The three judge panel unanimously overturned the Judge Annabelle Bennett's decision to grant Apple an injunction, but stayed the order until Friday afternoon to give Apple a chance to apply for special leave to appeal the decision to the High Court.
In a 48-page decision, the Full Court has found that Apple did not establish a prima facie case for infringement of either of the two patents at issue and that Bennett incorrectly assessed the balance of convenience when deciding to grant an injunction.
The decision also dismisses the relevance of Samsung's reluctance to accede to Apple's request for a limited early trial - a factor that Bennett had counted against Samsung in her October decision.
The Australian leg of the global dispute between Apple and Samsung began in August this year with Apple claiming that Samsung's Galaxy 10.1 tablet computer infringed 10 of its patents - it later raised that number to 13.
Samsung redesigned its tablet to try and get around Apple's patents, but the California-based company maintained that three of its patents were still infringed. The final hearings on the interim injunction focused on just two patents.
Samsung has also fought back in Australia by trying to get an interim injunction against Apple over its new iPhone 4S. It has since dropped the interim injunction application in exchange for an expedited full trial that will start in March next year.
"Samsung Electronics Australia is pleased with today's unanimous decision by the Federal Court to lift the preliminary injunction on sales of the Samsung Galaxy Tab 10.1," the company said in a statement.
"We believe the ruling clearly affirms that Apple's legal claims lack merit."
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