"Ultimately though, they are hopeful that the decision might mean that other artists seeking to express their political views will receive more liberal treatment that they did, or even that the outcome might compel much-needed reform of the electoral law."
The Court of Appeal concluded that Watson and Jones were not representing any political party or vested interest when they made the video, the court said, and were "simply expressing their own political views".
Ahead of the 2014 general election, the Electoral Commission blocked television and radio broadcasts of the song, saying that it breached electoral rules.
The music video features Key using an endangered Maui's dolphin as a guitar while an oil rig explodes in the background.
It also shows Finance Minister Bill English acting as a caddie for Key while the Prime Minister plays golf with US President Barack Obama.
The Electoral Commission's intervention came after an inquiry by a Hamilton radio station, which wanted to play Planet Key as part of a political programme.
The commission and Watson later sought a declaratory judgement from the High Court, which ruled against the commission in April last year, saying that it had imposed limits on the right to freedom of expression.
The Court of Appeal said it agreed with the High Court's decision, albeit for different reasons.
It also said the controversy had "significant implications" for future elections.
The commission said it welcomed the Court of Appeal's ruling.
It had sought the court's view to get clarification about the matter and how it should interpret election advertisements and programmes.
"The Commission will be studying the Court's decision in order to reflect it in advice and guidance to parties, candidates and third parties on their obligations in respect of electoral matters for future electoral events."
Because the commission's appeal was in the interests of clarifying the law, it had agreed to contribute to Watson and Jones' costs.
Any advertising in New Zealand which may encourage people to vote, not vote, or which favours a party or candidate must carry a promoter statement and follow rules on spending during an election period.