The million-dollar suit for "trademark infringement, unfair competition and false designation of origin" filed in April in New York claimed the YSL shoes would mislead consumers familiar with Louboutin's signature scarlet soles.
Judge Victor Marrero ruled that as color was key in the fashion world, "the court finds that Louboutin is unlikely to be able to prove that its red outsole brand is entitled to trademark protection," the Wall Street Journal reported.
"We are profoundly disappointed at the judge's decision," Louboutin's attorney Harley Lewin told AFP.
"Even though the judge agreed that Louboutin's red sole mark was famous and well known he appears to have concluded 'sua sponte' that in the fashion industry one ought not be able to use a single color as a trademark. We disagree."
Louboutin's glam footwear was frequently featured on the television series "Sex and the City." His luxury shoes typically cost hundreds of dollars a pair, but can cost thousands.
"We are currently evaluating all alternatives," Lewin said.