The injunction would have barred Microsoft from "offering, marketing, using or importing or possessing" in Germany some products including the Xbox 360 and certain Windows software.

The ruling against the German injunction came from the 9th U.S. Circuit Court of Appeals in San Francisco.

Microsoft deputy general counsel David Howard said the company was pleased with the ruling. A representative for Google's Motorola unit declined to comment.

Brian Love, a professor at Santa Clara Law school in Silicon Valley, said the decision helps Microsoft counteract a favorable dynamic for Google in Germany.

"To some extent Germany has a reputation as place you can go and get an injunction relatively easy," Love said.

The current Xbox 360 is the market-leading console in the United States. Microsoft is expected to unveil its next generation Xbox video game console in 2013.

Microsoft has said that Motorola's patents are standard, essential parts of its software and that Motorola is asking far too much in royalties for their use. Google closed on its $12.5 billion Motorola Mobility acquisition this year.

Microsoft sued Motorola in the United States in 2010, and Motorola then filed a lawsuit in Germany. Earlier this year, Microsoft announced plans to move its European distribution center to the Netherlands from Germany ahead of a possible injunction.

After a court in Mannheim issued the sales ban, U.S. District Judge James Robart in Seattle granted Microsoft's request to put the German order on hold earlier this year. According to Robart, the ruling would remain in effect until he could determine whether Motorola could appropriately seek a sales ban based on its standard essential patents.

In its ruling on Friday, a three-judge 9th Circuit unanimously upheld Robart's order. Since Microsoft had already brought a lawsuit against Motorola for breach of contract in the United States, U.S. courts have the power to put the German injunction on hold, the 9th Circuit said.

"At bottom, this case is a private dispute under Washington state contract law between two U.S. corporations," the court ruled.

European regulators are investigating claims that Motorola over-charged Microsoft and Apple Inc for use of its patents in their products and thereby breached antitrust rules.

The case in the 9th Circuit is Microsoft Corporation vs. Motorola Inc, Motorola Mobility Inc and General Instrument Corporation, 12-35352.

(Additional reporting by Malathi Nayak in San Francisco and Bill Rigby in Seattle; Editing by Gary Hill and Richard Chang)

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