In 2014, a federal court had ordered Google to remove the movie, which mocks the Prophet Muhammad.
Actress Cindy Lee Garcia sued to get the film taken down from YouTube after she had received death threats. She had also said she was tricked into appearing in the movie.
Google has said: “We’re pleased with this latest ruling.
“We have long believed that the previous ruling was a misapplication of copyright law.”
However, no decision has yet been made over whether to reinstate Innocence of Muslims on YouTube.
In the film, released as a trailer, Cindy Lee Garcia appears to ask whether the Prophet is a child molester.
The actress said she had been told she had been performing in a completely different film and the lines dubbed without her knowledge after filming.
However, Google had argued that only the film-maker, Nakoula Basseley Nakoula, owned the copyright, and, therefore, Cindy Lee Garcia had no right to demand its removal – and the appeals court agreed.
“In this case, a heartfelt plea for personal protection is juxtaposed with the limits of copyright law and fundamental principles of free speech,” wrote Judge M. Margaret McKeown.
“We are sympathetic to her plight. Nonetheless, the claim against Google is grounded in copyright law, not privacy, emotional distress, or tort law, and Garcia seeks to impose speech restrictions under copyright laws meant to foster rather than repress free expression.”
Judge M. Margaret McKeown noted that Nakoula Basseley Nakoula was currently in prison for unrelated offences.
Several people died in the global protests sparked by Innocence of Muslims release in September 2012.
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