In the case before the court, German publishing giant Axel Springer took issue with the use of ad blocking technology provided by Eyeo, the Cologne-based company behind Adblock Plus. Advertising revenue is pivotal to the business models relied upon by many content producers, but ad blocking technology allows users to block adverts from being displayed on web pages they are viewing.
Axel Springer had challenged the use of ad blockers and the practice of 'whitelisting' under German unfair competition laws. Whitelisting is where ad blocking providers allow adverts to be displayed to users of their software from businesses that pay them a fee.
The Federal Court of Justice said the use of ad blocking technology does not breach the law and that it is open to ad blocking providers to operate a 'white list' and to charge businesses to include their adverts on that list, according to a report by the Reuters news agency.
Axel Springer has said it intends to continue its legal challenge before Germany's Constitutional Court.
Dr Claas-Hendrik Soehring, head of content and commercial law at Axel Springer, said: "We see the judgment as a violation of the freedom of the press protected by Article 5 of the German Constitution, since ad blockers intentionally destroy the integrity of online media and their financing. Programs such as 'AdblockPlus' jeopardise the quality and diversity of information offers and are against the interests of the general public. What we are seeing here is a dramatic intrusion into the core of the liberal media landscape. We will file a constitutional complaint."
Adblock Plus said it was "extremely pleased" with the ruling by the Federal Court of Justice.
"This ruling confirms – just as the regional courts in Munich and Hamburg stated previously – that people have the right in Germany to block ads," Adblock Plus said.
The Federal Court of Justice reversed a decision of the Higher Regional Court of Cologne, which considered the charging of fees to major commercial publishers to participate in its whitelisting service as aggressive business conduct from a competition law perspective.
"We are excited that Germany’s highest court upheld the right every internet citizen possesses to block unwanted advertising online," Adblock Plus said. "As we have since 2014, we will continue to fight for users’ rights in Germany and around the world."
Munich-based technology law expert Nadia Hammouda of Pinsent Masons, the law firm behind Out-Law.com, said: "The recent judgement of the Federal Court of Justice on the admissibility of ad blocking software addresses the changed ways of consumers’ media usage. After this judgement, publishers and advertisers may have to accept the broad use of ad blockers, with paid whitelists, and are now in charge of deploying other adequate measures in order to monetise their provided services and content. Such measures could comprise paywalls and so-called 'walled gardens' which prevent users with activated ad blockers to access certain areas of the publishers’ websites."
"Correspondingly, the affected business models would need to put greater focus on paid quality content as well as more customised services to attract users. On the other hand, we expect the availability of free high-quality content to decline steadily due to increasing losses on advertising revenue. These developments have also to be considered in the context of the upcoming new EU e-Privacy Regulation, which could potentially establish another hurdle for generating revenue through online advertising. However, we are observing more and more innovative concepts in the online market developing thriving business models already taking into account the changed habits of the consumers," she said.
Diane Mullenex of Pinsent Masons, a specialist in telecoms regulation, previously said that the ad blocking debate is relevant to business models in the telecoms sector as well as in publishing.
Mullenex said: "If ad blocking is found to be legal … then it could force content providers to come to new managed service agreements with telecoms network operators. Those deals could see advertising restrictions lifted, and smooth delivery of content to consumers delivered, in return for content providers paying more towards the maintenance and development of networks. The agreements would have to be in line with new EU net neutrality legislation."
According to Hammouda, the judgment issued by the Federal Court of Justice in recent case was also noteworthy because it was the first time the court has allowed its oral delivery of a judgment to be filmed.