Nicole Narain, Playboy's Miss January 2002, sought to have Farrell's lawsuit dismissed. But Superior Court Judge Elihu Berle quashed the motion, instead directing Narain's attorneys to file an answer to Farrell's suit.
Narain is challenging the actor's claim that they agreed to keep the 14-minute videotape private. As "co-creator" of the tape, Narain alleges she has the right to reproduce, market and distribute it under federal copyright law.
Leodis Matthews, an attorney for Narain, said sales of the videotape could represent significant income for his client, rivaling that of the notorious Pamela Anderson-Tommy Lee sex tape.
Farrell's attorney, Paul Berra, declined to comment on the day's proceedings.
Farrell, 29, star of "The New World" and "Alexander," filed suit against Narain and several others in July, 2005, to stop distribution of the tape, which he claims would irreparably damage his career.
A restraining order has been in place since then, temporarily blocking public release of the videotape.