be high-quality broadcasts.
TV piracy is a big concern for broadcasters as next-generation high-definition TV programmes and devices that can play and record them become more popular.
Downloads of TV programmes have risen by 150% over the last year, according to a recent report.
The flag is one of the technologies that was identified by the EFF earlier this year as one of the biggest threats facing certain devices like high-definition PC tuner cards.
The courts said the FCC should not decide how devices work
In the UK, the digital terrestrial platform, Freeview, and other receiver technology does not employ copy protection technology.
Individual European Union member states are not permitted to enforce certain receiver requirements. Any copy protection system would need to be agreed at a European level.
The US is supposed to switch to all-digital broadcasts on 1 January, 2009. The entertainment industry may now look to campaign for other ways of requiring new technologies to enforce copyright-protection.
The FCC was not immediately available for comment on the court's ruling.