A US souvenir firm has been given permission to sue the Diana, Princess of Wales Memorial Fund in a row over memorabilia including dolls and plates.
The Franklin Mint produces a range of Diana memorabilia
A Los Angeles judge said Franklin Mint could take the next step in seeking damages after the fund failed in a legal bid to stop it selling the items.
Franklin Mint is seeking $25m (£16m) in compensation for malicious prosecution.
The ruling means the fund will continue its freeze on grants to charities. The hearing has been set for 5 November.
The fund's chief executive Dr Andrew Purkis said in a statement that he regretted the judge's decision.
"We are pleased that the damaging period of waiting will soon be over and we have full confidence in the great strength of our defence.
"We believe that the allegations of malice against the Trustees are groundless and implausible.
"We regret the waste of time and energy caused, and the interruption of much needed humanitarian work amongst some of the world's and the UK's most vulnerable people."
The battle has already proved costly for the fund, which was left with a £4m legal bill from the original 1998 trial in which it tried but failed to stop Franklin Mint making products bearing the princess's image.
In its original lawsuit the fund had argued that the company was commercially exploiting the identity of the Princess, and falsely implying the products would benefit her estate.
After that case finished, Franklin Mint accused the fund of wasting money by pursuing the legal case.
Of its own continuing legal case, which began almost two years ago, Franklin Mint said in 2003 that it was "not a matter of money" but principle.
It has also criticised the fund for freezing grants to 127 beneficiaries and said it was the victim of the "most nasty PR campaign" by the fund.
However, the charities have previously criticised Franklin Mint for continuing with the legal action, and thus jeopardising the fund's future - a claim denied by Franklin Mint.
The Diana memorial fund was set up in 1997 following her death and has pledged £50 million in grants in the UK and worldwide.