Chief Justice Terence Higgins acquitted John Desmond Thompson of producing child pornography in February despite admissions he had a sexual interest in young girls and evidence from the prosecution that the 63-year-old was sexually aroused while he recorded the footage of the naked infants.

The Chief Justice found that the grainy footage produced by Thompson did not constitute a representation of the children's sexual parts and so could not meet the legal territory's legal definition of child pornography.

Prosecutors launched an appeal against the decision of the Chief Justice, to the ACT Court of Appeal, arguing that Chief Justice Higgins made a series of blunders on points of law.

In a judge-alone trial in the territory, unlike other jurisdictions, the Crown cannot have a verdict overturned on appeal but prosecutors, backed by Attorney-General Simon Corbell, hoped a successful challenge would have stopped Justice Higgins' decision from setting a legal precedent.

But the full court of the Court of Appeal dismissed the Director's arguments yesterday finding that the Chief Justice did not decide the case on a point of law but on a question of fact.

Justices Malcolm Gray, Hilary Penfold and John Buchanan dismissed the director's appeal after finding the Chief Justice had decided the case on a narrow point of fact and not a point of law.

Prosecutors told the court Thompson used a small camera to film the girls on several occasions from different rooms in his O'Connor home between Christmas 2007 and January 16, 2008, when police arrived.

Prosecutors also told the court Thompson used the camera to zoom in on the children.

Thompson could be heard expressing frustration at one point in the footage when one of the children ran behind the backyard clothesline, obscuring his view.

He told police he was making the films to support complaints he was making to authorities about the children's family.

But when police arrived at Thompson's door in January 2008, they found thousands of child pornography images and videos on his computer. He was sentenced to eight months' weekend jail for possessing the images.