This is an embarassing defeat for the health care giant. A federal judge ruled today that the American Red Cross can continue using its iconic symbol, 10 months after J&J filed a lawsuit demanding the relief agency halt its use of the red cross emblem on products it sells to the public and licensed to others.

Amid a flurry of negative publicity, J&J claimed the Red Cross violated its trademark and was barred from using the symbol for commercial purposes. The health care giant claimed a congressional charter issued to the relief agency in 1900 didn’t empower the Red Cross to engage in commercial activities competing with a private business.

But US District Judge Jed Rakoff disagreed, noting that the Red Cross had used the emblem for more than a century and was authorized to do so by various Geneva Conventions and the US Congress. In his 33-page decision, Rakoff wrote the “real question” was whether the permission given by US statute to use the logo included commercial purposes. His answer? Yes.

The American Red Cross and its partners use the logo on products including first aid, health, safety and emergency preparedness products sold in US retailers. The relief agency says the money it receives from the sales is reinvested in its humanitarian work.

Rakoff left intact only a part of the suit that contends the Red Cross purposefully interfered with J&J’s business relationship with two of the four companies, Reuters notes. The agency has licensing deals with Learning Curve International and three privately held companies: Magla Products, Water-Jel Technologies and First Aid Only.

In return for using the symbol on their packaging and websites, the companies pay the Red Cross a fee or percentage of their sales. J&J had a similar arrangement with the American Red Cross in the 1980s, the judge noted.

“The proceeds from the sale of the products are reinvested in our humanitarian services,” Red Cross spokeswoman Suzy DeFrancis tells Reuters. “We receive a very small amount of revenue from this.”

The relief agency Red Cross filed a countersuit claiming J&J violated trademark law, but Rakoff noted that the 120-year-old company’s right to use the red cross was protected by a grandfather clause. He also dismissed the agency’s contention that J&J could use the red cross on products only for the same purpose it did before 1905.

“If ARC (American Red Cross) were correct that J&J could only sell kits containing exactly the same products as those sold prior to 1905, J&J would be constrained to continue forever selling kits that contain such antiquated products as cat gut ligatures and kidney plasters,” the judge wrotes.

His order allows J&J to proceed to trial against the American Red Cross for interfering with its contracts with Water-Jel and First Aid Only and also the four companies’ counterclaims against J&J.

“We are pleased that the court upheld J&J’s use of its Red Cross trademark over the past century as entirely appropriate under federal law,” a J&J spokesman writes us. “We are disappointed that the court rejected our claims involving ARC’s commercial uses of the emblem. We are reviewing the decision and look forward to continuing this process to resolve our legal dispute with the American Red Cross.”

Mary Elcano, American Red Cross’s chief executive, told Reuters she read the judge’s ruling “with great delight. It is our hope that J&J would drop the case, and let us be about the mission of the Red Cross…We’re the same ones that are responding to the hurricanes and tornadoes that ripped through the Midwest in the past couple of weeks. We’re the same ones that are helping the Chinese Red Cross and trying to get relief into Myanmar.”

In November, the same judge limited the scope of another claim to allegations of interference with J&J’s economic relations with Target, Wal-Mart, Walgreen and CVS. The products have been on store shelves throughout the dispute. The four companies didn’t respond to Reuters for comment.