The Postal Service improperly blocked a New Jersey firm from distributing flyers promoting use of prophylactics and advertising those sold by the firm, U.S. District Court Judge John Garrett Penn has ruled.

Saying the flyers were not obscene and did not treat the subject of contraceptive products "in a pandering, suggestive or graphic way," Penn said prohibiting Youngs Drug Products Co. of Piscataway from distributing its flyers violated free speech.

"There has been an insufficient showing that substantial privacy interests will be invaded in an essentially intolerable manner" by Youngs' unsolicited distribution of the flyers, Penn said in his ruling Tuesday, effectively striking down part of a 1970 statute.

Penn set the following conditions under which flyers promoting contraceptives may be mailed to the public:

* The envelope must completely obscure the flyer's contents.

* The envelope must note prominently that the flyer is unsolicited.

* The envelope must bear a "prominent warning" indicating that the contents promote "contraceptive products."

* The flyer must be accompanied by notice that the recipient can demand removal of his name from the mailing list.

Youngs Drug Products, a 60-year-old firm, had notified the Postal Service of its intention to mail the flyers, and filed suit when the service warned in letters that the firm could be subject to criminal prosecution.