The court in the southern French city of Nîmes ordered the state to pay compensation to his widow, his son, who was born just after his death, and his parents-in-law of Corporal Abel Chennouf, who was shot dead by Merah in March 2012, but not to his parents, brother and sister, who have already received payments for their loss.
Merah killed Chennouf and his regimental comrade Mohamed Legouad, in Montauban, near Toulouse, on 15 March four days after shooting another soldier, Imad Ibn Ziaten.
"The Nazislamists must be stopped before they take action," Chennouf's father Albert Chennouf-Meyer told RTL radio, adding that he would now name people "who did not do their jobs".
Surveillance lifted twice
While recognising the difficulty of stopping terror attacks, the court criticised a decision to stop surveillance of Merah even though he was known to frequent radical Islamists.
He had come to the agencies' attention after falling out with a young man to whom he had recommended jihadist websites and had been put under surveillance, according to the then-interior minister Claude Guéant.
The surveillance was lifted but resumed after he returned from a visit to Pakistan in 2011, having already visited Afghanistan the previous year, but "the judgement was made that he did not show signs of being dangerous, of criminal intention", according to Guéant.
Given that a soldier had already been killed four days before Chennouf's murder and that Merah's "highly suspicious" behaviour was known, the court found that the state carried a third of the responsibility for the killing.
Other legal cases possible
Four days after killing Chennouf and Legouad, Merah killed three children and a teacher at a Jewish school in Toulouse.
He was later shot dead by security forces after holing up in a flat in the south-western city.
The judgement would appear to open the way for legal action by relatives of his other victims and later on Tuesday a lawyer acting for 17 victims of the November Paris attacks announced that they were to file a legal complaint against the French state.
The case will be timed to coincide with the presentation of a parliamentary report that has found alleged failings, including the fact that one of the attackers was able to go to Syria while under judicial supervision following an earlier unsuccessful attempt to go to Yemen.