Welles directed and co-wrote Citizen Kane

Beatrice Welles has been in dispute with the Academy of Motion Picture Arts and Sciences over ownership of the 1941 Oscar awarded for best screenplay.

The academy says it must have first refusal for $1 if an award winner of his or her heirs want to sell an Oscar.

Ms Welles plans to auction the Oscar, but the academy is planning to appeal.

"Welles has unrestricted property rights in the original Oscar, which she may dispose of however she sees fit," Judge Dean Pregerson said in the Los Angeles District Court ruling, which was made public on Monday.

Dispute

The academy "always knew they had no right to this Oscar, but they made this woman sue over it," said Ms Welles' lawyer, Steven Ames Brown.

Academy lawyer David Quinto said he believed Ms Welles understood the academy's intention was to prevent the sale of any Oscars so the statuettes would not become "articles of commerce."

The Academy tries to stop Oscars being sold if possible

The Oscar in question had been presumed lost and Ms Welles received a replacement from the Academy in 1988.

She was then asked to sign the agreement regarding the possible sale of the statuette.

But the original Oscar was discovered in 1994 when a cinematographer who had worked with Welles sold it for $50,000 to a company called Bay Holdings.

Duplicate ruling

Ms Welles managed to block a subsequent sale through Sotheby's auction house and the Oscar was returned to her.

She then tried to sell the Oscar at auction herself but the academy said she must return it under the agreement.

Ms Welles sued the academy, arguing the agreement applied only to the duplicate, not the original. The judge agreed with her.

In the past, the academy blocked the sale of statuettes awarded to Clark Gable and others.

But in 1999, Michael Jackson paid $1.54m for the best picture Oscar awarded for Gone with the Wind.

Orson Welles won just one competitive Oscar, for best original screenplay for Citizen Kane, which he also directed, in 1942.