In a court notice on behalf of Correctional Service Canada, the government abandoned the case it had started against the presiding coroner, Dr. John Carlisle.
Lawyer Julian Falconer, who represents Smith's relatives, said the family was gratified there would be one fewer court proceeding, but again slammed the government's tactics.
"This represents proof positive that the sole motivation for launching the judicial review was to keep the videos from the public record," Falconer said.
"Once this bid failed, the judicial review became futile."
Earlier this week, Carlisle ruled the videos should be publicly available as part of a battle over the scope of the inquest into Ashley Smith's death and his jurisdiction to summons out-of-province doctors to testify.
He also denied a correctional service demand for an adjournment while the department applied to Divisional Court for a judicial review of his decision.
Corrections responded by heading to court Wednesday in a last-ditch attempt at an emergency stay pending the judicial review. However, Justice Joan Lax threw the case out, saying Carlisle's decision was fine.
The Justice Department notice Friday showed the government had dropped its attempt at a judicial review.
Smith, 19, of Moncton, N.B., choked to death in October 2007 in her cell in Kitchener, Ont., after spending her past year in solitary confinement, shunted 17 times among nine different prisons.
The videos at issue show, among other things, guards duct-taping Smith to an airplane seat, and forcibly injecting her with "chemical restraints.
In acrimonious arguments before Carlisle and Lax, Falconer accused prison authorities of trying to cover up the horrific treatment meted out to Smith.
He called Correctional Service Canada an "abuser," while other lawyers said the government was acting like a bully and its tactics bordered on "contempt."
Inquest motions resume Oct. 31. Corrections wants to limit the scope of the inquest and backs a handful of physicians who are fighting the summons of out-of-province doctors.
It remains to be seen whether Carlisle's eventual rulings on scope and jurisdiction will go unchallenged further delaying the much-delayed inquest.
A coroner's jury is scheduled to start hearing evidence Jan. 14, 2013.