Upholding a verdict by a lower court in January, the court said that Jon Johansen had broken no laws by helping to unlock a code and distribute a computer program on the internet enabling unauthorised copying of DVD movies.
The US movie industry, which says that piracy costs $3 billion a year in lost sales, had accused Johansen of theft in cracking the copy-protection code when he was 15 and appealed against the January acquittal.
Johansen, called DVD Jon, had pleaded not guilty to charges that he broke Norwegian law by helping break the code on commercial DVDs. The original court said that he was free to do what he wanted with DVDs he bought legally.
Prosecutors, who appealed against the original verdict, had urged a suspended 90-day jail term for Johansen.
"The appeal is rejected," Judge Wenche Skjeggestad told the court. Johansen himself was not present to hear the verdict, as he was on holiday in France.
The lower Oslo court also said in January prosecutors had failed to prove that Johansen's program - called DeCSS - had been used for illegal copying.
Prosecutors from Norway's Economic Crime Unit, which pursued the case on behalf of the Motion Picture Association of America (MPAA), argued that Johansen's copying of DVDs was unauthorised and therefore illegal.
The MPAA represents Hollywood studios like Walt Disney Co, Universal Studios and Warner Bros.
Prosecutors lodged an appeal against the January verdict, objecting to the application of the law and the presentation of evidence.
The MPAA will have to go to Norway's supreme court if it appeals again. It was not immediately clear whether that avenue would be pursued.