Mr Douglas-Johnson was hit by the boat's propeller
A judge at Southampton Crown Court threw the case out because of a technicality over the charge against Andrew Bowden, 33, of Victoria Road, Topsham, near Exeter.
He was being tried under section 58 of the Maritime Shipping Act 1995 for "conduct endangering ship structures and individuals."
Mr Bowden was accused of failing to attach a kill-cord to himself or the driver which would have cut the engine of the rigid inflatable boat (Rib) he was demonstrating.
'Vessel ownership'
Mr Bowden was demonstrating a Rib to Tristan Douglas-Johnson, 20, and his friend Kelly Stone at the Southampton International Boat Show when the accident occurred on 22 September 2000.
The court was told that Miss Stone was allowed to take control of the Rib boat and when she pushed it to full throttle all three of them fell into the water.
The boat circled in the water several times, striking Mr Douglas-Johnson causing an injury which killed the marine engineer from Winterbourne Abbas, Dorset, a short time later, the court heard.
On Tuesday, the judge ruled that the trial could not be continued over a technicality concerning the ownership and registration of the boat involved in the accident.
Afterwards, a spokesman for the Maritime and Coastguard Agency (MCA) said: "Ownership of the vessel could not be properly established and the application of the charges brought against Mr Bowden were dependent on this fact."
The MCA's principal enforcement officer Jeremy Smart said: "The MCA and Hampshire Police investigated the incident and the case was brought forward by the Crown Prosecution Service.
"I am disappointed the case has fallen at this late stage."