UPDATE: Nestle Wins Court Appeal Against Nespresso Rival

Swiss food giant Nestle S.A (NESN.VX) Tuesday said it has won a court appeal against a company making a rival coffee capsule to its high-end Nespresso brand.

The Swiss Federal Supreme Court called for a decision by a lower court to lift a temporary ban on the sale of coffee capsules by Swiss discount retailer Denner to be reconsidered.

"We are satisfied with today's ruling by the Swiss Federal Court," said Nespresso spokesman Julian Liew said. "We are currently assessing its implications and will draw appropriate conclusions after due consideration."

Denner said it was disappointed with the decision and will consider its next steps.

Denner was banned from producing, selling or marketing its coffee capsules, which are compatible with Nespresso machines, after Nestle claimed they infringed its patents.

But the commercial court in the canton of St Gallen withdrew the interim injunction in March, allowing Denner to resume sales of the coffee, which it sells under the NexPod brand.

Denner, which is owned by Swiss cooperative Migros, and its manufacturing partner Alice Allison SA, resumed sales of the capsules in April.

Nestle is also taking legal action against Sara Lee Corp (SLE) in the Netherlands and France and the privately-held Ethical Coffee Company in France over their coffee capsules.

Tuesday's court decision is positive for Nestle in the Swiss market but it is impossible to say how the ruling would affect similar cases in the Netherlands and France, said Bank Vontobel analyst Jean-Philippe Bertschy.

At 0952 GMT, Nestle shares were down 0.1% at CHF51.7 on the Swiss SMI index which was trading flat. The stock has lost 5.7% in value since the start of the year.

-By John Revill, Dow Jones Newswires; [phone] ; [e-mail]