PETA first took legal action against California's Milk Producers Advisory Board (CMAB) in December 2002 on the grounds of misleading advertising - only months after it first aired its 'Happy Cow' advertisements.
The US$33 million (€25.4 million) campaign, which has since helped California overtake Wisconsin as the country's leading cheese producer, depicts Californian dairy heifers grazing in green pastures, accompanied by the slogan: "Great cheese comes from happy cows. Happy cows come from California."
Conversely, PETA alleges that the majority of Californian dairy heifers are often housed in cramped, deplorable and inhumane conditions, repeatedly impregnated and pumped full of yield-inducing drugs.
"It is inexcusable for the government to deceive the public about animal abuse and avoid accountability for it," said Matthew Penzer, PETA's legal advisor.
PETA's 2002 case was, however, dismissed and the court ruled that as the California Milk Advisory Board (a division of the state's Food and Agriculture Department) is a public entity and not a statutory person, the state's unfair competition laws, which also govern false advertising claims, could not be applied.
But despite this unfavourable ruling, PETA has repeatedly appealed against the court's original verdict - although the Californian Court of Appeals threw out its case indefinitely on Wednesday last week.
PETA has vowed to continue legal action in an attempt to ban the advertisements currently being aired in a further forty-nine US states.
"While the ruling from the California Supreme Court marks the end of a road, the journey to stop these deceptive ads is far from over," the group said in a statement last week.
"If the California milk industry treated dogs or cats the way it treats cows, everyone involved would be prosecuted for cruelty to animals," said Bruce Friedrich, PETA's vegan campaigns director.
Meanwhile, Nancy Fletcher, CMAB's spokesperson, disagreed: "This appears to be another loss for PETA in their campaign against the California milk industry."
"The highest priority of our dairy farmers is the health and comfort of their cows. They take great pride in how well they treat their cows," she said, adding that many Californian dairy farmers had installed free stalls, misters and fans for their dairy heifers.