The appeals court also set aside a part of the lower court's order, saying the way it was worded "could be construed to prohibit the unfavorable comparison of even Time Warner Cable's analog programming."
Analog programming refers to basic cable packages, as opposed to digital packages that allow expanded programming and additional features such as high definition (HD) or video on demand.
The television ads, which featured ex-Star Trek actor William Shatner and pop star Jessica Simpson, aired last December and in January. They ended with the tag line: "For an HD picture that can't be beat, get DirecTV."
Time Warner Cable filed the lawsuit in December, accusing DirecTV of false advertising and deceptive business practices.
In February, Judge Laura Taylor Swain of the U.S. District Court in the Southern District of New York granted a preliminary injunction against DirecTV preventing it from running ads in Time Warner Cable's markets that disparaged the quality of Time Warner's high-definition programming.
DirecTV was also ordered then to take down any similar advertisements on its Web site, or other sites.
The Internet ads include one in which the picture quality of DirecTV is compared with that of "other TV," which the ad later identifies as representing basic cable, according to the appellate court ruling.
The DirecTV side of the screen shows a clear image of football player Kevin Dyson making a touchdown at the Super Bowl, while the image on the "other TV" side is blurry, according to the ruling.
"It is difficult to imagine that any consumer, whatever the level of sophistication, would actually be fooled by the Internet advertisements into thinking that cable's picture quality is so poor that the image is 'nearly entirely obscured,'" the court ruled.
