The Tokyo District Court on Wednesday blocked Nireco Corp. from including a poison pill strategy in the company's measures to defend against hostile takeovers.

The court said the ploy to issue share warrants to dilute stock "could cause unforeseen damage" to current Nireco shareholders, backing an injunction request filed by Cayman Island-based SFP Value Realization Master Fund Ltd., which has a 6.8 percent stake.

The poison pill refers to a range of strategic moves a company targeted for takeover can make to become less attractive for acquisition.

The tactic endorsed by the high-tech measuring-device maker's board on March 14 would allow the board to decide to offer all listed shareholders as of March 31 the opportunity to buy two new shares for each of their existing shares at a price of 1 yen each.

The board would be able to activate the warrants in the event a perceived aggressor bought 20 percent of Nireco shares, making it prohibitively expensive to take over the firm as the number of shares required would be much higher.

Wednesday's decision upheld SFP's assertion that the poison pill could triple the number of Nireco shares overnight, causing their price to plunge and creating huge losses for shareholders.

Tokyo-based Nireco trades on the Jasdaq over-the-counter market.

Since it filed for an injunction on May 9, SFP had claimed the defensive measure would give the board of directors the power to change the entire shareholder makeup with one decision.

"This violates the Commercial Law, which prohibits excessively unfair share issues," SFP said May 9.

Wednesday's decision follows a similar ruling made by the same court on March 11, backing Internet firm Livedoor Co.'s injunction against Nippon Broadcasting System Inc.

The court ruled in that case that the NBS plan to issue share warrants to Fuji Television Network Inc. was not justifiable as it was aimed at keeping the Fujisankei Communications Group in control of Fuji TV. NBS and Fuji TV are core members of the group. At the time, Livedoor and Fuji TV were in a battle for control of NBS.