The Pfizer pharmaceutical company has failed in its attempt to win back its exclusive UK patent on the use of the active compound in Viagra for the treatment of impotence.
The Court of Appeal dismissed Pfizer's challenge to a High Court ruling that the use of the compound was "obvious" and the patent therefore invalid.
Pfizer is to petition the Law Lords for leave to appeal and will keep its patent in the meantime.
If the company loses in the House of Lords, the way will be open for other manufacturers to develop and apply their own versions of the compound without fear of being sued for patent infringement.
The patent had been challenged by rival US-based Lilly Icos, which argued successfully that Pfizer's monopoly right to the use of sildenafil citrate to combat male erectile dysfunction (MED) was void and was stifling research by other companies.
Pfizer's patent on the compound itself is unaffected by the judgment, which applied only to its use. The company says it would take many years of expensive research and development before others could market rival treatments as effective as Viagra.
Lord Justice Aldous, sitting with Lords Justices Buxton and Longmore, said today that Viagra had been hailed as "one of the brightest British innovations of the 1990s".
Pfizer's patent stated that the inventor had found, unexpectedly, that the compound and others related to it, which were proposed for a number of medical applications but not impotence, were useful in the treatment of MED.
But the court agreed with the High Court judge, Mr Justice Laddie, that the use patent was "invalid for obviousness" because the scientific knowledge or "art" on which it was based was already in the public domain.
The judges referred to reports published in 1992 and 1993 on the work of a team at the Department of Pharmacology at the University of California School of Medicine in which it was suggested that chemical inhibitors similar to the Pfizer compound could be useful in the treatment of impotence.
PA