The U.S. Food and Drug Administration wants to regulate tobacco as a drug and impose new restrictions on its sale, advertising and marketing. As might be expected, the tobacco company objects strongly.

In April, a federal judge in North Carolina gave each side half a loaf. U.S. District Court Judge William Osteen said "yes" to allowing the FDA to regulate tobacco as a drug, but "no" to letting the agency control the industry's advertising.

In essence, the decision allows the FDA to move ahead with regulations that limit youth access to cigarettes. However, the agency is barred from imposing curbs on advertising in publications aimed at young people and from limiting billboard advertising and cigarette displays.

The decision marks only the beginning of what promises to be years of litigation, likely to go all the way to the U.S. Supreme Court. Both sides plan to appeal the part of Osteen's ruling that went against them.

However, his decision played a role in settlement talks between the industry and the attorneys general.

'They can't fiddle around'

In particular, the decision to allow the FDA to consider cigarettes to be drug-delivery devices -- coming from a judge in tobacco-friendly North Carolina, no less -- marks a power shift that former FDA Commissioner Dr. David Kessler calls "historic."

"For the first time in 30 years, the FDA can regulate," he said.

"I would say that this is a minor loss for the industry," says Allan Kaplan, a tobacco analyst at Merrill Lynch. "This is going to make it more difficult for them in their negotiations in terms of a settlement."

"I think it kind of puts a pebble in the shoe for the tobacco industry," says Sen. Frank Lautenberg, D-New Jersey, a tobacco foe. "They have to realize they can't fiddle around with this one. They have got to get going."

Clearly cheered by the judge's legal reasoning in favor of the tobacco industry on the advertising question was Madison Avenue. Tobacco companies spend $5 billion a year promoting their products, and they will remain free to continue to spend that money however they see fit.

Osteen's ruling could also give the tobacco companies a bargaining chip that they can play during the negotiations; namely, the continued use of Joe Camel and the Marlboro Man.

Tobacco foes very much want those kinds of popular advertising icons retired for good. But if Osteen's ruling is upheld, the FDA won't have the unilateral power to force Big Tobacco to comply.